Here's an economist who disagrees with you
https://economix.blogs.nytimes.com/2013/02/19/who-pays-the-corporate-income-tax/
Probably most people assume that the corporate income tax is largely paid by consumers of its products or services. That is, they assume that although the tax is nominally levied on the corporation as a whole, in fact the burden of the tax is shifted onto customers in the form of higher prices.
All economists reject that idea.
If the tax were a sales tax, and all sellers paid the same rate for a given product, that would be passed on to consumers. Your reasoning would work in that case.
One more thing that Bartlett doesn't mention is that even between corporations, the income tax is not a uniform percent of sales. Some companies have higher profits as a percent of sales than others. I think your example assumes they are all identical.
I was very tempted to stop after reading "All economists reject that idea.". I don't think ALL economists agree on anything beyond the most basic ideas.
I was going to find the one exception I need to disprove that (after all, he said
all), but then I'm not sure what qualifies as an 'economist'. Here's what wiki had about the author of that article:
He originally studied American diplomatic history under Lloyd Gardner at Rutgers and Jules Davids at Georgetown. He did a master's thesis on the origins of the Pearl Harbor attack at Georgetown, ...
I can find plenty of 'economists' of that level (and probably much higher) that would disagree.
At any rate, it's a twisted, tortured premise.
Therefore, corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply.
Hmmm, so I'm taxed but my competitor isn't? Then I guess he's not making a profit? How long can that go on before he goes out of business, or raises his prices so he can make a profit?
Or if other reasons exist to allow my competitor to not pay taxes while I must, well, then if I can't be competitive, I'll shift my business to another product. From there, the lack of competition will allow my competitor to raise prices, and he will.
I also worked in pricing - brand / product and corporate. It’s fair to say that taxes affect pricing, but product and brand pricing always seeks to maximize profit. Taxes are not a driving force, competition and demand are.
Sure, but the cost of doing business (which includes a corp tax) fits into that. Demand is affected by price. Competition drives prices down, but a business isn't going to accept a low or negative profit margin for long. They will either raise prices or shift their business. The cost of paying taxes, the cost of compliance (and legal avoidance) all help to set a floor on the price of that product.
Sure, taxes aren't everything, but they are as much a part of pricing as components, labor, overhead, etc. A $ is a $, once they are summed up, their origin doesn't matter.
And to be clear, I'm not viewing this as a big-business versus the little guy. I believe that everyone (especially the little guy) benefits from eliminating corp income tax. Not only is the tax, but the cost of compliance and legal avoidance, which are non value added processes, passed on as well. And every $ avoided is just another $ the little guy will eventually pay - better he pay it w/o adding the lawyers and accountants in what amounts to a shell game.
-ERD50