I'd also be interested in Beep's take.

Post #306,651 by Another Scott 4/2/09 10:38:53 PM Reply	I'd also be interested in Beep's take. Bookselling on the web is a complicated issue because it's worldwide. The answer you get will depend on the assumptions you make. But in the context of the USA, it's a reasonable question since, as I think is inescapable, sales taxes are eventually going to apply to Internet sales. What would happen to Internet sales as opposed to local sales? If booksellers suddenly had to apply a $2 fee for book sales, I think it would be handled much the same way as all of the various taxes on phone service. There's a separate line item for them. So, instead of $9.95 for your new favorite author's book from Amazon and free shipping, you'd pay $11.95 on the day that tax takes effect. Would Amazon feel they needed to eat the tax? Possibly not, unless they saw a drop in sales, or unless they felt they could get good press by absorbing the cost temporarily. But it's hard to know. But, if you're like me, you don't look at your monthly phone bill and say, gee that local tax really burns me up. "You say, !%*##%! I'm going to cancel this if the price keeps going up!!!" It's the total cost that matters. As Drew says, prices are usually based on supply and demand - not costs. http://www.thetrutha...iscounts-exposed/ Of course, in the long run, income (revenue) has to exceed costs, so there is a feedback loop in place. But Bill Customer doesn't care if it costs Amazon $12 to sell him a book if he can buy it for $10 from Powell's. So how would it end up? It's hard to say. I think that in the long run the $2 would be added to customer's total cost. But, and it's a big but, if total sales revenue drops then companies will be forced to reduce their costs or become more efficient to make their customers see the value in making the purchase. And in the real world, if it's only a US tax, then one could imagine that sales by Canadian and Mexican bookstores (or foreign affiliates of US bookstores) might see substantial increases. Ultimately, the market will decide - not the booksellers. Assuming there isn't a cabal of booksellers, and assuming the tax is applied equally and can't be gamed.... So, the common view that "the corporation doesn't pay the tax, the customer does" is far too simplistic. It depends on a whole slew of factors. My $0.02. Cheers, Scott.
Post #306,657 by beepster 4/3/09 8:50:56 AM Reply	For Pete's sake...how hard is it? at the end of the day, the consumer pays for everything. It really is that simple. If you want to complicate it and say "company x cuts costs so they don't have to pass it on"...company x has just fired 100 people..those 100 people are consumers. They might not be customers of company x...but they are consumers. After peeling back several layers of complication, the beginning and end is the consumer. Sure, in your example, the US taxpayer may not bear the entire burden of a "global tax"...but at its root, with no consumers...there is no Amazon, no GE, no Exxon, no ATT, no nothing. I will choose a path that's clear. I will choose freewill.
Post #306,666 by Another Scott 4/3/09 10:09:30 AM Reply	Let's play Reductio ad absurdum Business taxes are bad because they take money from consumers. Therefore, we should eliminate all business taxes. No corporate income taxes, no FICA contributions, no local taxes... Behold! Business prices drop and consumers get the benefit! Amazon sees sales rise! But wait. Revenue to national governments drop unless tax rates rise for individuals. But that's not politically popular, even though it would be "revenue neutral" according to the economists. Because the locality can't afford a police force anymore, Amazon has to hire its own security force. Roads fall into disrepair because states don't have the funds for road improvements. Amazon can't deliver packages in a timely way, so their sales fall. Since the court system has collapsed due to lack of revenue, Amazon employees no longer have to worry about prosecution by the state, so they take what they want. The Amazon Police can't stop them, because they are understaffed and some of them are also in cahoots with the looters. Net result - Bad. Without any discussion of what Bill's $2/book tax would be used for, it's a senseless exercise. Government doesn't usually collect taxes to have the money sit in a vault. How long did your phone bill stay below what it was in 2006 when 26 U.S.C. § 4251 was repealed? http://en.wikipedia....ephone_excise_tax If corporate taxes are always paid by consumers, then corporate tax rate reductions are always passed on to consumers, right? I don't think so. Things are more complicated than that. As I mentioned earlier, and as Krugman pointed out, it's much more efficient for the public to pay for a public good than for the private sector. Public goods are paid for with taxes. HTH. Cheers, Scott.
Post #306,668 by beepster 4/3/09 10:13:00 AM Reply	And taxes are paid by consumers. duh. Efficiency doesn't enter into that equation. You seem to be arguing about which way the taxes are taken from you is more appealing. In the end...it still comes from you. Until you get that, you're lost. I will choose a path that's clear. I will choose freewill.
Post #306,673 by drook 4/3/09 10:18:50 AM Reply	See my other post WE DO GET THAT! Yes, we do understand that taxes come from us. Yes, we are arguing about which way of taking those taxes is more appealing. And "more appealing" means that it comes from a more equitable distribution of "us". -- Drew
Post #306,674 by Another Scott 4/3/09 10:20:19 AM Reply	Thank you. You're much clearer than me.
Post #307,039 by drook 4/9/09 12:05:39 AM Reply	Just found this today As Drew says, prices are usually based on supply and demand - not costs. It's not me saying it. It was Drucker in 1993: Most American and practically all European companies arrive at their prices by adding up costs and putting a profit margin on top. And then, as soon as they have introduced the product, they have to cut the price, redesign it at enormous expense, take losses and often drop a perfectly good product because it is priced incorrectly. Their argument? 'We have to recover our costs and make a profit.' This is true, but irrelevant. Customers do not see it as their job to ensure a profit for manufacturers. The only sound way to price is to start out with what the market is willing to pay - and thus, it must be assumed, what the competition will charge - and design to that price specification. Cost-driven pricing is the reason there is no American consumer electronics industry any more. If Toyota and Nissan succeed in pushing the German luxury car makers out of the US market it will be a result of their using price-led costing. Starting out with price and then whittling down costs is more work initially. But in the end it is much less work than to start out wrong and then spend loss-making years bringing costs into line. http://www.independe...sins-1501842.html You don't get to "pass on" increased costs to your customers. The price they are willing to pay is not based on your costs. -- Drew
Post #307,042 by beepster 4/9/09 12:32:59 AM Reply	Problem with this it assumes that the costs are not incurred equally across suppliers creating competitive advantage. Taxes don't work that way. All suppliers are assessed equally. I will choose a path that's clear. I will choose freewill.
Post #307,043 by Another Scott 4/9/09 12:41:20 AM Reply	That reminds me.... I heard the argument phrased a little differently long ago. Q: What's the most important thing for a business to have? A: A customer. Someone has to be willing to give you their money in exchange for what you give them or do for them. You can have a great idea, great people, great technology, great advertising, the lowest costs, and be head and shoulders above the competition in every way. But if you don't have any idea of who your customer is, you're dead. In that sense, Drucker is too glib. Apple isn't the cheapest when it comes to computers and phones and music players or music stores. But it knows its customers' desires very well (much of the time). Good companies have ways of increasing demand. Cheers, Scott.
Post #307,048 by drook 4/9/09 1:53:10 AM Reply	Drucker is only applicable to commodities If your product is a commodity, then what he says about cost-based pricing vs. price-led costing is true. If your product is not a commodity, then you don't have competitors and most of the rules of markets don't apply. Yes, see Apple. -- Drew

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