Most people have no idea how our tax system works. Let’s look at an example.
If you go to a furniture store and buy a wooden chair how many levels of tax would you pay?
Taxes are not just charged at the point of sale. They are charged at every stage in the production process that adds value. A tree becomes a plank of wood. The plank of wood becomes a chair. The chair is sold wholesale. You buy it retail.
As the chair moves from the forest to the showroom value is added and it’s that value that’s taxed along the way.
In this example, excluding corporate income tax, there are four levels of tax.
I say excluding corporate income tax because the more tax a company has to pay the more they’re ultimately going to charge for their goods and services.
If you look closely at our tax system, you’ll discover that no corporation pays tax. Only people pay tax. If a company has to “pay” more tax they raise their prices to remain profitable.
Think about that next time you hear someone talk about taxing companies more. At the end of the day they’re really screaming to pay more for what they buy and use.