Consumers and Hidden Taxes: How Consumers are Effected by Hidden Taxes

Simply stated, consumers are effected by hidden taxes because the cost of these hidden taxes is part of or hidden inside the prices business must charge.


Reality check here – businesses gets the money they use to pay all taxes government requires from the money they collect from their customers.  That’s it.  That’s the reality of it.  The only source of income (called revenue for business) is the money collected from their customers.

Hidden Taxes force prices higher.

I could create something called a financial model to make my point here.  But I’m not going to do that in this part of my eight part series.

Business has certain costs that are paid using the money they collect from customers.  For example, the cost of employee wages and benefits are paid using the money business collects from its customers.  The cost of lights, heat and other utilities are also taken out of the money business collects from its customers.  The money business uses to make payments on loans and other debts also comes out of the money collected from customers.

In the same way, all taxes that a business must pay, and which are not added on at the time of sale as a transparent tax are hidden inside of the prices the business charges.  In this way, all hidden taxes have the effect of forcing business to raise their prices just to be able to pay for these hidden taxes.

I will comment more on the effect of hidden taxes on prices in part 4 of this series, where I give an example of how the markup works.  More specifically, I show how the normal business practice of a markup causes prices to be raised higher than the amount of the actual hidden tax being passed on to customers.

But for now, I’m keeping it simpler, because not all consumers are experienced business owners or managers who already understand why businesses use a markup.

Transparent Taxes would allow prices to be lower.

Let’s just assume that, on average, a business pays 10-cents in hidden taxes for every dollar of revenue collected from customers.  What this means is that if all hidden taxes were to suddenly end, the business could lower its prices from $1.00 to $0.90 (or 90-cents) and have the same dollar amount of profit they do now.

If a business currently averages 10-cents profit per dollar of revenue collected from their customer, and that business also pays 10-cents in hidden taxes, then by ending the hidden taxes, the business could lower its prices from one dollar ($1.00) to ninety cents ($0.90) and still have the same 10-cents profit.

I will comment more on this point throughout this eight part series.

Thank you for taking time to read and ponder my opinion on this topic.
An Opinion Article by Dave Kemper
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It has been said that: "One definition of insanity is to do the same thing, the same way, over and over and over again, each time expecting to achieve a different result."
Therefore, we must either CHANGE the way we live, or we bind our future to our past as if with CHAINS.
"I do not consider myself to be better than anyone else.  But I do believe in exercising my right to not stay stupid."

David W. Kemper, Author
© Copyright 2014 by David William Kemper.  All right reserved
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