I'm no fan of tariffs ... .. but I do think it is puzzling how so many folks thought increasing corporate income taxes wasn't going to jack up prices Did they really think Walmart and Amazon were just going to suck it up and cut profits?
#22 | Posted by Miranda7
That's a little different.
Corporate income taxes are only on profits. It doesn't increase their overall cost of business. If they could increase product cost to increase profit, they likely would have already done it even before an income tax increase. So a fair income tax increase shouldn't necessarily increase product prices because prices are already set to maximize return.
Tariffs are on EVERYTHING. Profit or loss, the cost of doing business increases. So prices go up whether the market can bear it or not. Maybe not as much as the tariff but still they go up.
Think of it this way: A Business does $10 billion in revenue with a $2 billion profit margin (20%) selling at an optimum return price.
Put it in perspective with a imported product and a 10% corporate tax vs. a 10% tariff assuming a healthy 20% profit for the company:
Product Price per item: $100
Profit per Item sold: $20
Income tax on item sold by profit: $1
Tariff cost per item sold: $10
What if the product is made in the US with only 50% of the cost from imported parts:
Product Price per item: $100
Cost to manufacture and sell in the US: $80
Profit per Item sold: $20
Income tax on item sold by profit: $1
Tariff cost per item sold: $4
However, the other 50% of the US made parts are likely going up in price too because demand increases for local raw materials or third party parts: $1-$2
Tariffs are GREAT if they are targeted and low. You want more manufacturing? Tariff end products, not base materials. Demand goes up for base materials anyway in the US because more manufacturing takes place in the US as our products are more competitive price-wise with foreign products. But... the Trump tariffs...ugh.