Newsflash: Tax Hikes Hurt Business
In Chicago the city instituted a tax on bottled drinking water, which went into effect on January 1st, and projected big revenues from it. But do you know what really happened? Businesses sold fewer bottles of water, and the tax isn’t anywhere near meeting revenue protections.
January collections were $554,000. That’s far short of the $875,000-a-month needed to meet the city’s $10.5 million-a-year projection. . . .
David Vite, president of the Illinois Retail Merchant’s Association, acknowledged that bottled water consumption rises with the temperature.
But that doesn’t explain away what Vite calls “enormous increases” in suburban bottled water sales, particularly in stores near the Chicago border.
Taxes decrease demand by artificially increasing cost. This is a simple fact.
Now apply this fact to other issues, like the minimum wage. The government artificially inflates the price of low-wage labor, and as a result fewer businesses employ low-wage workers. Capital gains taxes. The government inflates the expense of investing, so fewer people invest.
That’s how it works. Now, obviously, some taxes are a necessary evil. Government has certain necessary functions that must be funded, but wouldn’t it be better for government to narrow its focus in revenue streams to a few broad areas (like a single sales tax, for instance) instead of spreading the corrosive effect of taxation around the economy through a laundry list of taxes on everything from property to income to bottled water purchases?
