Tuesday, November 18, 2008


Let's make it simple.

You manufacture thingamadoodles.

Each thingamadoodles you make costs you $.30 in raw material.

So, you sell it for $.60 and make $.30 on each one, right?


The cost of material is not all that goes into the cost of making your thingamadoodles.

There is the cost of productions machinery, which is amortized over the life of the machines.

Then there is the cost of the building you build your thingamadoodles in.

Added to that is the cost of the utilities you use to build thingamadoodles: electricity, water, sewer, etc.

By far the largest cost to most manufacturers is the cost of labor.

Let's say you pay your workers $30.00 per hour to produce thingamadoodles for you.

They also want you to pay for health insurance and to provide them with a retirement fund.

By the time you add in all of these factors, it costs you $1.00 to produce a single thingamadoodle.

Now let's say you decide to sell each thingamadoodle for $3.00.

You make $2.00 per thingamadoodle, right?


The government taxes your business (because your business sells 250,000 thingamadoodles per year, bringing in $250,000.00 per year).

The tax rate is, let's say, 39% of your earnings after "deductions" and "loop-holes," or about $97,500. Subtract that from your $250,000.00.

That brings your earnings down to $152,000.00.

That's an additional $1.52 for each thingamadoodle you make.

So now your "landed" cost (the cost after all other factors have been added in) is $2.52!

If you sell your thingamadoodles for $3.00, you make only $.48 on each one.

In order to make $250,00.00 now, you must sell 520,000 thingamadoodles per year.

Since the market will only support 250,00 thingamadoodles, you must make adjustments to your "landed" costs.

That might mean lay-offs, cuts in health insurance or wherever you can find things to cut.

Now the employee come along and tell you they won't work any longer without making $45.00 per hour and they want a bigger retirement plan and more health coverage.

Do you see what happens?

Exactly what has happened to the auto industry.

Add to that the costs of government required, but not relevant to your industry, "green" standards, etc., and your company makes even less and in fact may face bankruptcy.

Raise the price of my thingamadoodles?

People won't buy them at that price.

So you am stuck between a rock and a hard place, so to speak.

What happens if the government WITHDRAWS from its requirements that you pay so much in taxes and "green" regulations?

Then you can make money and contribute to the productivity of my country.

That, my friends, is why the capitalistic system needs to be allowed to function without interference from the government.

This is not to say that they should be allowed to abuse their employees, the environment or anything else.

It means that there are certain things the government does NOT do well.

Business is one of those things, because business is profit driven and the government is not.

Business gets its money in exchange for productivity.

Government gets its money by confiscating it from people...you and me.

Business, as it relates to the government, is none of their business.


shoprat said...

The left recognizes only business expense and it is the only expense that matters to them. Taxes.

If someone is given the choice of pay a bill or go hungry the left goes after the wicked businessman who is forcing this choice. If it's a choice of pay your taxes or go hungry, well that's a different matter entirely.

dmarks said...

"Government gets its money by confiscating it from people...you and me."

It is theft, actually. A form of armed robbery. And I'm not any sort of radical Randist for saying so.

Consider that it is yours. You create it. And then the government says "gimme". If you refuse to pay your taxes, you do run the risk of being confronted by the government's armed enforcers. So ultimately this form of taking is indeed backed up by the threat of armed force.

@shoprat: There is a major inconsistency with the logic of the greedy left:

1) they claim that business owners are rapacious and greedy.

2) Yet, when they further overtax businesses, they act with total shock when business owners look after themselves first, as the tax hikes force encourage to fire people and cut benefits.

Tapline said...

Joe, This isn't going to change. It is the government intervention that causes much of the cost of doing business, They mandate safety features, in many cases needed safety features and in other cases not needed, just nice to have.....enviornmentalist also have an agenda against businesses...can't build there it will disturb the titmouse....and on and on. then what is left of profits are taxing them out of existance, Then one wonders why businesses are leaving the US..I don't! Do you??..