In order to obscure the amount of unproductive cost being added to the production of widgets, government typically imposes many less obvious taxes at various and multiple levels of the production and distribution cycle.

For example, the government imposes a tax on the raw materials of 10-cents on average for the material needed to produce one widget.  Next it imposes a “value-added” tax on the amount of value that the producer adds to the raw materials by transforming them into a form that is usable by consumers.

Government imposes an “income tax” and “payroll taxes”, increasing the costs of hiring labor to produce the widgets.  It imposes fuel taxes and transportation taxes which increases the costs to transport and distribute the widgets. 

Government imposes inventory taxes which increases the costs to warehouse and store supplies of widgets.  It imposes taxes on the land and building in which the widgets are sold.  And finally, it imposes a “sales tax” which is paid by the consumer, for the privilege of being allowed to purchase a widget.

Suddenly, instead of 50-cents, government is realizing 80-cents or more in tax “revenues” as a result of each widget produced and sold.

In spite of this additional tax "cost" of production and distribution, the consumer's valuation of the widget (and thus the amount he is willing to pay for it) remains at a maximum of $2.00.

Additionally, in spite of more efficient manufacturing and distribution methods resulting in a reduced material cost of 70-cents per widget, in order to keep the total cost to the purchaser at or under the $2.00 percieved value limit, the manufacturer, distributors, and seller must now share a reduced margin of profit of 50-cents OR LESS per widget.

In short, the taxes imposed by government on the manufacture, distribution, and sale of widgets now EXCEED both the material COST of producing and distributing the widgets, AND the margin profit shared by ALL the players in the allocation COMBINED.

Think about this the next time you hear a politician accusing a business or industry of "excessive profits", "obscene profits", or "price gouging".  Instead of predatorial business, think about "predatorial taxation".

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