Obama's press conference.

[HappySqurriel]

Squilliam said:

HappySqurriel said:

Squilliam said:
Actually the cost of taxation really depends on how flexible the consumers/producers are. When demand is inelastic the taxation falls most heavily on the demand side, but when demand is more elastic (ignoring supply for simplicity) the tax falls more heavily on the suppliers.

Cigarettes -> Consumers pay.
Canola oil -> Producers pay (as people can get Olive, Bran, Lard etc)

@Mafoo

1. You don't get campaign contributions taxing the rich.

2. Because like I said wayyyy earlier. The proportion of income in that group has increased substantially at the same time as the taxation level has dropped. You've proved correlation and not causation.

And when the tax falls heavily on the supply side, producers cut back on their costs by laying people off, reducing employees income and benefits, and by buying less goods and services from their suppliers which (effectively) has them passing the cost of the tax onto others.

It doesn't work that way.

If a company is charged a tax then some of the tax is bourne by the company itself and some is passed forward to the consumers and backwards up the supply chain. Infact it doesn't actually matter whether the tax is originally placed on the producers or the consumers of the product. Whether the government taxed tobacco growers, tobacco companies or tobacco sales the cost would get passed onto the consumer because people are unlikely to decrease their consumption much in reaction to a price increase. Taxes aren't sticky, and who pays the tax is really dependent on the elasticity of demand/suppy of those involved.

Except it does work that way ...

Companies and individuals will do everything in their power to increase the cost of their goods or services, or reduce their expenses, to offset increased costs. These costs continue to be passed along until they reach a company or individual who doesn't have the ability to pass the cost along, and this (generally) means that the costs are felt by the middle class and the poor.

Certainly, the worker who is layed off because his tractor factory's production was cut may not associate it with an increased tax on canola oil which forced farmer to reduce their expenses (which resulted in fewer tractors being bought) but that would be the cause.