Trickle Down and Around Taxation

Trickle down taxation is when business push higher operation costs onto their customers. John Stossel’s article, “Obama: I Will Tax You to Punish Banks,” expresses the idea that taxes aren’t really paid by business–all taxation eventually trickles down to customers:

“In other words, the Obama Administration is going to punish those greedy banks by making it more expensive for you to borrow money. This is wrong on so many levels, it’s hard to know where to begin. Let’s start with a point made by Jamie Dimon, CEO at JP Morgan Chase: ‘Using tax policy to punish people is a bad idea…All businesses tend to pass their costs on to customers.'”

And from TheOneLaw on Trickle Down Taxation:

“Taxes on corporations are just passed on to the customer that purchases the products of that company. If that customer is another business it adds on its taxes and passes it along until it gets to the final consumer of the product.”

I agree with both of these articles, but want to point out not all the additional taxes are paid by customers. With high unemployment, businesses have the option of passing some of the tax burden onto their employees. Several companies have stopped matching 401(k) contributions and unpaid overtime is on the rise. Keep in mind the banking industry is regulated by Washington DC as to what they are allowed to charge customers. The taxation can be passed along with new hidden fees, but don’t be surprised to hear bank employees complaining about benefit and wage cuts.

With each new tax, sooner or later the tax shifts its way to the bottom, to the person that has no power to pass the tax farther along.

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