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It has been documented that virtually all paper money (dollars, anyway) have traces of cocaine on them. Basically, most money ultimately came from a coke dealer. Thus (according to the reasoning of the essay Who really pays MOST Taxes?) cocaine dealers "ultimately" pay almost all taxes. One suspects that something is wrong with this argument. Such suspicions are correct - the essay is flawed by bad economics. The error: Just because money has gone through someone's possession, doesn't mean that possessor pays subsequent taxes. There are other errors in the article. E.g.
It does not follow that the consumer is paying the tax (from the fact that business costs are "passed on to the consumer.") Does taxing something raise consumer demand for it? Of course not. Thus, if the price of the widget is simply raised, the number sold will fall. The business's rate of return diminishes. Or if the price of the widget is not raised, then the profit margin for the business is less. Either way (or if the price is raised only somewhat), the loss accrues to the business, not to the consumer. Only if the demand for the widget is perfectly inelastic will the seller be able to raise the price without diminishing total revenue. But then, he would have raised it even without a tax! Bottom line: Assuming that demand is not totally elastic nor totally inelastic, both the business and the customers suffer from the tax; who pays more depending on the elasticity.Taxpayer essay wrote:Business taxes, whatever form they take, are just another cost of doing business. ALL business costs are, of necessity, passed on to the consumer. It could not be otherwise.
The main point of the essay - that only/mainly consumers pay tax - fails. The essay is about all taxes, but since income tax is a major part of total taxation, the following chart gives pretty good evidence that the rich pay most.
Note that the bottom 50% of income earners pay only 4.3% of all income tax revenue. The top 5% pay over half. This explains why big-spender politicians don't mind cutting taxes for the lower half - it costs them little and gains support for soaking the rich. Cf: The Rich Getting Soaked.
Now don't get me wrong - the poor working stiff suffers most from taxation. Wealth stolen from the rich and blown by the State is money not used for capital goods (machines) and thus not used in employing people, creating better higher-paying jobs, and so on. The plundered loot is blown by government on foreign wars, things that blow up and don't raise anyone's standard of living, paying people to not work, to subsidize inefficient projects that can't hack it on the market, to reward political cronies, to maintain the highest incarceration rate in the world primarily for political and victimless crimes, and so on.
The essay does make some very good points. Government employees (and government pensioners, milfare retirees, etc.) do not pay taxes. They are pure tax consumers. Another good point: Regulations and mandates amount to taxes. (Even the forced collection of taxes for the government, i.e. all the paperwork and trouble involved, amounts to a tax.) Another point is right, but misses that which is unseen: "Rich folks are not the ones who suffer from high taxes." True, but all those who would have become rich, were it not for higher government extortion are worse off.
The "truth in payroll" idea is wonderful! It is absolutely true that the hidden nature of withholding makes State plunder more palatable. It is unlikely that the State could get away with current tax rates without withholding - people would rebel. Withholding was ostensibly a temporary war measure enacted during WWII. As they say, there's nothing more permanent than a temporary government program.
One hidden tax that concerns me a lot, that's not mentioned in the essay, is inflation. This is even more diabolically subtle than withholding - people can't feel their wallets getting lighter when governments create printing-press money. Inflation amounts to a flat tax on all dollar-denominated wealth. It hits the poor more than the rich, since the rich have more of their wealth in concrete, objective goods.
