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If the market has reached the pre-tax equilibrium, would an added evenly-applied tax change competitiveness at all? I guess I don't see how that would change a

If the market has reached the pre-tax equilibrium, would an added evenly-applied tax change competitiveness at all? I guess I don't see how that would change anything at all. If you and I are competitors, and we both pay the same tax rate, that's already factored into our businesses in some way. Sliding it up or down an equal amount on both of us won't change the me vs. you competitiveness right? I get what you're saying regarding only pricing what the market will bear, but on the flip side of all this, consumers suddenly have more money, so I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets, and around the mulberry bush we go...

unclebucknasty 13y ago
>would an added evenly-applied tax change competitiveness at all? Any variable can change competitiveness, as companies may differ in their responses to it. For example, look at fuel prices for airlines. When they increase across the board, some airlines may raise prices, others may cut back on services offered, still others may add baggage fees, some may focus on increasing volume on more profitable routes, some may lower prices and heavily promote their lower fares to gain market share, while others may risk prepaying for fuel at current prices or hedging with shorts, etc. Point being, of course, that the same change that hits every competitor will produce different responses and effects. This can completely alter the competitive landscape. And, it's virtually a guarantee that you won't simply get some uniform, across the board price increase. If we don't acknowledge this, then we are looking at the change in a vacuum, completely insulated from the realities of free market behavior. >I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets Yeah, I think I actually mentioned that in another post (too much risk/work to view another post mid-reply on this tablet). Anyway, it could definitely be the case that consumers can bear more, however, it is not neccesarily 1:1. That is, there are a lot of variables that might impact whether they'd be willing to spend that extra money on that product. Also, there is still some price that the market simply won't bear for a given product, irrespective of the extra money in consumer pockets. In any case, there is certainly no guarantee that companies can simply pass on the additional cost. And, it can also be the case that some companies can, but others cannot, given their prior prices. Just too many variables.

unclebucknasty 13y ago

>would an added evenly-applied tax change competitiveness at all? Any variable can change competitiveness, as companies may differ in their responses to it. For example, look at fuel prices for airlines. When they increase across the board, some airlines may raise prices, others may cut back on services offered, still others may add baggage fees, some may focus on increasing volume on more profitable routes, some may lower prices and heavily promote their lower fares to gain market share, while others may risk prepaying for fuel at current prices or hedging with shorts, etc. Point being, of course, that the same change that hits every competitor will produce different responses and effects. This can completely alter the competitive landscape. And, it's virtually a guarantee that you won't simply get some uniform, across the board price increase. If we don't acknowledge this, then we are looking at the change in a vacuum, completely insulated from the realities of free market behavior. >I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets Yeah, I think I actually mentioned that in another post (too much risk/work to view another post mid-reply on this tablet). Anyway, it could definitely be the case that consumers can bear more, however, it is not neccesarily 1:1. That is, there are a lot of variables that might impact whether they'd be willing to spend that extra money on that product. Also, there is still some price that the market simply won't bear for a given product, irrespective of the extra money in consumer pockets. In any case, there is certainly no guarantee that companies can simply pass on the additional cost. And, it can also be the case that some companies can, but others cannot, given their prior prices. Just too many variables.