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Taxes they dont tell you about

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The ignorance of the population at large and especially the punditocracy regarding basic economics – let’s call it Economics 101 – is truly appalling.

I guess we’d better include the bureaucratocracy as well because their understanding is also woefully inadequate.

What I’m talking about is the general ignorance of how taxation affects people. Let’s start with a basic economic fact, shall we?

Businesses depend on profits to provide jobs, pay employees, employees’ benefits and to continue to manufacture or provide goods and services consumers want, need or desire.

The most basic definition of profit is income less expenses and taxes.

There you have it.

For businesses to stay around they must pass taxes through to the ultimate consumer – YOU. Do you get it now? Businesses don’t pay taxes. You always do.

So, when legislative bodies want to tax business what they really want is to raise taxes on the average Joe but in a manner he doesn’t see. Understand?

When elected officials can pull that off they get the increased revenue but escape the harsh criticism of folks about raising taxes. It’s a tax they don’t tell you about.

There is another way to tax folks without telling them and it’s pretty slick too.

Take just one example. Congress passed a new energy bill right before the first of the year containing a stiff new fuel-efficiency standard for U.S. automakers.

What you got from Congress was a great big tax hike and you didn’t even know it.

How about that?

The CAFÉ standards which are a part of the Energy Independence Act require fuel efficiency to jump to a fleet average of 35 miles per gallon by 2020 from about 25 now.

What does it mean? It means you will soon be paying a lot more to buy a car.

Sound reasonable?

To a lot of folks these rules are long overdue.

Why, they’ll help us cut our reliance on foreign oil while reducing global warming.

Only a conservative could disagree with such worthy notions!

So, what’s the problem?

Well, from what we know now it will cost automakers some $85 billion to comply and when all costs are factored in, other estimates put the cost at $18 billion a year.

Well, fine. Stick it to those evil automakers, right. But do you really think for a minute GM or Ford will pick up the tab? Hardly. It will be YOU.

GM’s Vice Chairman, Bob Lutz, explained that after more research the cost "per car of the new CAFÉ standards is going to be in the range of $4,000 to $10,000, with an average of about $6,000."

So, if the average cost of a new car in 2006 was $27,958, according to the Comerica Automotive Affordability Index, the new energy bill will be a 21.4 percent tax hike on the current car prices.

Oh, you mean they didn’t tell you that?

Plus, new fuel-efficiency standards are supposed to clean up the air by encouraging people to drive cleaner cars thus saving four million barrels of imported oil per day.

That sounds great, doesn’t it? But as with most things, the devil is in the details.

In reality, the higher cost of new cars will encourage people to keep their older, dirtier but cheaper cars much longer. What do you think that does to those projected benefits?

Want proof? Well, in 1970, just before the first CAFÉ standards came out the average age of an auto on the road was about 5 ½ years.

By 2000, the average had climbed to nine years thanks to the higher costs of buying and operating new cars.

The direct results of higher fuel efficiency and safety standards.

Want to hear another negative?

One way automakers can improve mileage is to make smaller, lighter cars.

Why do you think European vehicles are so tiny when compared to U.S. cars?

It’s true, smaller cars are cute but they’re also darned dangerous.

A study by Bob Crandall and John Graham of the Brookings Institute estimated there were some 2,200 to 3,900 additional deaths per year related directly to the CAFÉ standards then in place.

Other studies such as one by the National Academy of Sciences say the same thing.

Now, if you want to thank Congress for its 21 percent tax hike on cars along with a policy destined to kill almost as many Americans per year as has died in the wars in Iraq and Afghanistan, please feel free to do so.

While you are at it you might thank Barack Obama and John McCain as well since both supported the new standards.

This is bad economics, it’s bad policy, not to mention excessive regulation.

Our government through short-sighted, feel-good policies coupled with excessive regulation continues to drive up the cost of many things.

Count them: oil, food, cars, homes, medical insurance and on and on.

Then when things don’t work out they blame others.

Stupid consumers, greedy big corporations, foreign interference, just to name a few, for the bad results.

Bottom line; all this just makes us poorer and a heck of a lot less safe.


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