I'll try 1 more time.... At 09:06 AM 9/25/2007 -0500, Leland F. Jackson, CPA wrote: > > You're looking at too small a part of the picture. Look at the bigger > > picture in the real world and you'll understand what happens. If corporate > > tax is raised, corporations will raise the price of their products. The > > concept is it increase the percentage of their profit to offset the > > additional percentage lost to higher taxes. > > >The tax rate schedule for corporate taxation of net income before taxes >is out of the control of a corporation, once set by congress. The >corporation should strive to maximize profits before taxes. If income ..... yada yada yada
>which in tern increases income tax, which in turn requires another >additional raise in sales price ... which adjustment would go on forever No, it would not go on forever. You eventually arrive at a point where the price raise increment would only increase the tax amount by 1 cent or so and they'll usually accept that loss. The point is that corporations do not do things the way you're thinking. In the real world, they are always trying to maximize profits, cut costs, etc. When the gov rolls out a tax increase, pretty much all corporations have to "immediately" (when feasible) raise their prices to make sure their projected margins are maintained, etc. Of course there are a lot of other considerations that factor in - e.g. if the prices were already so high that raising them again would result in significant loss of market share and so on. But the real key point you are missing is that companies look at taxes as a type of "expense" (not in an accounting sense - in a real world, "subtraction from profit" sense). Let me see if a simple example can help: Here in a local town, the son of a... oh... a-hem..... the politicians decided to hike the local city corporate tax. I believe the bump was something like 0.25%. Pretty much the day that tax went into effect, every fast food restaurant bumped the prices of their products - in some cases like 2% or more. I noticed the prices in stores rose as well - not sure of percentage there, but I'm sure it more than compensated for the additional tax amount. -Charlie _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[EMAIL PROTECTED] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
