Quote:
Originally Posted by edslunch
Tax increases on input costs such as property tax also reduce profits. It’s nice to think a business owner can just turn up the volume to 11 to make up for reduced margins but it doesn’t work that way.
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We are talking about corporate taxes, which to a point have very little impact on a corporations well being, as long as distributed equitably across all industry. Obviously depending on consumers abilities to continue spending within that industry, but realistically we are talking about a 5% change in tax translating into 1% or less change in prices.
The most optimistic scenario I could come up with for a business.
Company sells $100,
Profits $20
@10% corporate tax, they pay $2 to the government
and keep $18
Change that price to $101
Profit $21
@15% corporate tax, they pay $3.15 to the government
and keep $17.85
Now if Large corporations have the ability to avoid those increases which they often do, you will either see time undercut prices, or you will see investment shift to large corporations. But that's not a tax rate problem, that's a tax policy problem.
Property taxes are completely different, you absolutely can property tax a small company out of business, because they are fixed cost regardless of the health of your business or industry, and moving to react to tax changes would be very expensive.