Tuesday, September 29, 2009

Democrats Confused About Business Taxes. Or are They?

Tom Gantert in his Reporting Michigan blog GOP state representatives are against a health care tax on physicians’ gross receipts reports:

“The Republican state representatives criticized a Democrat plan to tax health care in order to help balance the state budget, according to a GOP press release.
House Bill 5386, which is currently in the tax policy committee, levies a 4 percent tax on physicians’ gross receipts.

“It is astounding to me that right now when we are in the middle of a national discussion about lowering the high cost of health care, Michigan Democrats are actually pushing for a new tax on doctors that will make medical treatment more expensive,” said House Republican Leader Kevin Elsenheimer, of Kewadin, in a press release. “Doctors are going to have to pass these costs onto their patients, making the cost of health care go up.”

The GOP estimates that, if approved, the tax would raise health care costs in Michigan by nearly half a billion dollars annually.”

This attempt by the House Democrats reveals a fundamental misunderstanding many Democrats have about taxes levied on businesses or professionals. Anyone who understands economic theory knows that in general, businesses don’t pay taxes – individuals do. In the long run, any taxes levied on businesses get factored into the prices for the products the businesses produce or the services the business provides. An exception to this rule may be in the case of a small business in which the “profits” are actually the wages the sole proprietor or small business owners take home as a residual of what left after paying the business’s expenses. And, even in this case, in the long run there is less of this product or service provided which raises prices to consumers of those products or services.

Another possibility is that the Democrats are simply confused about business. Many Democrats equate a “business” which makes profits as “evil”, and therefore should be punished by extracting taxes to be redistributed to those they perceive as more worthy. The quest for profits is what makes the capitalist system work, and the capitalist system has been proven to provide abundance. Would anyone care to try the Soviet experiment in the United States? Profits are the wages for the small business owner. Big corporation profits go to the shareholders, who are you and me, owners of many corporations indirectly through our ownership of shares in our mutual funds, 401(k)’s and other investments.

The bottom line is that the Republicans in the Michigan State Legislature are justified in resisting further taxes on businesses, even those the Democrats perceive as “filthy rich, greedy physicians”. We must resist such class warfare.

Comments? Arguments?

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