10-16-2009, 06:03 PM
Hi,
Also, in your example, consider the possibility of being able to produce the product cheaper elsewhere. The differential might not be enough to pay for itself in the tax free case, but could become large enough with the imposed taxes to make the move attractive. Although this is not an argument in support of my statement about passing on the cost of the taxes, it is an argument in favor of eliminating B&O taxes in general.
--Pete
Quote:Not always. You are right if the product price has little or no effect on demand.You are quite right, I implied the universal qualifier when I should have used the existential qualifier. I contend, though, that my statement is true a majority of the time. Fiat contributes to the economy of Italy much more than does Ferrari.
For products whose demand is based on price, as is the case for the product of a monopoly or for a prestige product only made by one manufacturer. In this case, the price is set to an optimum-profit value that often has little to do with the cost of making the product.
Also, in your example, consider the possibility of being able to produce the product cheaper elsewhere. The differential might not be enough to pay for itself in the tax free case, but could become large enough with the imposed taxes to make the move attractive. Although this is not an argument in support of my statement about passing on the cost of the taxes, it is an argument in favor of eliminating B&O taxes in general.
--Pete
How big was the aquarium in Noah's ark?