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How can the tax ever be worse than a sale? Even if the tax is 100% on the profits from a sale it would still contribute to economies of scale at the production

• AnthonyMouse 6y ago
  > How can the tax ever be worse than a sale? For one thing, sales taxes are on revenues rather than profits (because the entire price is profit to somebody, and otherwise you're giving incentive to corporate shell games again), and that means the tax could exceed the profit to the entity making the decision. Also, any non-zero profits aren't necessarily better than the alternative, because the alternative is to deploy the same capital somewhere else. Your factory is producing as many widgets as it can for a unit cost of $5, France was paying $10, now with tax you're only seeing $7.50 of that, but people in Oregon (no sales tax) would pay $9.75 so it's now more profitable to sell to them instead. Or you could stop making widgets entirely and turn your factory into condos if that's now more profitable. For that to make sense the profit from widgets doesn't have to be zero, only less than what you can get from doing something else. Meanwhile if the customer in France still wants the widget, they can get it, but they've got to pay enough so that the after-tax price is still ~$10. So in that case the company keeps making widgets and selling them to France but it's the customer eating the tax.
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