I posted this in the 2012 group, but am blogging it as well so it can be shared with folks who are not a member of: http://www.sodahead.com/group/3652/bill-mcgee-in-2012/

Hello everyone,
Thank You for taking the time to read this in it's entirety.
It's a little long, but I promise you that it's informative, factual, based in common sense, and well worth the read.
Thanks in advance
Bill

synopsis:
In this article, I make a few points concerning the perception/illusion of "greedy corporations" that so many folks hold.
I show the factors involved
I show the costs variables
and I show where the mis perception lies.

Greedy Corporations vs Greedy Government: The Illusion and The Facts

I'm continually amazed at the amount of people who constantly make comments like "Greedy Corporations" or "business's stealing from people" and a whole myriad of other disparaging comments in relation to businesses and corporations in this country and how they "do so much wrong" because of (insert excuse of the day here) and it really makes me wonder if the proponents of the "anti-business" crowd even have the slightest inkling of a clue about reality...

Don't get me wrong here, I'm not trying to attack anyone, or even point fingers at any single person that holds those views, I'm simply saying that they are wrong...., totally, unequivocally, undoubtedly 100% wrong in their blanket view against corporations and businesses.

Most of the "anti-business" rhetoric is fueled by a well known and commonly used political tool called "class envy", and the fact is that most of the people who buy into it are themselves tools whether they realize it or not.

Sure there are and will always be a business or a person that IS greedy, but in the other 99.9999999999999% of the cases, there isn't any greed involved, in fact more often than not, it's just the opposite and here's why...

When looking at a business, no matter whether it's retail, wholsale or anything in between, you must consider all of the factors:
1. costs of production:
these costs include (in no particular order)
a. costs of materials
b. costs of equipment
c. costs of maintenance
d. costs of location(s) and the business's infrastructure (IE. the building and/or property for the business and/or it's offices, warehousing, and internal communications)
e. costs of utilities (water, electric, gas, phone)
f. costs of internal development, research, IT, meetings, presentations, and consultants, ect
g. costs of employees (salaries and hourly wages)
h. costs of advertising and marketing/market research
i. costs of office supplies
j. costs of fuel
k. costs of inbound shipping
l. costs of packaging the product for sale or for shipping, in bulk, or in single units (depending on the product)
m. costs of product testing
n. costs of quality control and quality checking in line with testing the product
o. costs of tooling or retooling

These costs are outgoing and are incurred before the first item is ever sold and while not all of those items apply to every single business, and some people will even combine some of them, they apply to most.....
I know that some people will say "there isn't any employee costs until something is sold", or "the kid who mows my lawn doesn't have those costs" and quite frankly, that's wrong, think about it, in one form or another, almost every single business on the face of the earth has those costs regardless....

BUT WAIT!!!!!, there's still more....
I haven't touched on a single one of the costs that a company/business incurs from regulation, taxation, or benefits for it's employees yet, but I promise I will.

2. Sales and income:
When a business sells a product, the average markup/profit runs between 5% and 30% depending on the nature of the product and whether someone is selling it retail or wholesale, but in order to make the math very simple and easy to follow and in order to show that even by being generous on the markup the "anti-business" crowd is living in a fantasy land, I'm going to take the higher end of the markup and use that figure in my example.

So based on that, we know that an Item that sells for $1.00 retail price, brings in $0.30 to the seller over and above his/her $0.70 cost investment in the item. A hundred sales of that Item grosses $30.00, a thousand of them grosses $300.00

Out of that, the following items must be paid: (not including sales taxes as they are added to the retail price, not a part of it)

3. The costs of taxation:
a. business taxes (corporate tax rates in the US are one of the highest in the world @ about 35%)
b. property taxes (based on the value and assessment of your property by the auditor)
c. employment taxes (both the employee and the employer pay taxes on an employee's wages.. most people don't know that)
d. workman's compensation insurance
e. business insurance for inventory, ect ect.
f. property insurance (real property like the buildings and such)
g. Insurance for equipment and vehicles as required by state law
h. liability insurance
i. Sales permits/vendor's licenses
j. taxes on items that are purchased that do not meet the guidelines for a non-taxable item when purchased by the company
k. if you have a business outside of the US and your business is based in the US, you also have to pay taxes on the money you make in the other country too (most people don't know this either)
l. if an employer offers health care coverage to an employee, the general way that it works is the employer pays a part of that, and the employee pays a part of it, in many cases, the employer pays more than the employee does.
m. if an employer offers a 401K type program to their employees, the employer usually contributes matching funds to those accounts and those funds become the account holder's funds once fully vested in the 401K by virtue of time on the job, or other criteria as set out in the account's guidelines... (most people don't know this either)
o. if an employer provides their employees with paid vacation time, they must also pay for that as well (all the taxes and other related costs when the employee isn't even there producing for the employer)
p. Employers pay for training of their employees
q. if an employer offers schooling benefits for their employees, they also pay those costs too.

Ok so, have we used up the $300.00 yet?
Do you see that even with everything I've written, there are still some costs that remain unpaid?

BUT WAIT!!!! I'm not done yet...
By now someone's fuming at how ignorant and stupid i must be, "everybody knows that companies get tax breaks that regular people don't get..." Well, ok, some people call them "loopholes" if they subscribe to the "intravenous" version of the class envy Kool-aid, but never fear, I do in fact know that they get those tax breaks..

Businesses are given categories of items that they can get a tax break on that are items used for or done to increase and grow the business, That's why the aforementioned $1.00 retail priced item doesn't cost $1.25 with only a 10% markup on it.

Sure, sometimes people will take advantage of some of the breaks in the codes when it really doesn't "fit" into what the guideline was intended for, but you'll have that anywhere, it doesn't matter, people take deductions on their personal taxes if something meets or "kind of meets" the criteria no matter what it is..
for example, my Boy stays at my house almost 182 days a year.. technically, because i provide him food, a roof, a bed, utilities, ect ect ect when he's here, I could rightfully and legally claim him on my taxes as a dependent... I don't, but I could, and many people fudge a little on their personal taxes and some flat out lie to reduce their tax liability, so when someone hollers to me about corporate tax "loopholes" it often falls on deaf ears and it always reminds me of the story about the stone and the "glass house" and the person hollering obviously doesn't realize that the government is already taxing businesses and corporations as though it were a leech that had lucked out and found an artery...

anyway, with everything that's been written so far, it's pretty obvious that there's a huge burden placed on business in this country, but, I'm 100% sure that someone's still out there thinking what a dunderhead i am because "selling a million of those items gets $30,000.00 for the business and that $30K will more than cover the costs I've listed so far".

Oh Really?
how long did it take to sell that many?
how many people did it take to sell them?
how long did those items sit in the warehouse?
are those items still in style or needed?
were they sold at retail, or were they reduced just to get them gone?
IF they were reduced, were they sold "below cost", if so, where does the $ come from to make up for that loss and still cover the "hard costs" to the business?

Then let's look at the final nail in the coffin...
What happens when an employer is told that he must increase what he pays his employees?
What happens when the government increases the taxes on a business?
what happens when costly (often un-needed or outdated) regulations are put into place that increase that businesses cost to produce something, or to remain in business?

WHO DO YOU THINK PAYS FOR THOSE INCREASES???

of course the consumer does, in all cases the consumer bears the burden of those increased costs whether they realize it or not.
Currently, the minimum wage is federally mandated to go up by $0.70 an hour tomorrow (friday 7-24-2009)

you can take any cost increase and apply the same rule to it that I use in the minimum wage posts of mine and it's consistent across the board...

My question and example has always been, "can you tell me what the effect of a higher minimum wage is?, can you tell me who benefits from a higher minimum wage?"

Better yet, how about i tell you?

A forced higher wage increases the cost of production to the business owner, this cost has to be made up from somewhere, so the following three options are available to the company or business owner.

1. reduction in workforce.
2. increased cost of the product to the consumer.
3. The business eats the difference.

Ok let's have a look at the three options shall we?


# 1
because someone just joining the company will now be making a higher wage, the entire hourly employee structure must be given a comparable raise, I mean, you can't have a person coming in the door making as much as someone who has been there 6 months to a year right?
Now if the workforce is reduced to offset the new costs, the remaining employees are going to have to make up for the lost person(s) and the end result will be either a slowdown in production, or a lower quality product..

the result of that is that a person or number of people are now out of a job and the consumer is facing a lower availability or poorer quality product.

# 2
If the employer makes the needed pay adjustments, the consumer will find the price of the product rising to compensate for the increased cost of production due to the forced higher wage.

the result of that is not that a single item increases in price, but ALL items increase in price because ALL businesses will have to adhere to the increased wage laws.

# 3
Honestly?, do you really think a company's going to eat the extra costs?, or do you think they will pass the costs on to the consumer?


now to who benefits from increased wages...

NO ONE DOES!!!!!! in fact, a mandated wage increase in most instances hurts the American worker because the paltry .50 cents to 1.00 an hour wage increase is offset by higher prices for everything that they purchase... They are no better off

than they were at first, and often are worse off than they were to start with..

It has been said that the government will benefit by virtue of "higher wages = higher income taxes", but the fact of the matter is that more jobs = more income taxes for the government, not less jobs...

along this same line, i had a conversation with a fellow Sodahead who after reading the text above concerning the minimum wage increase and effect replied to me with the following:

"Could also point out that companies stealing billions of dollars from the government or overcharging for everything like gasoline takes more from consumers than a minimum wage hike... and that inflation is often the reason for this moreso than anything more. Thus... greedy corporations raising the cost of living = minimum wage hikes.

Get inflation down and boom... can lower the minimum wage."

To which I replied with:

"true, but you can't force the companies to sell their products for less than it costs them to make it in one location/country because if you do, they'll simply sell it somewhere else where they can get what they want or what the market will bear out of it.
Also, It's funny that you mention gas, when the average tax on a gallon of gas is almost $0.50...

That's 50 cent on a gallon of pure profit to the government on a product that they have absolutely no part in the production of from start to finish, while the oil company's average profit on a gallon of gas is about $0.05 and a retailer makes about $0.03 a gallon..
then you take the government's almost 35% corporate tax, the wage taxes they collect, the sales taxes collected on the equipment, buildings and supplies used to produce a gallon of oil, and add that to their already clear and free 50 cent a gallon pure profit, and then ask yourself again where the cost cutting should start?

it's not at the "greedy corporation" level as you suggest, but rather it's at the "Greedy Government" level....

not sure what your beef is with businesses, but I think that it might be a little off center of the target...

thanks for the reply though.
Bill"

the point of course being that inflation is generally caused by increases in the costs to the business, or a weak market, not the other way around...
another Sodahead responded to my reply with the following:

""it's not at the "greedy corporation" level as you suggest, but rather it's at the "Greedy Government" level...."


BINGO!!!!!!!!!!!!!! THANK YOU!!!!!!!!!!!!!!!!!!!!!!!!!!...

And that is exactly what people do NOT see. The government has people brained washed to think BUSINESSES are the bad guys. They are not. It is THE GOVERNMENT with the games they play that are the bad guys.

If people aren't happy with a buisness...they will stop spending on that business. And the business will have no choice but to close down. If people don't want to work for a wage because it's too low...the business will either have to raise it or no one will work and they will go out of business. But with the government digging it's greedy little hands everywhere...the only ones that get screwed are THE PEOPLE and small business owners."

I really couldn't agree more with that statement, that person "sees" the forest regardless of the trees.....


I also thanked them for giving me the idea to write this paper since the perception of business and greedy corporations is not limited to just that one person, I've seen it repeated time after time, after time, after time...


Anyway, this has run a little longer than I wanted it to, so I'll stop here, but if anyone has any questions or comments about this, I always welcome them.

Thank you, and please share

Bill