This would be the scenario if, for some wacky reason, all businesses refused to cut their prices in short order:
- US hosts competing with Canadian hosts become 30% more expensive over night
- US hosts cut prices 30% to compete with Canadian hosts, even if it means running at a loss for a while, because the alternative is to go out of business.
And some will go out of business, because hosting is rather slim margins, especially starting up.
- US hosts start demanding much cheaper supplies so that they can remain profitable.
- US suppliers cut prices because US hosts strongly demand cheaper products, because the alternative for them is also to go out of business.
- And on up the chain...
Well, let's look at the suppliers.
Ideally, a host is either renting DC space or owns their own. Hosts owning their own DC would have an immediate advantage in that they would no longer be paying property taxes. Large companies will like that. Small to midsized hosts won't, of course.
The host's DC (whether their own or rented) needs to provide power, supplied by the local monopoly
. Something will need to specifically happen in order to guarantee a price reduction in power costs.
They'll also maintain fuel reserves for backup generators, which are diesel, the price of this is no longer driven by American demand. This is a price guaranteed to go up. Futures markets will probably ensure a smooth transition, but the price of diesel will still be ~30% higher.
They need to maintain peering agreements, which have the same limitations in regards to the market value of power commodities. The peering structure already favors megacorps, so that may be a moot point.
Labor costs are assumed to be able to be cut by 30% de facto.
Hardware, though, is largely commodity based for anything produced in the United States (things such as processors and other high-value items the US produces in the tech arena are often reimported through the gray market). Prices would not increase, since you could just source everything from Canada or Mexico. But the willful encouragement of a bad trend is certainly not a good thing.
And actually none of that would happen because everyone would read the writing on the wall that they have to cut prices by 30% the day that the tax comes into effect.
You misunderstood three quarters of my point.
When I pay income tax, now, it's once for the sum total of all transactions my business does over the course of a year. Income comes after taking expenses into account. This means that businesses with more vertical integration by definition have an edge, and businesses that handle fewer, higher margin transactions will have an easier time over businesses that handle many small margin (fast moving) transactions. Businesses with no vertical integration (IE, most startups) will have another hurdle to jump. Businesses that need to generate a lot of transactions daily - or even hourly - to sustain operations are also at risk, because they end up paying more taxes than their brethren, even if they start losing money.
For example, going back to the hosting scenario again.
One (rather ridiculous - though I've seen it) possibility to enter into is having a person by a hosting account from an account reseller, who bought the reseller account from a VPS owner, who rents the machine from a guy who bought a server from a server reseller, who bought the machines from the upstream host, who rents their datacenter space.
You might argue that that sort of insanity ought not to be reasonable and I would agree, I'm just illustrating that this gives a lot more power to vertically integrated businesses, as they aren't transactions in these cases, just, at best, differing levels of service.
The final portion you are missing:
If I do not make money, I do not pay income tax.
If I do not make money, I still have to somehow pay my self-reported sales tax.
No one will honestly tell you that tax evasion is not going to occur in this case. This isn't going to be any less disruptive - what will the policy be when a business is incapable of paying its tax obligation? In the US as is, that's not a common occurrence. But under this policy, it's going to be a concern for every single bankruptcy.