Are Most Corporate Tax Hikes Passed on to Consumers?

All United States corporations pay a corporate tax of one type or another, and sometimes they many different types of corporate taxes depending on sales revenues and even the area in which the Corporation is located. There are many types of corporate taxes that every corporation must pay, and some corporate taxes are more of a burden for a company than others. However, there are times when corporate taxes affect a corporation's ability to produce goods and services and maintain current levels of pricing for consumers and customers.

Furthermore, there are many times when a tax hike increases costs for the corporation and those higher costs are passed along to the consumer – in the form of higher prices for products and services.

Corporate Taxes and the Effect on Consumer Prices

Most corporations spend a lot of time in determining sufficient pricing levels for their products and services. Furthermore, there are many factors and variables that must be considered when a company prices its products or services. Generally speaking all of the costs incurred by a company to offer a product or service are included in the pricing of a company's products or services.

If costs remain relatively stable for a company, most corporations will generally try to avoid increasing price levels as increasing prices tends to anger customers and potentially drive them to other competitors or other sources for their products and services. However, there are times when a corporation is left with little choice but to increase prices, and one of the reasons a corporation may consider increasing prices is whenever government entities impose higher tax rates or tax percentages on the corporation and its revenues. This is because a corporation needs to maintain profits to ensure returns for investors and shareholders as well as meet obligations of the corporation. When taxes impact profits, prices are usually raised to help offset the additional costs of doing business, and the consumer pays a higher price for goods and services at the cash register.

Why Corporate Taxes Are Passed on to Consumers

Whenever a corporation is assessed with a higher tax rate or a new type of corporate tax, a corporation may not have another option to increasing prices. Corporations need to earn profits in order to meet obligations, perform research and development as well as expand their businesses and potentially employ more people. However, whenever government agencies increase the amount of taxes to be paid by a corporation, most companies will try to maintain current profit margins by increasing the price charged to the consumer.

There are many Americans that believe United States corporations pay too little income tax and often escape liability from paying their fair share of taxes. On the other hand, there are just as many Americans that claim the tax burden on United States corporations is too much already. Regardless of your viewpoint on this particular issue, it is reasonable to believe that tax increases imposed on United States corporations will almost always result in higher pricing for the average consumer to some degree.

There are many common examples of corporate taxes that increase consumer pricing. For example, the United States government earns a lot of revenue from taxes imposed on oil producing companies, alcoholic beverage companies and tobacco companies; in fact, these types of industries have incurred many tax hikes in recent years. Therefore, in response to tax hikes many of these companies have increased prices to consumers. If you are a smoker or enjoy the occasional alcoholic beverage, you are probably aware that prices for these types of items have increased two or threefold in recent years. While many price increases may not be attributed to a corporate tax hike, whenever corporate taxes are increased - you will usually pay higher prices.




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