My side of the bucket

I'm considering the reality that if our President-elect does what he says he will, I will pay more in taxes.

No, I'm not one of those $250K-per-family people who will have to pay a marginal rate of 39.6% or whatever it is. (Or is it $200K or $150K now?) I'm just a consumer and investor, and thus I'm in that class of people on whom all business taxes eventually fall.

Let's assume that corporate taxes are going to be raised, which I think is a fair assumption. Kroger, McDonalds, Wachovia, Exxon, 7-11, WalMart, Home Depot, and hundreds of other businesses that I regularly patronize will be subjected to higher taxes, as will my employer. Let's say that one of these earns $5 million annually and is taxed an extra 1%. That's $50K. How do these businesses recoup this extra expense?

1) At a wage of $7.25/hr (as of July 2009), 261 eight-hour days per year works out $15,138 annual gross; add to that 60% for employer expenses (taxes, insurance, admin, vacation coverage) and you have about $25K. Thus, an employer can respond by eliminating two minimum-wage positions. Not only does this mean less tax revenue (so higher income tax to compensate) and more unemployment (likewise higher employment tax), it means longer lines for me to get my hamburger, buy clothes, cash my check, etc, which is a tax paid with my valuable time.

2) Instead of reducing headcount, they can reduce compensation. Raises can be reduced, bonuses eliminated, and benefits diminished. When my employer does it, that's money that goes to the government instead of me.

3) If lowering the HR budget isn't feasible, they can always increase prices, or equivalently lower the value of the product. Shortly after the last minimum wage increase, Wendy's got rid of the "Texas Double" (at least that's what they called it here) and introduced the "Double Stacker" or whatever they call it for the same price, but it's decidedly a lesser burger.

4) If nothing else, maybe the business pays the increased tax burden directly from profits. To rephrase, the stockholders pay the extra tax in the form of lower stock evaluations and lower dividends. I'm paying that tax, and if you have a 401K, you are too.

I really like the way that Fred Thompson put it during his speech at the 2008 RNC:

No, they're just going to tax "businesses"! So unless you buy something from a "business", like groceries or clothes or gasoline, or unless you get a paycheck from a big or a small "business", don't worry, it's not going to affect you. They say they are not going to take any water out of your side of the bucket, just the "other" side of the bucket!