these 2 employees decreased the net income by $14 in 30% case and by $16 in 20%. Granted the high margin business in your example can absorb it. Without high margin the business must increase productivity to mitigate such a higher labor cost caused by the lower tax rate.
Of course. See my other post where i mention capital investments for example.
> E.g. if your cost of materials increases by $20 instead of your cost of employees.
yep. in case of 20% tax the net cost of the materials is $16, in case of 30% - $14.
>This doesn't mean you're paying more, or less, for these materials - simply that are not obligated to give away as large a share of your profits from any change in costs.
call it any way. In the end paying $20 for materials results in $16 decrease to the resulting after-tax business profit in one case and $14 decrease in another. Thus the materials became $2 more expensive to the business.