Bastiat wrote that "Taxes must, in the end, fall upon the consumer". Isn't the truth the exact opposite?
Taxation is a parasitical activity. A parasite can only leech off of a productive host; it cannot leech off of a corpse. You can only tax wealth that has been produced. Therefore, only producers can be taxed; a "consumption tax" is a myth.
What was Bastiat trying to say?
AnalyticalAnarchism.net - The Positive Political Economy of Anarchism
If only we had more Austrian entrepreneurs...
Sage:What was Bastiat trying to say?
Taxes are priced into the cost of the good.
Tax is just another overhead from the perspective of a businessman. When costs go up, he raises prices to compensate, he doesn't absorb every expense increase from his profit margin. Ultimately, he runs into a price ceiling where his costs are greater than he can raise prices, and thus the industry becomes uncompetitive to be in (less profitable), and competition dwindles.
Taxes make the consumer worse off because he can buy less. Taxes make the producer worse off because his prices are higher than they need to be, and thus he will have difficulty competing. Which again hits the consumer, because he has a less robust marketplace to shop from.
Taxes hit property owners the hardest.
The fallacies of intellectual communism, a compilation - On the nature of power
Sage:Bastiat wrote that "Taxes must, in the end, fall upon the consumer". Isn't the truth the exact opposite?
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Either the producer has to take a hit off for a loss of profit due to the tax, or hike up the price of the product. The producer can only take so many tax hikes before the consumer has to pay for it. Even if the producer isn't raising the prices, he in turn is going to consume less in his life or invest less into his business (perhaps by not hiring someone who needs a job, thus hurting another consumer). The only people who make out on taxes are govertment subsides, uber rich business who can afford the loss while the compition dies, and government employees.
Taxes: this is what humanitarians, bored rich kids, and the fashionably educated promote.
When I say the producer can only take so many tax hikes before the consumer pays for it, I mean an actual factual direct raise in the price of the product. Not an indirect/unseen payment, in which case the damage is already done.
Income tax is equal on all producers. I believe Bastiat is referring specifically to taxes on business profit, before it is paid out in dividends.
liberty student: Income tax is equal on all producers. I believe Bastiat is referring specifically to taxes on business profit, before it is paid out in dividends.
If that post is refering to me, so was I. Perhaps I was unclear of that. Usually when I use the word "producer", I usually mean where the money supply/ production starts (so the business owner, investor) not that others aren't producers or people of lesser fabric, it is just a habit of mine to use the word "producer" in that term.
Dondoolee:If that post is refering to me, so was I.
If you click REPLIED ON next to my name on my post, it will show you who I was responding to. Just letting you know for future reference if you are unsure who is responding to which post. I was replying to Juan btw.
with a payroll tax and a sales tax you're getting hit a lot.
once straight out of your paycheck
once out of the tax your employer pays on your paycheck instead of to you
once when you buy something
once because the price of the good is higher than it would be if producers were taxed less
now figure in inflation and you're getting hit with a fifth tax
if you invest in a business you get hit with an additional tax for any dividends
how much does your dollar buy you at the end of this?
this is the "free market" that has "failed us".
This is a basic macroeconomic principle, illustrated by a supply and demand graph.
S1 is the original supply curve. The examle assumes that the original equilibrium price for the product was $15, and the government imposes a $1 tax. That is represented by the $16. This model assumes equilibrium, but is simply used to establish a point. The tax shifts the supply curve to the left; the distance between S1 and S2 is $1. The new equilibrium is at $15.50, which shows that half of the tax was paid by the producer and the other half by the consumer. Therefore, the lesson is that government can tax whomever, but in the end it's the market which decides who really pays that tax.
Supply and demand graphs are unsophisticated and cannot explain true tax incidence. The reason consumers are least affected by taxes is that they are not invested in the supply until they make their purchase. Suppliers are invested. Raising taxes does not change the equilibrium price of the existing supply, it makes it unprofitable to resupply to the current level. Capital that was invested to produce the current level of supply becomes worthless and is gradually shut down, leaving industrial rust belts as a consequence of the tax.
So yes consumers become poorer over the long run as a consequence of the tax, but it is not an expropriation for them, while it is an expropriation for suppliers. Consumers only become poorer because suppliers go out of business.
Jonathan M. F. Catalán: This is a basic macroeconomic principle, illustrated by a supply and demand graph. S1 is the original supply curve. The examle assumes that the original equilibrium price for the product was $15, and the government imposes a $1 tax. That is represented by the $16. This model assumes equilibrium, but is simply used to establish a point. The tax shifts the supply curve to the left; the distance between S1 and S2 is $1. The new equilibrium is at $15.50, which shows that half of the tax was paid by the producer and the other half by the consumer. Therefore, the lesson is that government can tax whomever, but in the end it's the market which decides who really pays that tax.
To expand, since the tax raises the price, it, thereby, prices-out some would-be buyers out of the market.
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."