Why Taxing the Rich Doesn't Work: Taxes Are Subject to Price Optimization

Price optimization is the the process in which a company determines the optimal price point for a product to maximize profits. It's done by analyzing how the consumers react to prices in a particular market. It's no coincidence that a gallon of milk has a particular price point; it's the result of price optimization, as well as competition in the market for that particular product.

Even if you really wish to buy a gallon of milk, there's a certain price level that you're willing to work with. No one would pay a hundred bucks for a gallon of milk, for instance. Depending on how much you need the milk, you're willing to pay a little extra if you have to, but there's always a breaking point.

The market has done this ever since its emergence, but for some reason, a lot of people hold on this idea that taxes are exempt from this.

I feel this is false.

If you really look at it, taxes are the price tag for the product that is the society in which a company operates: the infrastructure, the level of education of the people, different services that the government provides through public money, etc.

A company can be willing to pay an X amount of taxes for whatever he feels the benefits of operating in a certain country are, but just like with the consumer and his gallon of milk, companies, too, have their breaking point. Just like every individual in general, rich or poor.

A good example of what I'm talking about is Finland.

Over here, alcohol has always been the favorite thing to tax by law makers for years, and to a certain point, increases in alcohol taxation have lead to more tax revenue for the government. But recently, there's been an increase in people buying their alcohol "south of the border", if you will, from Estonia, since its taxed less there, and therefore costs less. It's cheaper to pay for a boat ride to Estonia to buy your alcohol than it is to buy the alcohol from Finland.

This has lead to less tax revenue, since, instead of it working the way a lot of people seem to think, which is "the more you tax something, the more money you make", consumers have decided that the price of alcohol has reached its breaking point, and they no longer buy it from Finland.

This is the same with companies, and this is really important if governments wish to keep the jobs within their borders.

Every time there's an increase on taxation and expensive regulations, they move closer to their breaking point. For some, the the bar is lower, and for others its higher, but every economic actor has his or her breaking point, and once its reached, it's a-bye-bye. People who are poor have less opportunities to take their ball and go somewhere else, but those who have the resources to do so, will. And the poor suffer even more due to the lack of jobs and opportunities that the rich create.

People, particularly in the left, need to understand that the economy consists of people, all looking to maximize either their profits or well being in general, and you can't just increase the price tag forever, and expect people to just keep buying the product. It doesn't work in business, it doesn't work here.

A company will remain in a country as long as keeping it in said country best serves the people running it: as long as its worth the tax price tag. Reasons to keep a business in a country can vary: it might be the owner's home country, he may have good partners, good work force, etc. in that country, but that doesn't mean that he's willing to pay more than their value in taxes.

So, the idea that oh, we just need to tax the rich more to gain more tax revenue is just erroneous to begin with, since it's likely to not increase tax revenue at all. Businesses are not in business for you, they're in business for themselves. Whether you like it or not is completely irrelevant.

If you don't believe me, start selling milk for a hundred bucks per gallon, and report back to me.

Of course I am not, but if I were a government, instead of just taxing people, I'd actually ask people how much they feel the society is worth, to get a feel for how much they value whatever it is that they get out of society, in order to determine tax rates through the process of price optimization. Right now, businesses are moving abroad from the west, and governments seem to have very little answers other than "Welp, tax revenue is decreasing, so we need to increase taxes!"

Not taking into account that perhaps the taxes were the cause of the problem.

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