Philadelphia Mayor Kenney is shocked that his soda tax resulted in higher prices. Apparently Mayor Kenney missed Economics 101. When you tax a business that tax becomes an operating expense of the business which impacts the cost of the product. That’s not to say that business are evil. That’s just to say that if a business wants to stay in business, it has to pass operating costs on to the consumer. It becomes a part of the price the consumer will pay for whatever goods and services the business is providing.
Mayor Kenney also failed to notice such trends when our General Assembly passed gas fees on to the businesses who provide us our gas at the gas stations and convenience stores. Prices started going up leading Pennsylvania to become one of the worst places in the nation to purchase gas. Kenney responded to the rising soda prices by claiming that the soda companies are gouging their customers, when in reality is was Mayor Kenney and his failure to grasp basic economics who was gouging the consumer.
Higher taxes on a business means higher prices, lower wages for the employees, and less reinvestment back in to the economy and community. No matter how you look at it, it’s the people who pay.
We hear all the time about corporate greed and that certainly exists, much of it only made possible through government sponsored corporate welfare. In a real free market economy price gouging from a business can be crushed by their competition in the industry unless the government steps in with their grants, subsidies, low-interest loans, tax abatements and deferrals.
When it comes to price we pay for a gallon of gas, you can get as angry as you want at the gas stations but it’s misdirected anger. The $2.50 average you’re paying at the pump has about $1.40 going to the gas companies. Of that, about 7 percent goes to actual gas company profit. That translates to gas companies making about 10 cents on every gallon of gas sold. Now contrast that to the $1.10 the government is collecting in taxes for the federal and state coffers….Who’s really the ones gouging the customer?
The mayor of Philadelphia isn’t the only person in this Commonwealth who doesn’t grasp basic economics. Recently the Chamber of Commerce cited a sales tax on diapers as part of their opposition to HB/SB 76 property tax elimination plan. Of course, the chamber doesn’t want you to realize that the price of those very same diapers is inflated because there is a property tax involved in every step of the production of that pack of diapers.
The companies who produce the material the diaper manufacturers use pay a property tax that drives up the cost of those items. The company producing the diapers is paying a property tax which is also driving up the cost of those diapers. Then the diapers go off to a warehousing facility when another property tax is levied. Finally, the diapers arrive at the retail store where property tax is again levied on those goods. In between all of that, a shipping company was hired to transport all those goods from one place to another. That shipping company charges a fee that is artificially inflated by the property tax they pay on their business.
Apparently the Chamber is only offended by an actual tax that the consumer can see. Apparently taxing an item once at the time of purchase is bad, but taxing it several times through the cascading impact of the property tax is perfectly fine!
You see, no matter how the government spins it, or the Business chamber for that matter, property taxes on a business becomes part of a hidden cost that drives up the cost of everything we use.
We can see this dramatically in the impact of the property tax on rental properties. We can complain all we want about those greedy landlords but in the end, if a landlord doesn’t pass on the property taxes to the renter, the landlord isn’t going to be a landlord very long. The cost of the keeping that property will soon be far more than the landlord can sustain. It’s not an increase in the cost of the mortgage; that hasn’t changed. The changing variable is the property tax.
It goes further than that. When the landlord goes to purchase a new hot water heater for their rental property, the hot water heater is carrying a price that’s been inflated by the property tax on the retailer, manufacturer shipping companies and the business that manufacture the parts for that hot water heater.
Opponents of HB/SB 76 will proudly proclaim that eliminating the property tax on a business is somehow immoral. They tell us that 30% of the property tax revenue comes from businesses. Somewhere in that diatribe Walmart will be mentioned making it appear as though Walmart is paying 30% of the business taxes revenue related to the property tax. It’s just simply not true.
In the First place the 30% is an inflated number. The number is closer to 25%. When it comes to businesses in the Commonwealth, well over 90 percent of the businesses hire less than 50 employees. It’s not the Walmart’s, it the small mom and pop stores that are located all over the Commonwealth.
Those businesses need to make the property taxes they pay part of their operating expenses so what is really happening is that the public is paying the property taxes that provide for the other 75% of the revenue but they are also paying the business property taxes that make up that 25%. In case you were wondering how that all breaks down. The Home-owners are providing about $10.5 Billion of the revenue from property taxes directly when they pay their annual school property taxes each year. Then they pay higher prices for their goods and services to the tune of about $3.5 billion the come from the property taxes applied to businesses.
We supposed to be okay with that. After being extorted for 10.5 billion just because we live in a house we are then hit again with a $3.5 billion dollar price tag because we purchase things.
When they start talking about some of the items that would be taxed through a sales tax (things like flags, books or whatever else they roll out) don’t be fooled. You are already paying taxes on those things because of the cascade effect of the property tax. That includes all the food and clothing you currently use.
Under HB/SB 76 no clothing item under $50 dollars would be taxed. All food stamp purchases will continue to remain untaxed. All food items on the WIC list will remain untaxed. To add to the mix, once the property tax is eliminated the hidden cost of the property tax in all those goods and services goes away. We won’t see the artificial inflation as a result of the property tax that keeps driving up the cost of those things.
Or we can continue to tax smaller family owned farmers off their land to make way for the corporate farms because we still have to eat. That’s what property taxes are doing!
We can continue to tax people out of their homes and force them into rental properties because they’ll still need a place to live and then keep driving up their rent forcing more families to double up. That’s what property taxes are doing!
We can continue to drive smaller family owned business out of business to make way for the corporate teams who hire their lawyers to fight the assessed values passing that cost on to the rest of us. That’s what property taxes are doing!
We can continue to pay artificially inflated prices on everything we purchase: food, clothing, whatever. That’s what property taxes are doing!
Or we can change the status quo.
We can eliminate the property tax and stop inflating the costs on everything we purchase; Stop artificially driving up rent; Stop creating needs for government run home and rental subsidies and programs like KOZ and LERTA which cost us far more than they return in value.
We can eliminate the property tax and instead of closing doors of opportunity or controlling those doors through government programs, we can open doors of opportunity for the working families in this commonwealth.
We can provide a path for renters who want to become homeowners to do so; We can provide and easier path for the small business to compete with their corporate counterparts; We can grow jobs naturally instead of relying on government funded corporate welfare; We can stop the artificial increases in the goods and services we purchase making things more affordable for everyone.
That’s our choice! We maintain the status quo where things will continue to get worse or we can create a new vision for our future. We not just looking a better way to fund education. We fighting for a better life for everyone in the Commonwealth!