How Taxes Nearly Destroyed an Industry

Politicians believe that taxes and regulations are simply the cost of doing business. Business owners can either absorb the costs or pass them on to customers. It doesn’t work that way. When the minimum wage goes up, an employer often will lay off a single employee while paying his remaining employees more money to do the extra work. This also lowers his cost if he’s paying health insurance

When I was in high school in the 1960s, I worked for Kroger, union rules said that full-time employees had to get paid $3.30 per hour, while part-time employees could be paid $1.65 per hour. So what do you think happened? Kroger hired two 4-hour employees for an 8-hour day, saving $1.65 per hour. Since part-time employees didn’t get health insurance, even more money was saved.

Most shoppers don’t know the behind-the-scenes business practices of most retail outlets. What they’re looking for is the best price for the best product. Business owners have to satisfy customer demands. Price and service are important to consumers. When governments and forced labor restrictions (at the insistence of government) add cost to labor, retailers have to find a way to save or go out of business. Sometimes there are few alternatives.

The following email was sent to me in response to one of my articles. It’s very helpful in understanding the unintended consequences of so-called revenue enhancements by governmental officials, most of whom have never owned a business or had to run a business:

When my wife and I lived in Tucson, Arizona, in the 1980s and 1990s, Pima County passed a tax on RV overnight stays. The next year, the snowbirds stayed away in droves since they could just as easily camp in surrounding counties for a lot less. The RV parks were almost empty that winter in Tucson and Pima County. One year later the county supervisors quietly rescinded the tax as they realized it cost the county huge amounts of lost revenue.

The newspaper editorial opined that governments need to be very careful when they tax people who live on wheels. So this effect is nothing new. Just more of the same (like when the US tried a luxury tax and killed the entire US luxury yacht business in one year).

 I would love to see these government geniuses go on a celebrity apprentice show with Donald Trump and see them fall on their faces as they tried the same policies in a retail business.

It’s not surprising that productive business people are leaving high taxing states for less taxing states and large manufacturing companies are setting up shop in right-to-work states.