But, the Government Made Us Do It

by Mike on January 3, 2011

in Politics

When the government increases taxes on the things we buy, the prices of those things inevitably go up.  That’s because the businesses that sell those goods pass the cost on to the consumer.  After all, those businesses have profits to make and employees to take care of.  It’s common sense.   It’s also common knowledge.

What often goes unnoticed is that the price increases caused by taxing binges aren’t limited to the value of the tax increases themselves.  Over in the UK, David Cameron’s government just implemented a 2.5 percent VAT tax increase (think sales tax) on a wide range of goods and services.  With the tax increase in the news, consumers are rightly expecting prices to rise.

Which gives certain businesses an opening to take advantage.  Since people are expecting to pay more anyway, many large private companies are planning to hide additional price increases, above and beyond the cost of the VAT tax increase.  In fact, some analysts are expecting the 2.5 percent tax increase to cause a 5 to 8 percent price increase.

You see, our liberal friends are partly right.  Some businesses are unscrupulous.  What they fail to realize is that government often enables those unscrupulous businesses.  Without the tax increase, prices would not be rising by 5 to 8 percent, even if they were going to rise at all.  With it, the government just gave business the cover it needed to do what the free market wouldn’t allow.

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