David J. Bean
David J. Bean is a freelance writer living in California.
There are several proposals going through Congress these days that involve spending a lot of money and almost all the methods advanced to pay for them look to increase taxes on businesses and "the rich." Recently a friend gave me something to think about regarding all such taxes.
This friend was attending a fraternal luncheon meeting and the scheduled speaker failed to show up. My friend had often addressed the group about a number of timely subjects so the president asked him if he could fill in for a few minutes. My friend stood up and gave the following talk:
I am sure all of you are aware that a viable business is one that is up and running, making a profit, satisfying its customers, and keeping the shareholders happy. How many of you believe that a viable business pays taxes?
Almost every arm went up. My friend continued: "Well, where does this viable company get all of its money?" Some said "From the bank," while finally, a few said "From the sale of its product or service." "Yes," my friend said, "but more specifically don't all the operational funds the business gets come from its customers? Where else could it come from?" Everyone nodded agreement. "Well, if that is true, who pays the business' taxes? It follows, doesn't it, that the customers do. Isn't that right?" But wait, it gets worse.
Suppose that business gets its raw materials from three other businesses. Where do those three companies get all their money? It must come from their customer or customers of course. So part of the three suppliers, taxes are being paid by our first company and the rest by any other customers the suppliers have. But wait, it gets even worse. How about the trucking company that hauled the raw materials and the laborers who handled the packaging and anyone else who drew a paycheck from a business and was part of the chain of businesses that got the final product to the last customer? Even the "rich" CEO's check must be paid by that business' customers. And his check must eventually cover all the taxes he pays.
And now you can see that the final customer is also the consumer of that good or service and that the costs, including all the chain of taxes that have heretofore been included in the cost of the product or service can no longer be passed along. The chain has ended.
So if you just follow the money, the only conclusion that can be drawn from this analogy is that the final consumer of any product or service pays all the accumulated taxes collected from all the people who drew a paycheck while having anything to do with bringing the product or service to market. In fact, even these working people's personal income taxes are paid by the money they received working for a viable business, for once again, just ask yourself where all their money came from.
So, when you buy an automobile you are paying a portion of the taxes of all the people who dug the ore, the smelter, the steel maker, the machinist, the trucker, the assembler, and even the salesman. When you buy a loaf of bread you are paying a portion of all the taxes of the farmer who grew the grain, the miller, the baker, and the store owner who sold you the bread. Then, to top it off, because a business has to show a profit on its total "handle," the consumer pays the business a profit on all those taxes.
We are not talking here about one specific tax like income tax. To illustrate, let's take a look at a worker somewhere in the middle of the bread-producing chain. This worker receives a wage from which he must pay all the taxes that he pays; sales taxes, income taxes, state taxes, local taxes, union dues, taxes on his telephone. Of course those wages also cover such non-tax items as his personal living expenses. The wages he is paid are carried as an expense by the company he works for and are totally passed on (plus a small profit) to the next supplier in the chain. The next supplier, and each one that follows, does the same thing and a wage worker in each company contributes to the accumulated total hidden tax charge that shows up at the end of the chain in the final product or service. Then, to complete the circular nature of this process, every product or service this worker purchases for his personal consumption contains its own hidden chain of accumulated taxes.
One of the main differences between pre-WW II and now is that the number of taxes we all pay has greatly increased. These taxes were necessary to pay for the war but were never really discontinued. And of course prices today include all the taxes being paid by everyone who has anything to do with getting anything to market. All of those taxes have to be paid by the final consumers.
Today's income tax code runs to over 40,000 pages and is a total waste of resources as there is no one in this country who can give you a straight answer on a tax question. As we just discussed, the consumer winds up paying all the taxes anyway. Thus, all the pain and effort we go through with our present tax system still results in what amounts to a consumer tax. A consumer tax would not solve all our tax problems but why not eliminate all the hypocrisy and just have a consumer tax in the first place. Write your Congressman. *
"Hope is a good breakfast, but it is a bad supper." --Francis Bacon