The Customer Is Always Taxed

FEE – Philadelphia’s most famous son, Benjamin Franklin, popularized the expression that “nothing can be said to be certain, except death and taxes.” To that list you can add a third certainty: politicians will consistently misunderstand or misrepresent how taxes actually work. Look no further than Philadelphia Mayor Jim Kenney’s misguided soda tax for proof.

Like most politicians, Kenney looks at taxes the way a barfly looks at an ATM near closing time: he thinks he can simply draw money out of the economy whenever he wants without consequence. As any Economics 101 textbook would have explained, had he picked one up, the soda tax was destined to lead to higher soda prices. Instead of looking in the mirror, though, he blames the very merchants on whom he foisted the tax in the first place. “They are,” he said, “gouging their customers.” The implication? Mayor Kenney believes that “business,” not customers, should pay the tax.

Taxes in Reality

In pushing for more taxes, politicians either don’t understand or won’t admit that every tax ― no matter on whom it is levied ― is ultimately paid by people. Every tax on “business” gets passed on in the form of higher prices, lower wages, or lower investment return. Businesses don’t pay taxes to the government; they collect taxes for the government. One way or another, people pay.

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