Now here‘s an interesting bit of legislation.
The Problem: The cost of providing Medicaid is growing
The Solution: Impose a fee on drug stores for every non-Medicaid perscription they fill, to help subsidize the cost of Medicate perscriptions.
The Catch: Drug stores can’t pass this cost along to the consumers.
Most pharmacies immediately added the charge onto customers’ bills, sparking citizen outrage that quickly made its way to the ears of legislators. Lawmakers lashed out at the pharmacies, arguing that they had never intended to tax citizens.
What the hell is that all about? Where the hell did the lawmakers expect the money to come from? Where do the drug stores get their money from? Do lawmakers have even a fundamental understanding of economics before dishing out policy?
Of course it’s clear what they intended. They decide the state needs money, and are simply going to take it away from businesses. The difference between a law like this and outright stealing isn’t clear to me. The profit margins of a business are no longer up to them – they’re up to the state. Hey, imagine if a drug store (in competing with other stores) offered a product with only a $1 markup. This rule would mean that such a store would be required to lose money on every sale. Of course, it’s not like we actually have a free market in medicine anyhow, so the odds of us getting drugs at reasonable prices are fairly slim to begin with (which is what caused this problem in the first place – thanks Uncle Sam).
From my minimal understanding of economics, I think that you’re pretty much right. In a perfectly competitive market (which I’m fairly sure the drug store market isn’t), there would be zero profits for a firm, meaning that every tax increase would be passed directly onto consumers.
The only way that the tax might not be passed to consumers is if the government had some way of figuring out the profits of the drug store industry, then mandating that the tax come out of them. This would basically mean that CEO’s and other workers wouldn’t be paid as much (I assume they’d be getting paid more than what they *should* receive in a perfectly competitive market), and it would be these workers, therefore, who would bear the brunt of the tax. It’s not as if the “drug store” itself would be the one to suffer the consequences of a tax increase.