Businesses Should Pay For It…

Especially Big Companies With All The Money…

There are seemingly endless opportunities to undertake worthy (sometimes) endeavors in support of the common good.  Everything from protecting the environment to expanding services or protections for citizens.  It all comes at a cost of course, which somehow, needs to be paid.  Popular ways to cover costs these days involve having the government pay by going even further into debt or having businesses pay, especially big companies since they have all the money.  If only it were so easy.  Let’s look closer.

Businesses provide products and/or services at a price.  Businesses compete for sales based on price and value of what they provide.  The price a consumer pays reflects the cost associated with providing the product or service.  If athe business does not charge enough to make a profit they will go out of business which serves no one, including the customer.  If a business charges too much they will lose customers to competitors and will also eventually go out of business as a result of not being competitive.

If a business experiences an increase in costs, those costs are generally passed along to consumers in the form of higher prices.  A business is like a conduit in this regard.  They really have no choice other than to flow costs through to consumers.  There is no other sustainable way to absorb added costs considering competition already requires operating as efficiently as possible.  

Let’s consider a few simple examples.  New regulatory costs associated with telecommunications will increase cell phone bills, which of course are paid by consumers.  Look at your phone bill.  How many regulatory fee line items does it include?  Mine has seven.  In a similar fashion, new regulatory requirements (cost) related to automobile manufacturing are reflected in a vehicle's sticker price even though not specifically itemized like with your cell phone.   The consumer pays.

Housing costs are a serious issue these days.  Decline in homeownership in America due to  unaffordability has wide ranging negative consequences.  Why is housing so expensive?  A big part of the answer is compliance with a growing myriad of regulations.  Every step from permitting to construction to insurance is laden with regulatory costs.  Approximately 25% of the cost for a new home directly results from government regulation.   I’m not passing judgment on the merits of any particular regulation.  I am pointing out who pays.  The notion “homebuilders should pay” is nonsensical.  The consumer pays. The consumer always pays.  There really is no other source of payment.

Don’t be gullible next time you hear “make businesses pay”.  It does not work that way.  

What are you paying for that isn’t worth it to you and/or ultimately the common good?  More importantly, how can you push back next time there is a great new need business will pay for?  Errr .. make that you will pay for.