Reply To: FDR and prep for WWII


Bharat is correct. This is also Rothbard’s point about how businesses can’t just “pass the tax on to the consumer.” When a new tax is passed on a business, some free-market people lecture the “progressive” supporters of the tax by saying, “You know, that tax just gets passed on to the consumer in the form of higher prices anyway.” But that can’t be right. If the firm, or the industry at large, could get away with higher prices without compromising overall sales revenues, why weren’t they charging those higher prices already?

No, the way in which such taxes are “passed on” to the consumer is more indirect. Marginal firms that cannot compete with the burden of the new tax go out of business. This means less production, and this lower supply of goods means higher prices can be charged by the remaining firms.