Earlier quoted context omitted.
Taxes are not set by supply & demand. > they can take a hit to their margin instead Not for long. Low margin businesses tend to go out of business. And if you can earn 5% buying bonds, why run a business that has an ROI of 4%?
The point is that supply and demand works on the final price, not on "price before tax". Especially when taxes are proportional, so if you offer a lower price than your competitor, you also pay less of it to the state in taxes. So the tax level is irrelevant to the value of the market price, if you believe in supply & demand as the price setting mechanism. Showing price without tax is then obviously a scam to try to…
That's correct.
> So the tax level is irrelevant to the value of the market price, if you believe in supply & demand as the price setting mechanism.
Taxes raise the price, which reduces demand. If the prices don't rise, then the margins decrease, which reduces the incentive for the business owners to continue.
> doesn't make you a low margin business
It makes you a lower margin business. It reduces the margins on all the businesses, and the marginal (!) ones are no longer viable, and a new set of businesses become at the edge.