Yet at the same time, the labor gone into processing / handling manufacturing those consumer goods will be cheaper, possibly offsetting that rise in material costs. An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.
> An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.
Because income tax is taken out of a worker's gross pay, the Ex'tax plan is not going to substantially impact how much companies pay their workers. It will simply increase take-home pay. Assuming it's a revenue-neutral tax shift, three things happen:
- Workers with low incomes get a little bit more take-home money every month.
- Workers with high incomes get a lot more take-home money every month.
- Milk and eggs are uniformly more expensive.
That's why this is a regressive move that hurts people with low incomes.
Just because you tax labor less, does not mean salaries necessarily go down. The cost of labor is primarily a function of supply and demand + overall competitiveness of your economy on the global stage.
In fact if you increase the cost of consumer goods by pushing up the cost of manufacturing inputs, you're going to have to pay workers more to maintain the same standard of living. Their cost to drive to work goes up; their cost to feed themselves goes up; their cost to buy a house goes up; etc.
