Politicians proposing taxes on common grocery items may see dollar signs but they must remember who will be paying the price. An economics professor and research fellow say that in Philadelphia, where a 1.5 cents per ounce beverage tax impacting more than 3,000 products just went into effect, the burden is falling on the consumers.
In an opinion piece for the Philadelphia Inquirer, Dr. Antony Davies, an economics professor at Duquesne University, and James Harrigan, a senior research fellow at Strata, write that, “In pushing for more taxes, politicians either don’t understand or won’t admit that every tax – no matter on whom it is levied – is ultimately paid by people.”
This is because simple economics tells us that businesses cannot just absorb tax increases. Rather, they must pass taxes onto consumers in order to offset the extra cost. Davies and Harrigan explain it this way:
“Every tax on ‘business’ gets passed on in the form of higher prices, lower wages, or lower investment return. Businesses don't pay taxes to the government; they collect taxes for the government. One way or another, people pay.”
Politicians may think that so-called taxes on businesses are a back-door way to generate revenue without having to take responsibility for raising taxes on consumers, but people see through this gimmick. And for that reason Davies and Harrigan say, “the citizens of Philadelphia deserve better.”