This has been known for over 200 years.
After implementation the land value tax is considered a burdenless tax. You can learn about it here: http://en.wikipedia.org/wiki/Land_value_tax
"Economists are almost unanimous in conceding that the land tax has no adverse side effects."— William Vickrey, Nobel laureate in Economics (1996)
Land value taxes cannot be passed to consumers, producers, renters or anyone else.
Land value taxes only reduce land prices. If land value taxes are raised to 100% of the lands value, then the land will lose all exchange value, while the commodities coming off the land won’t increase even a penny in price.
Land value taxation was to be the sole source of government revenue under the original U.S. constitution ... that is before the special interests got involved.
Since business has a mandate to maximize profit, other things will be done to make this happen, from reducing manpower to reducing future growth, both of which are affects that are passed on to the public as something other than a price increase. On the other hand, business may try to purchase other businesses to maximize profits, but again, this usually means that manpower is reduced. This all affects demand but in this case, demand reduces as people are laid off and unable to purchase more.
Another affect is that to increase profit to acceptable levels if taxes are increased, business will move to friendlier countries and leaving behind the worker here.
So yes, higher business taxes are passed on to the consumer, but not always as a price increase.
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I understand that you feel that it would happen, but you're not explaining a proposed mechanism that would override competition. The only potential explanation is that you feel that all businesses set prices according to a cost plus model--which itself has significant problems for traditional market-based economic analysis. If most pricing occurs by cost-plus pricing, we can throw most of what we know about economics out the window. Markets don't work, supply and demand are figments of our imagination, every government policy that we've pursued for the last 150 years is a waste of time, and the entire conservative political movement ought to just go back to the drawing board when it comes to their economic policy.
Among other things if cost-plus is the normal mode of pricing there is no calculation problem and command economies would work just fine.
That makes absolutely no sense. Why on earth would I drop out of a profitable business just because the government raises taxes on my profits from 27% to, say, 33%? That's a case of some seriously sour grapes there--because I'd be giving up 67% of the profit over a 5% difference in the tax rate. What's the incentive there for me to get out? I'm still making money, albeit not as much as I was before. I've pretty much got no choice but to eat that cost, or collude with my competitors and hope they abide by the agreement.which does happen in some cases where business hopes competition follows suit, or the business may just drop out of the market, affecting supply and raising prices that way for all competitors.
That might happen for very marginal businesses, but any business that close to the edge of "something worth pursuing" probably isn't going to survive anyway.
That doesn't make any sense either. If the goal is to make more money in an absolute sense, the correct response to an increase in taxes on profits is to increase production, not decrease production. It would especially make sense to divert additional capital into business expenses and wages, since those are tax deductible. Divesting capital as profits would be the last thing you'd want to do when taxes on profits are high.Since business has a mandate to maximize profit, other things will be done to make this happen, from reducing manpower to reducing future growth, both of which are affects that are passed on to the public as something other than a price increase.
That's something I think that conservatives don't really understand--if taxes on profits are high, you want to keep investing in the company and expanding, not contract the business and divest profits.
Which a sane country would prevent through protectionist trade policy (free trade only with countries who adhere to US labor, wage, and environmental standards) and the criminalization of capital flight. You know, like most countries do.Another affect is that to increase profit to acceptable levels if taxes are increased, business will move to friendlier countries and leaving behind the worker here.
Only if you ignore the obvious and take conservative pundits at their word.So yes, higher business taxes are passed on to the consumer, but not always as a price increase.
Last edited by Someone; Mar 07 2012 at 03:00 PM.