GOP Texas Gov Hates America, Talks Seceding

[swake]

Taxes are built into price.  When developing a proforma for a product or business, you apply your multiplier after you've added your cost for goods and services (tax included), insurance, and overhead, and after your add your payroll and disbursements (tax included).  So each time one of those factors is adjusted, you simply adjust your profit multiplier to cover it and maintain your margin.

Sure some businesses with multiple distribution points and multiple product lines will shift profit models, but ultimately any increase in taxes passes to the consumer.

No! Successful businesses will ever compromise their business model to "suck up".  The additional cost is shifted somewhere, and that somewhere is always in the form of consumer cost, service, warranty, or product quality. 

Thanks for playing.

Most public businesses DON'T track performance by net profit. Most track performance (and drive share prices) based on EBITDA.

EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization

That is BEFORE TAXES.

Since income taxes are charged on net income long after the EBITDA equation (and only after Interest, Depreciation and Amortization) net after tax income rarely if ever is a retail price driver.

[cannon_fodder]

Swake,

You're actually arguing that when taxes are raised companies just go "damn, guess we won't make any money this year" and eat the loss?

I've set prices for businesses.  I can tell you very directly that when setting a price you take (fixed costs) + (variable costs) + desired profit = price setting.    Insurance rates (both fixed and variable since some are based on sales), labor, margin for error, fuel, maintenance and repair, and certainly taxes (ad valorum, unemployment, payroll taxes, tolls, property taxes, and corporate income tax) is all added in to the equation.

When a cost of doing business goes up we had to assess if we could pass it on to the customer.  Generally, we could pass the cost on IF the cost was universal to the industry.  When fuel prices went up dramatically, EVERYONE raised their fuel surcharge - so we could do so without fear of a negative market consequence.  When the labor contract initiated an across the board raise, it affected most of the industry and we could raise prices.  When we initiated a non-union benefits package it only effected our company, we had to eat that cost or risk alienating customers.

Taxes are an across the board increase.  When everyone's expenses go up the market forces more easily allow for price increases.  It would be doubtful that the company would simply eat the extra cost.  Perhaps find ways to cut in other places and try to keep the price level.  But in general, such a scenario is ripe for upping the price.

I'm guess the phrase "crap, the government is taking more of our money so I guess we just don't make as much" is generally not heard in board rooms.
- - -

And while you are accurate in your understanding of EBITDA, the distributions to owners come from the bottom of the line.  If all the money is out the window for interest expense and taxes, there is none to distribute.  And few owners really give a damn if their company looks profitable if there is no money to distribute.  Money on paper < money in my pocket.  The conversion rate never seems to be 1:1.

At least, that's my humble opinion.

[waterboy]

Gas, not all businesses behave in the same way. Pricing is subject to a myriad of components but not tax rates. What is important is profitability before tax. You set your price and profit projections separate from taxes because they are subject to many different deductions, exemptions, deferrals etc. The taxes are collected and passed through but have no effect on pricing strategies.

I can charge more for a Coke in NYC than I can in OKC even if the tax rates are similar.

[guido911]

Okay, I read all this crap filling the last three pages AND the remarks made by Governor Ludicrous Perry from Texas or (I'm not as dumb as that Alaska chick Perry).

Are you claiming that Gov. Perry referred to Gov. Palin as a dumb Alaska chick or are you trying to be clever. If so, let's not foget that dumbass in the white house right now, you know, the guy that's visited 57 states and bowls as well as Special Olympians.

[we vs us]

The point is that taxes are only one factor among many that affect pricing.  They may or may not be passed on to the customer.  The right has fetishized tax rates to the point that many people believe them to be the PRIME factor in pricing and that's simply not true.

[Cats Cats Cats]

(fixed costs) + (variable costs) + desired profit = price setting

you can set your price all you want, you still have to multiply by quantity which is where the profit really comes in.  You can desire all the profit you want but if you sell 0 you make 0.

[Hoss]

Are you claiming that Gov. Perry referred to Gov. Palin as a dumb Alaska chick or are you trying to be clever. If so, let's not foget that dumbass in the white house right now, you know, the guy that's visited 57 states and bowls as well as Special Olympians.

Looks like the Freeper's dander is up today.

If being clever, then why is the GOP distancing themselves as far away from Gov. 'I have foreign affairs experience because you can see Russia from Alaska' Palin?

The Republicans remind me of the Democrats eight, or even four years ago.  In disarray with no clear-cut direction.  And with Michael 'I knew what I was doing when I criticized Boss Limbaugh' Steele in charge, they may be in for two election cycles worth of this.

Look, I don't dislike the Republicans.  I thought Reagan was a good president for the most part.  The problem now is that the Neo-Conservatives and Right-Wing talking heads are now trying to be the voice of the party, when it's obvious that they are actually in the fringe.  I guess the louder you talk, the better your message gets across.  At least to them.

A moderate is going to need to step up and be the face of the party.  If the Republicans continue to let people like Rush and Gov. Palin put that face on, they'll be going nowhere in the elections anytime soon.

[cannon_fodder]

(fixed costs) + (variable costs) + desired profit = price setting

you can set your price all you want, you still have to multiply by quantity which is where the profit really comes in.  You can desire all the profit you want but if you sell 0 you make 0.

Ummm.  True.  I was only talking about how you price a product.  I'm not pricing a single unit price to satisfy my profit desire.  Generally it is a rate setting, I need to set a 15% margin if I hope to actually turn a profit. 

I guess I assumed people had in mind the inverse relationship between price and demand.  Which is where my discussion on cost increases across the board in an industry come in.  I really don't want to do a 3 page write up on basic market theory.

[Cats Cats Cats]

Ummm.  True.  I was only talking about how you price a product.  I'm not pricing a single unit price to satisfy my profit desire.  Generally it is a rate setting, I need to set a 15% margin if I hope to actually turn a profit. 

I guess I assumed people had in mind the inverse relationship between price and demand.  Which is where my discussion on cost increases across the board in an industry come in.  I really don't want to do a 3 page write up on basic market theory.

No nobody does, that was the point I was trying to make.  If you get charged an extra $5 in taxes just raise your prices $5 you will sell exactly as many and the consumer pays the $5.  That is what everybody has been saying.  Go ahead and write the 3 pages up and save it for a later posting.

[swake]

Swake,

You're actually arguing that when taxes are raised companies just go "damn, guess we won't make any money this year" and eat the loss?

I've set prices for businesses.  I can tell you very directly that when setting a price you take (fixed costs) + (variable costs) + desired profit = price setting.    Insurance rates (both fixed and variable since some are based on sales), labor, margin for error, fuel, maintenance and repair, and certainly taxes (ad valorum, unemployment, payroll taxes, tolls, property taxes, and corporate income tax) is all added in to the equation.

When a cost of doing business goes up we had to assess if we could pass it on to the customer.  Generally, we could pass the cost on IF the cost was universal to the industry.  When fuel prices went up dramatically, EVERYONE raised their fuel surcharge - so we could do so without fear of a negative market consequence.  When the labor contract initiated an across the board raise, it affected most of the industry and we could raise prices.  When we initiated a non-union benefits package it only effected our company, we had to eat that cost or risk alienating customers.

Taxes are an across the board increase.  When everyone's expenses go up the market forces more easily allow for price increases.  It would be doubtful that the company would simply eat the extra cost.  Perhaps find ways to cut in other places and try to keep the price level.  But in general, such a scenario is ripe for upping the price.

I'm guess the phrase "crap, the government is taking more of our money so I guess we just don't make as much" is generally not heard in board rooms.
- - -

And while you are accurate in your understanding of EBITDA, the distributions to owners come from the bottom of the line.  If all the money is out the window for interest expense and taxes, there is none to distribute.  And few owners really give a damn if their company looks profitable if there is no money to distribute.  Money on paper < money in my pocket.  The conversion rate never seems to be 1:1.

At least, that's my humble opinion.

No,

I'm arguing that corporate income taxes are such a game that they are not a factor to companies' real bottom lines. There are so many loopholes and deductions that few large companies pay any amount of real money due to taxes on net income.

But, since those same companies want to "look" profitable to Wall Street (because they are) and still not pay much if any taxes EBITDA is the way they show profitability before they play accounting games to avoid taxes.

Earnings before Interest, Taxes, Depreciation and Amortization, it's the Interest,, Depreciation and Amortization that companies use to avoid taxes so effectively. This most of the gap between Nominal tax rates and Effective rates.

The real unfairness is that small businesses often don't have the resources (and lobbyists) to be able to take advantage of the tax code and end up paying much more in taxes, especially sole proprietorships, and end up paying much closer to the nominal tax rates than large businesses do.

And for those that say businesses should not pay any taxes, fine, but if they aren't going to pay taxes, they should give up all tax credits and government assistance at the same time. I would guess that business, especially large business and farmers, pay in far less than they get out of the government.

[Wilbur]

No,

I'm arguing that corporate income taxes are such a game that they are not a factor to companies' real bottom lines. There are so many loopholes and deductions that few large companies pay any amount of real money due to taxes on net income.

But, since those same companies want to "look" profitable to Wall Street (because they are) and still not pay much if any taxes EBITDA is the way they show profitability before they play accounting games to avoid taxes.

Earnings before Interest, Taxes, Depreciation and Amortization, it's the Interest,, Depreciation and Amortization that companies use to avoid taxes so effectively. This most of the gap between Nominal tax rates and Effective rates.

The real unfairness is that small businesses often don't have the resources (and lobbyists) to be able to take advantage of the tax code and end up paying much more in taxes, especially sole proprietorships, and end up paying much closer to the nominal tax rates than large businesses do.

And for those that say businesses should not pay any taxes, fine, but if they aren't going to pay taxes, they should give up all tax credits and government assistance at the same time. I would guess that business, especially large business and farmers, pay in far less than they get out of the government.

If corporate taxes really don't play any role to a businesses bottom line, then why do so many move out of the country and claim lower taxes?

And, I'm good with no tax credits and government assistance.  Much of the point at the Tea Parties.

[Gaspar]

Gas, not all businesses behave in the same way. Pricing is subject to a myriad of components but not tax rates. What is important is profitability before tax. You set your price and profit projections separate from taxes because they are subject to many different deductions, exemptions, deferrals etc. The taxes are collected and passed through but have no effect on pricing strategies.

I can charge more for a Coke in NYC than I can in OKC even if the tax rates are similar.

See, I told you it makes my head hurt. 

Yes their are a "myriad of factors."

Yes their are many ways of manipulating price structure.

But at the end of the day, if you increase the cost of doing business, you increase the price of the product.  That increase may come in the form of a higher price, less service, cheaper manufacturing, restricted availability or distribution, reduced labor force (layoffs), slower development, or increased prices on ancillary products or accessories.

Ultimately the consumer pays.  Sorry, but that's the way economics works.

[cannon_fodder]

Does anyone else's head hurt? 

I misunderstood your point Trogdor.  Sorry if it seemed like I jumped on you.  Here's a drawingto make it up to you:


Swake:  I agree more when put that way.  However, I still resolutely stand by the fact that taxes on corporations are a bit of a joke.   No matter how you slice it the money for that tax comes from consumers and is withheld from investment in the company, hiring of new workers, acquisition of new capital, or distribution to owners.  At the end of the day, people pay the tax.

I hate the entire tax system so incredibly much!

[Cats Cats Cats]

Does anyone else's head hurt? 

I misunderstood your point Trogdor.  Sorry if it seemed like I jumped on you.  Here's a drawingto make it up to you:


Swake:  I agree more when put that way.  However, I still resolutely stand by the fact that taxes on corporations are a bit of a joke.   No matter how you slice it the money for that tax comes from consumers and is withheld from investment in the company, hiring of new workers, acquisition of new capital, or distribution to owners.  At the end of the day, people pay the tax.

I hate the entire tax system so incredibly much!

No , I wasn't thinking you were jumping on me.  This is like the third thread that everybody assumes that volume has nothing to do with profit.  I am not even trying to make a statement that this will net the government money or lose the government money.  It just isn't as simple as raising prices because your costs go up.

[swake]

If corporate taxes really don't play any role to a businesses bottom line, then why do so many move out of the country and claim lower taxes?

And, I'm good with no tax credits and government assistance.  Much of the point at the Tea Parties.

Who has moved out of the country?

You are confused with moving jobs overseas and moving companies. Labor costs in the US are out of sight. Due in no small part to Medical Costs that government picks up in most other countries.