>A supermarket chain may have a pretax income of 2%, with 1% after taxes. If it only has 0.5% after taxes, then it will be forced to increase prices to get to 1%, otherwise, it cannot raise needed capital. Thus, the tax burden is always passed to the consumer.
Yes, but what if their pretax income is 5%?
>Many economists believe that workers and customers bear much of the burden of the corporate income tax. To see why, consider an example. Suppose that the U.S. government decides to raise the tax on the income earned by car companies. At first, this tax hurts the owners of the car companies, who receive less profit. But over time, these owners will respond to the tax. Because producing cars is less profitable, they invest less in building new car factories. Instead, they invest their wealth in other ways—for example, by buying larger houses or by building factories in other industries or other countries. With fewer car factories, the supply of cars declines, as does the demand for autoworkers. Thus, atax on corporations making cars causes the price of cars to rise and the wages of autoworkers to fall.
This could happen with raising any cost related to running a business.
-Z |
