The Real Effect of Raising BusinessTaxes

Simplistically, most people think that raising taxes on businesses or corporations is a lot like themselves paying higher rate of taxes. They think that a business or a corporation simply gets hit with a "single" higher rate and that's it. But nothing could be farther from the truth.

When our lawmakers in Washington, D.C. raise taxes on corporations and on small and private businesses, a whole series of tax increases take affect; and, all those compounded taxes increase greatly influence the price of the final product. Take, for example, a hamburger being sold by Wendy's or McDonald's or whoever. When taxes are raised, the franchise owner of each Wendy's or McDonald's is taxed at a higher rate. The franchisee, the main corporate name-holder like McDonald's, is also taxed at a higher rate for all the food and supplies that it provides to each of its franchise owners; like the 16 oz. cups with the Wendy's trademark name on it or those unique square meat patties. Before those products ever reach McDonald's or Wendy's for their distribution to the franchise owners, the supplier of those products and each of their suppliers will also be hit for higher taxes. In the case of the meat that is used in a hamburger, the rancher will pay higher taxes and will have to have to charge more for his beef or go under. The supplier of the feed that rancher uses for his cattle will pay higher taxes and he will have to raise his prices. The slaughter facility will pay higher taxes and that will force his prices higher. The truck that delivers the meat from the slaughterhouse to a meat processor will pay higher taxes and will have to raise prices. That meat processor will pay higher taxes and raise prices; and, so on; and, so on, and, so on.

Whenever taxes are raised, the effect on prices is compounded as a raw material makes its way through the system and value is added -- from vendor to vendor -- on its long trip to become a final and finished product. Even, a simple one percent increase in business and corporate taxes can influence the final price by as much a 5 or 10 percent; based on how many steps (taxable suppliers) there are in getting the finished product to market. That's why corporate taxes are forcing manufacturing to go off-shore. In order to be competitive with foreign companies and their products, our American companies have no other choice but to have the products made cheaply in places like China, India, Mexico, or Indonesia.

Taxes are inflationary. They are the primary reason that jobs are moving overseas. Our products can't compete in a world economy if the price of those products keeps forcing people to buy from other countries. At a time when inflation from high oil prices is already affecting fuel costs, plastics, paints, fertilizers and, especially, food, do we really want to raise the tax rates on small and large business so that the prices for American-made goods are even less competitive? Would someone explain that to Barack Obama and the rest of the Democrats!