Economy 101

Got an e-mail from a Democrat friend celebrating the passage of the increased taxes on corporations. 

On the surface, sounds good...,make the companies pay. But for anyone with even the most rudimentary understanding of economics, this is yet another disaster for Oregon.

See, no company ever pays taxes. They don't pay millions of dollars, they don't pay hundreds of thousands of dollars, they don't pay the fabled Oregon "$10 dollar company tax". They don't pay a single thin dime. They don't pay one red cent in taxes.

You do. The consumer. 

When company taxes go up, they do not do so in a vacuum. The money to pay those taxes has to come from somewhere.

Higher taxes, let me introduce you to your source...higher prices.

Compounding the situation is the Oregon habit of maintaining a minimum wage level higher than Federal standards, a fact trumpeted by many people as a wonderful thing.

It is not. 

Let me break it down for you; when companies have to pay higher wages, that money has to come from somewhere.

Minimum wage goes up, they pay more for their employees, so what follows? Prices. Bread price goes up. Gas prices go up. The McDonalds Happy Meal goes up.

Individually, none of those are back-breaking, but combine the prices raised for higher wages and suddenly you can buy LESS with your "higher" wages. As someone who makes enough that I do NOT get a wage increase when the minimum wage goes up I can tell you...I feel the pinch. I hate those increases because I know my standard of living is taking another smurf-slap.

But back to the point at hand. Oregon is going to combine our higher-than-average wage base with higher taxes. Yeah, that should help the employment crunch here in one of the top-5 highest rates of unemployment in the nation (currently over 12% if the sources I am using are correct.)

So companies are going to look at high labor costs and high taxes. Their cost of doing business here will put them at a competitive disadvantage to companies operating in other states or, lets be clear, countries.

Why manufacture widgets here for a dollar apiece when you can manufacture them for 50 cents apiece in Idaho? 

So companies will simply move to where their operating expenses are more manageable. I would do the same if I ran a company. But until they locate a new home for their manufacturing and distribution facilities they will do what they must to remain profitable; raise prices. The money to pay those taxes has to come from somewhere.

But the dimwits in our Legislature think a time of high wages and high unemployment is the right time to create a climate conducive to moving companies out of state.

Again...companies don't pay taxes. Consumers do. 

And in this case, when we are done paying the higher prices, we will pay the more severe price in lost jobs. Watch as companies like Boise Cascade, Mentor Graphics, Nike, and so forth find places to base their business where they can keep their prices competitive and Oregonians join ever-longer unemployment lines.

The vote was strictly along party lines which proves that neither party should have any members in the Legislature; the Democrats who understand neither economics nor mathematics and the Republicans who can't explain them or negotiate at least one person into changing their vote.

Thank you, Oregon Legislature, for proving once again what I have long said. A vote for a candidate from a major party is a wasted vote.


Riot Kitty said...

You've got to be kidding me if you think a tax that hasn't been revised since 1931 is appropriate. You and I are already paying the bulk of the state's coffers, and that is unfair.

Riot Kitty said...

However, I should add, you're absolutely right - both major parties suck.

Darth Weasel said...

We still will be if they jack up the rates on corps, only moreso because the smart corps will indeed move their operations to other states (or countries) where their overhead is lower. So then, instead of increasing the intake, it will have the opposite effect and lower the tax income.

Do I think it is good coprs essentially pay no taxes? Nope. But I do know it is reality and the local government just made a move that will crush our economy even worse and at the worst possible time if they follow through on it.

Fullur said...

"Do I think it is good coprs essentially pay no taxes? Nope."

This statement puzzles me. How could corporations possibly pay taxes based on your above explanation of how they do not? Further, why should they? All corporate taxation does is double tax the consumer.

It is interesting how stupid you have to be to be a Democrat politician. One of them (I think it was Rengal or Schumer) recently admitted that lowering taxes has historically resulted in greater tax revenue and greater prosperity all-around, then said he still did not think it was a good idea. So we are in "the worst economy since the great depression," but taking the clear course to reverse the tanking economy is not a good idea? Brilliant!