Quote:
Originally Posted by rocket
...snip... (ALL taxes on ALL busnesses are passed to the consumer)...snip...
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I used to think this as well. After taking some economics courses, I've understood that it's not true. It depends on what's called "the price elasticity of demand." If demand is inelastic, taxes can be passed on and profits maintained, if demand is elastic, they cannot. You'd immediately think that gasoline pretty much defines inelastic demand, but the reduction in gasoline consumption this year shows that it is more elastic than many had thought, albeit at the cost of a slowing economy, lost jobs, etc. If and when substitutes become available at economic prices, elasticity will increase. As people move to more fuel efficient vehicles, elasticity increases.
Further, externalities distort the market. Even if we assume that, one way or another, "we" will pay for the external costs of fossil fuel extraction, production, distribution, and consumption, if this doesn't happen "by the gallon" which, with the present model can only occur through taxation, then the market cannot properly allocate resources.