Caterpillar claims Health Care Reform Bill will hit their bottom line for $100 million. John Deere claims it will cost them $150 million. AT&T claims it is $1 billion. No matter what the cost is or which corporations are impacted, the one thing for certain is that the tax payer will foot the entire bill.
Well, here we are. Some people believe that “Large Corporations” have this unlimited resource or “Pot of Money” that they simply pull out when they need to pay the bills. Then, what ever is left over goes to the “Big Wigs“, who buy mansions and fancy cars to show us how important they are.
There is an opinion that we can lay the tax burden on ” Large Corporations” instead of the “little” guy and that the “little” guy will pay less as a result! Sorry, it just doesn’t work that way. It just ain’t so!!!
First of all, large companies don’t pay for tax increases. Technically they do, but realistically, all taxes are eventually paid by the people who buy their products. That’s a fact no one can argue!
The Basic Business Model
People invest in the stock of large corporations in order to gain a “fair” return on their money. If a company can not return more on a person’s money than the person can get by putting in a nice safe savings account at the bank then the person would not, or at least should not, invest in that company. Therefore, it is imperative that a company make a reasonable profit so it can return to it’s investors a fair return on their money.
The price of products are usually determined by the cost it takes to provide them as determined by all of the expenses (cost) required to produce and deliver that product or products to the market place. It is also limited by the competitiveness of the industry the company participates in. Never the less, you simply take (labor, material, utilities, advertising, health care benefits, warranty expense, taxes and all other costs and add a margin for profit. The amount of margin is usually limited by the competitiveness of the industry that company competes in.
If expenses(cost) such as health care benefits or taxes go up, then it simply increases the total cost of producing the product or products. In order to maintain profitability or margin, the price of the product must then either go up or other expenses(cost) must go down. If the price goes up the consumer pays the increased cost of the health care or taxes in the increased price of the product. The alternatives to increasing prices are not any better.
What if the price of the product doesn’t go up?
When health care costs and/or taxes go up, there are four things a company can do to maintain margin.
- Increase the price of the product in which case the consumer pays more for the same product. This is not a very viable solution if the company is to remain competitive in their industry. Everyone loses!
- Cut jobs sometimes called improving productivity. Everyone loses!
- Reduce benefits or wages paid to it’s employees. Everyone loses!
- Move the jobs to somewhere that doesn’t have the same tax burdens or benefit costs (aka China, Mexico) Everyone really loses (unless you are from China or Mexico)!
Other Things A Company Can Do
Some will argue that there are other things you can do such as reduce material cost, reduce you utility cost, or even reduce your quality? However, I will argue that in the big picture all of those have a chain reaction to your suppliers and/or consumers that results in the same reduced jobs, reduced benefits, and increased prices to consumers and real tax payers.
- Reducing material cost simply puts the same burdens on your suppliers to reduce jobs and lower expenses.
- Reducing utility usage puts the burden back onto the utility supplier to do the same as above and then next the coal companies, etc.,etc..
- Reducing quality results in increased warranty cost, increased consumer costs or lack of competitiveness.
Who Pays for it? … You do! I do, We do! … Nobody else!
The government produces nothing. They pay for nothing. Everything they do, every job they add or create, every thing they supposedly pay for, every tax they impose on large or small businesses, every give away program they create is paid for from the taxes they collect from you. The Government doesn’t make money. Every cent they spend they get from us!
All increased cost are paid for by the consumer or the “little” guy. You see there is no Mr. Maytag. There is no Mr. John Deere. There is no Mr. Caterpillar. There is no Mr At&T. There are stockholders, some are large stock holders, some are small stockholders. There are consumers who buy the products. There is no “Pot of Money”!
There is nobody but you and me to foot the bill for higher taxes. It doesn’t matter where the government attempts to impose them, we pay for them!
Don’t let me mislead you, I am not for zero government. There are things the government provides that we pay for that are absolutely necessary and appropriate.
The Real Question?
The real question becomes, “How much are you willing to pay for?”
Don’t know ’bout no $100 million, $150 million , or no $1 billion. But, … that’s my TWO CENTS !!! … Papa B.