(no subject)

[spankingfemme]

So I finally got my grades and I kept my 4.0 average! Yay! =D



As promised as soon as I got my final grade, I'd put my last assignment in for those who might find it interesting :) Feel free to by pass LOL!

Going to attempt to cut with rch text, although I'm not sure it'll work... sorry in advance to those if it doesn't work.

Phase 5 IP

ECON212-1303A-05

Instructor Jason Dixon

Jenna Jenks

Colorado Technical University

Taxation is one of the ways the government balances the economy by supplying jobs through public services like roads, schools, and law enforcement. The more taxes levied on a nation’s citizens the less that they will tend to spend. GDP rises and falls by the rate of fluctuation of consumption. When taxes are too heavy, money supply shrinks across the board, so the taxes that are enforced must be well designed so as not to discourage overall spending in the economy. “Each state and local government in the United States uses a variety of taxes to raise the revenues necessary to meet required expenditures. These taxes include the sales tax, personal income tax, property tax, excise taxes, and the corporate income tax.” (Leatherman, 2013)

Breakdowns of these taxes are as follows: sales tax, otherwise known as general sales tax since most items and services are covered under this particular tax, is a state regulated percentage of however much a good or service sells for. Personal income tax taxes your gross wages dependent upon what bracket you fall into. Property tax varies contingent with the state’s personal tax rate and is the predominant way the local government gets their revenue. Excise taxes are an added tax to a specific service or good that is often on top of general sales taxes. These taxes are selective to the state they are in and can be a set amount per unit verse a percentage. Lastly, corporate income taxes are not unlike income taxes except often the tax is a flat rate other than with personal income taxes having a fluctuating rate dependent upon the amount earned. Corporate income taxes are considered the lowest contributor to the overall GDP of the nation where income tax and sales tax are the highest.

Taking our flourishing business in to account of selling online cookbooks, if the government decided that cookbooks were suddenly a leading cause in the health epidemic of obesity, they may levy an excise tax on the sales of cookbooks in an attempt to diminish the amount of circulation of what they deem to be a public hazard. I personally disagree with the government meddling in the free market; citizens should have the right to consume what they wish without government intervention. As shown back in the 1920’s with the prohibition, if demand is high enough, someone will sell it whether the government tries to stop them or not.

Unlike the prohibition where the government tried to outlaw alcohol and later settled on putting a steep excise tax on the product because people really wanted the good, I don’t see underground sales of cookbooks coming about. However, because of this tax, less cookbooks would be sold and the supply of cookbooks overall would go down as venues decided that perhaps selling cookbooks was not worth the drop in consumption, the added costs for their potential shrink, or the legal repercussions if they failed to enforce the new excise tax and were fined. In most cases, inflation happens for the particular item to make up the difference in lost revenue and added demand. In the end, the consumer is the one who pays as the merchant will inevitably just raise the price to match the excise tax.

I don’t think the government taxing certain goods more is constitutional, but in the argument of whether it would make a difference or not health wise, sure it would. Consumers only have so much money supply to allocate, so if buying a cookbook for twenty-seven dollars before was a bit steep but still considered rational, buying a cookbook at thirty-two dollars may not depending on that individual’s budget.

Just looking at the sales of cigarettes (a heavily excised good) it can be seen that the progressive hike has definitely had an impact on the consumption of this particular good, and as the taxes on it have steadily risen year by year the demand has also declined. (Joshritchie, 2011)

Cigarettes are not cookbooks and do not hold the same level of demand, but the charts above can give a clear understanding of how taxation of a good and the demand of a good work hand in hand.

If the cookbook industry were booming despite the excise tax the government has placed on the good, it might be time to expand overseas. Since this good is a comparative advantage in that it is not really unique standing against any other cookbooks outside of the recipes contained within, it would be wise to consider a few options concerning overseas sales. The first option to consider is where is your good going to sell? Say our cookbook is a country cooking styled book with many of the recipes containing Southern based dishes of fried chicken, casseroles, turnip greens, banana vanilla wafer pudding, etc. You would not try to establish an overseas venture in say China where the diet of the common individual would not find your dishes attractive. But a similarly cultured background like Mexico, Australia, or Europe may embrace your dishes more readily. Costs to ship overseas would be a huge overhead, so setting up shop in that country would be more advisable.

Once you’ve decided where your product has a comparative advantage to be sold, it is important to look into that nation’s laws and tax frames. Some countries even give tax incentives to owning a business in their country and should be considered before deciding on where to settle your multinational roots so to speak. Do understand that by founding a company in another country even though it may be wholly owned by you as an American, because it is on foreign soil, the company is still considered to be that country’s corporation. It would be prudent to decide how exactly you wish to enter into sales within this country.

There are five basic means of becoming multinational through branches, which is as the term implies branching out from the main hub without severing control of the company. It may be wiser to ponder teaming up with a local already established business. Maybe they sell Italian cuisine or some other cuisine that is not in direct competition with your good, but sold in the same place giving the customer a spice of variety. This would be understood as a joint venture and would usually have expenditures and profits split 50/50. If your cookbooks are just that popular, you may be able to simply purchase other companies that sell cookbooks and acquire their name as well as your own and expand your brand through this junction. This form of takeover is called an acquisition or a subsidiary. Subsidiaries are the most common form used by multinational companies since the recognition of an established company is already present, and your labor force is experienced. Of course, if the company you acquisition is in a sinking ship, it could also drag your company with it. A safe approach would be building franchises where a merchant interested in your company b8uys a license to sell your goods and you receive royalties. The majority of profits will go to the owner of the franchise, but it is also the least risky financially if the chain store fails. The last manner used is called a turnkey project where a company sells its trade secrets to a foreign investor and only profits from the original sale of knowledge foregoing any real expansion into that country.

Of these five options, only two really fit for our particular product, and those two would be a joint venture or an acquisition. “In light of the potential for significant tax and penalty liabilities, every acquisition of a multinational business should begin with thorough due diligence of the potential exposure arising from cross-border transactions.” (Jeffrey Trey, 2013) Overall, I would think the best option would be a joint venture due to the nature of the product and the joint partner’s ability to be familiar of business law and tax codes adhered to in that particular country.

It is important to note that although businesses growing through multinational means can be a good way to increase profits; our own nation’s GDP may suffer from the loss of income per capita. Real GDP is dependent on more consumption of goods and services which requires more income to sustain higher purchasing power. The more money supply, the more jobs leading to more circulation of money and overall growth. As population grows, having enough jobs to sustain the amount of workers can be tricky especially when inflation rises from consumption causing unemployment when The Fed shrinks the money supply to counter the inflation. Unions were created essentially to help workers come together to improve working conditions whether it is job security, safety, benefits, or wages.

However, not everyone believes the intended outcome of unions is as helpful as they were meant to be. “Vedder and Gallaway maintain that labor monopolies in the transportation, construction, manufacturing and mining industries have decimated employment in these fields, increased the supply of employment in less unionized fields and lowered wage growth.” (Carbasho, 2013) Ways Vedder and Gallaway explain that unions have a negative impact is by pointing out some of the flaws of unions such as shady accounting leaving those part of the union out of the loop concerning where their dues are being dispersed. Even more of a concern of unions and having set wages at a higher rate means employers must downsize their labor force in order to compensate the loss in revenue being paid out for one more worker. Increased wages means the company must find equilibrium of labor wage rates.

Ways companies compensate these higher wages is by charging the consumer a higher price for the good to equalize the supply and demand of labor. If supply for a good is high, prices go down, and a company cannot lower its wages, they may have to resort to producing less with less labor diminishing growth of the company and often creating a continual shrinkage in company growth making jobs less stable.

Unions will tend to argue that increased wages lend to a higher consumption rate for the employees retaining a membership and boost the economy. In actuality as time goes on, the continuing growth of the population means the supply of labor is higher and wages can be lower without lowering ample demand of jobs not unions, but that is only my personal opinion. Minimum wage is placed into effect in America to ensure workers have a cut off for how low wages may drop which is controversial in and of itself, but as the population continues to increase and the elderly become a higher percentage of the population, what will that mean for real GDP economically?

“The ageing of the population presents a major fiscal challenge for the countries of Europe. The combination of increased longevity and a reduced birth rate will directly reduce the growth rates of the European economies by slowing the growth of the capital stock and by weakening the productivity of the labor force.” (Feldstein, 2006) As we as a civilization become more advanced and educated, it also means that our growth rate will increase from a decreased rate of fatality due to conditions provided from better health standards and living conditions. There has already been a change in the retirement age as longevity in life means that individuals will have to remain in the work force longer in order to reap the benefits of retirement as the proportional increase in poverty rates would rise due to the rise in individuals unable support themselves. Education has grown giving rise to better opportunities of job dispersing for the aging populace, but increasing jobs for the elderly also creates fewer jobs for the younger individuals entering the workforce seen as quite problematic currently in Europe. The question is how we as a nation will react as it is predicted that “between 2000 and 2050, the number of older people is projected to increase by 135%.” (Tilly, 2002)

Works Cited

Carbasho, T. (2013). Unions Condemn NLPC’s Economic Impact Study. Retrieved from Construction Equipment Guide: https://campus.ctuonline.edu/pages/MainFrame.aspx?ContentFrame=/Home/Pages/Default.aspx

Feldstein, M. S. (2006, Dec). The National Bureau of Economic Research. Retrieved from The Effects of the Ageing European Population on Economic Growth and Budgets: Implications for Immigration and Other Policies: http://www.nber.org/papers/w12736

Jeffrey Trey, J. L. (2013, April 1). International Tax Issues for Newly Multinational Corporations: A Due-Diligence Perspective. Retrieved from AICPA American Institue of CPAs: http://www.aicpa.org/publications/taxadviser/2013/april/pages/clinic-story-04.aspx

Joshritchie. (2011, Aug 1). Cigarette Taxes In Photos. Retrieved from Tax Break: The Turbo Tax Blog: http://intuitturbotax.files.wordpress.com/2011/07/110729-tt-cig-3.png

Leatherman, T. A. (2013, Aug 8). An Introduction to State and Local Public Finance. Retrieved from The Web Book of Regional Science: http://www.rri.wvu.edu/WebBook/Garrett/chaptertwo.htm

Tilly, J. M. (2002). International Journal of Epideiology. Retrieved from Population ageing in the United States of America: implications for public programmes: http://ije.oxfordjournals.org/content/31/4/776.full