More businesses ought to ‘tax-plain’ themselves

Call it a “tax-planation” — spelling out for your customers why the government has forced you to increase what you charge them. From a Wall Street Journal article:

In New York, the sale of whole bagels isn’t subject to sales tax. But the tax does apply to “sliced or prepared bagels (with cream cheese or other toppings),” according to the state Department of Taxation and Finance. And if the bagel is eaten in the store, even if it’s never been touched by a knife, it’s also taxed.

That was news to one New York bagel-store owner, who found out he was out of compliance with the policy this summer when the state audited his company.

Kenneth Greene, the owner of 33 Bruegger’s Bagel franchises throughout New York, says the state demanded that he start charging taxes on all bagels, except for those that remain intact and are consumed off premises, and forced him to pay a “significant” sum in taxes that the state estimated he owed.

Mr. Greene says the extra charge, about eight cents a bagel, depending on the local rate, filled his customers with boiling rage. “They felt we were nickel-and-diming them. They thought we were charging them to slice a bagel,” he said.

To clear things up, he posted signs at the cashier informing customers that it was Albany, not Bruegger’s, to blame. “We apologize for this change and share in your frustration on this additional tax,” the signs read.

When I lived in Europe, I always felt that one of the only reasons governments there could get away with value-added taxes (VATs) of 20 percent or more on retail purchases was that the tax was — by law, as I understand it — baked into the price listed on the price tag. When I moved back, it was jarring at first to have 8 percent tacked onto the price of a good at the cash register, even though I knew the sales tax in Atlanta was smaller than the VAT I was charged in Brussels.

Government imposes all sorts of direct and indirect taxes that are passed on almost invisibly to the price of goods. For example, requirements that certain waste doesn’t go into a landfill may result in a “disposal fee” buried in the fine print of your bill for a certain repair or installation service.

We’d be a lot more aware of how much “nickel-and-diming” government does to us every day if more businesses would follow Kenneth Greene’s example.

87 comments Add your comment

Horrible Horace

August 24th, 2010
10:48 am

Well lets not hold our breath awaiting Ayetollah Obama to address such issues.

Thurston B. Howell III

August 24th, 2010
11:03 am

Only the little people pay taxes

left wing

August 24th, 2010
11:08 am

Actually Kyle, I was just reading this article, also in the Wall Street Journal discussing how corporations do whatever they can to maximize their profits, even if it’s against the public interest:

http://online.wsj.com/article/SB10001424052748703338004575230112664504890.html

And I’ve been waiting for you to post an economic-related blog, because I have an economic question for you; As I understand supply side economics, the contention is that they don’t like government programs like ARRA (the stimulus plan) because it would ‘crowd out’ private sector consumption. The problem, as I see it, is that we just went from a $16 Trillion dollar economy to a $15 Trillion dollar economy. The stimulus was $787 Billion, essentially over 2 years (capital investment project take longer, but we’ve also had things like unemployment extentions added in); let’s call it $400 Billion.

So, we’ve lost $1 Trillion and the government is replacing it with $400 Billion. Seems to me like there is underconsumption of $600 Billion. Care to comment?

barking frog

August 24th, 2010
11:10 am

All tax should be broken out of pricing on all goods,
as you say making the consumer aware is the only
way to change.

F. Sinkwich

August 24th, 2010
11:10 am

How about eliminating withholding? If citizens had to write a check to Uncle Sam every quarter, perhaps their eyes would finally open.

joe

August 24th, 2010
11:10 am

precisely why we need to abolish the income tax and IRS and go to the fair tax…let’s see how long it takes for some idiot to post “squirrel” after this (what the heck does that mean anyway==stupid).

Paul

August 24th, 2010
11:11 am

Used to see a sticker on gasoline pumps listing fed gas tax and state gas tax. No more. I recall a station owner in Calif telling me it became illegal.

Dave

August 24th, 2010
11:12 am

Just another example of how the current tax code (federal and local) just doesn’t make any sense…and why we need to overhaul the whole system (flat tax, fair tax, etc.) No tax on a whole bagel, but tax on a cut/served one? What genious politician came up with that one? Probably the result of some deal with some special interest/lobbying group…which is how most of the current tax code was created.

left wing

August 24th, 2010
11:19 am

joe @ 11:10 – I don’t like the IRS any more than you do. If you printed the tax code, it would wipe out a forrest. However, the “fair tax” is a really bad idea, and here’s why:

1. You shift the tax burden in this country from rich people (think Neil Bortz) to lower income people (think us).

2. The numbers don’t work and here’s why:
What I’ve heard is a 25% sales tax, so I’ll use that. The US economy is currently $15 Trillion, and the budget is about $3.7 Trillion so, 25% of $15 Trillion would be about . . . . $3.7 Trillion? Gee, that sounds good. Except that the government (federal & state) won’t pay taxes. The states are about $2.3 Trillion combined, which means that governments collectively take $6 Trillion out of the equation. Now you’re only taxing $9 Trillion, which means the tax rate would really be over 40%.

So, really, you’re being scammed by this “fair tax” stuff.

The Aristocrat

August 24th, 2010
11:20 am

left wing –

It is not the government’s responsibility to disrupt the natural ebb and flow of the private sector. Private industry is run to be as profitable as its management is able. Handicapping free enterprise for “social good,” which is vague in its own right, is the WORST thing the government can do to stimulate the economy. If employers are no longer free to pursue wealth, there is no reason for them to create wealth or jobs.

Kyle Wingfield

August 24th, 2010
11:24 am

left-wing: Is that your argument for a $2 trillion stimulus? If so, you might want to check your numbers because you’ve overstated the drop in GDP by a factor of 2.

http://www.bea.gov/national/index.htm#gdp

left wing

August 24th, 2010
11:30 am

The Aristocrat @ 11:20 – I would disagree with the “disrupt the natural ebb and flow”, even in “normal times”, but right now, there is a trillion dollars of excess capacity in the system. There is no displacement of resources, there are resources which are unused and available.

It seems to me that the stimulus still left about $600 Billion of excess capacity, which we see, among other things, as 9.5% unemployment.

Jefferson

August 24th, 2010
11:33 am

Talk about nickle & dime, what about the “back door”? Power bills, phone bills, cable bills – so called “franchise” fees. Basically city and county taxes on these items in addition to the sales taxes already added on to these items. Some a flat amounts, some are percentages. I don’t see my local “conservatives” doing anything about it.

left wing

August 24th, 2010
11:40 am

Kyle @ 11:24 – nice link. And I accept the overstatement. However, I reiterate my earlier . . . . iteration. Isn’t the stimulus simply replacing that capacity which, due to economic decline, is would not be consumed by the private sector?

F. Sinkwich

August 24th, 2010
11:50 am

Please define “capacity.”

Thank you.

left wing

August 24th, 2010
11:56 am

F. Sinkwich @ 11:50 – I assume you’re addressing me. I define capacity as the net difference in the drop in GDP. I’m using it in the broadest term to refer to people (as reflected in unemployment), manufacturing capacity which has been idled by the great recession, et al.

retiredds

August 24th, 2010
11:56 am

That’s the problem with state taxation, it differs in every state and what is or is not taxed. I don’t think this is a federal problem but a “states rights” issue. Let’s face it as the Feds lowered taxes (for the top 1% of tax payers) the States have incrementally raised taxes so it’s a zero sum game.

joe

August 24th, 2010
12:00 pm

@ leftwing…scammed?? You are way out of whack…the government IS scamming us already with the wasted spending and bailouts. Adjust your liberal thinking cause it is doing you zero good.

Overtaxed

August 24th, 2010
12:06 pm

@ Leftwing: Actually, under the fairtax, government entities WILL pay the fairtax. I’d suggest you read some of the literature on Fairtax.org and educate yourself before further comment. Any google search will yield the myriad economic studies proving the feasability of the plan and the effective tax rate necessary.

Additionally, the tax is progressive due to the prebate. A family will pay zero tax on the level of consumption required to maintain a family at the defined poverty level, and ony begins to tax on incremental consumption beyond that point. Note that US poverty defenitions are quite “rich” when compared with the majority of the world, or even compared with the US circa 50 years ago.

Lastly, business has no obligation to operate in “the public interest”. Please review the constitution and note that we are a democratic republic, and that individual rights have supremacy over “the public interest”, less we resort to mob rule.

Horrible Horace

August 24th, 2010
12:10 pm

I thought Imam Obama was gonna change everything, for the better. AH HAHAHAHHAAAA!!!

Obama gone in 2012!! YEA BABY!

wallbanger

August 24th, 2010
12:19 pm

Well, we in Dekalb are likely to have our property taxes raised significantly due to having Commissioners who are utterly clueless. With 17% of retail stores closed, and 25% of offices in Dekalb closed, the commissioners want to finance the building of an Atlantic Station type facility on the old GM plant lot. Why???? Don’t they get a clue. No one is buying anything, except us taxpayers who are forced to “buy” idiot choices made by those in control.

Jimmy62

August 24th, 2010
12:23 pm

left wing: Of course companies seek profit, sometimes at the expense of society, sometimes not. But the point is that they seek profit. We always know their motivations. We don’t have to wonder. It’s different when the government is making economic decisions. Are they doing it for electoral reasons? Are they doing it to help out unions, or to pay back industries that donated a lot of money? Are they doing it because some competitor to bagel shops has undue influence on some politician? The one thing we do know is that they rarely make a decision because it’s best for society at large. Even if they think that’s why they are doing it, there are always unforeseen negative results. Like pushing everyone to own a home helped lead to our current economic crisis.

Also, maybe if the government hadn’t taxed $3 trillion to come up with the $600 billion of the stimulus, then there would be more money still in the private sector to fulfill this demand you say is missing. It’s tough for me or for a company to spend money if the government has taken it already from successful businesses and is giving it out to failed companies like GM and to unions and such.

Find me the right winger or libertarian who is saying that for profit companies act for the good of society, and I will show you a moron. You might do better off debating if you actually understand the positions of the people you are debating against. Might I recommend you read The Road to Serfdom? Or Economics in One Lesson? Heck, even Adam Smith.

left wing

August 24th, 2010
12:26 pm

Overtaxed @ 12:06 – So, you think the government will pay taxes to . . . itself? If the budget is $3.7 Trillion, it’s going to pay itself $900 Billion in tax? Doesn’t that imply that, either we have a balanced budget and that percentage goes up, or we don’t, and the government has to pay itself $900 Billion? Not buyin it.

And it seems to me your statement equates businesses with individuals. I have a serious problem with that. I understand that the Supreme Court has equated them with respect to their ability to make campaign contributions. I simply think that’s a horrible decision.

Will

August 24th, 2010
12:30 pm

Kyle:

As a republican newspaper writer, you must have some influence with Nathan Deal.

PLEASE help to make him understand that his refusal to release income tax returns in hurting his standing with the “birthers” and other republicans.

Birthers claim that President Obama’s refusal to release his birth certificate is proof that he has something to hide. Nathan Deal says the President should provide evidence to prove that he does not.

At the same time, many believe that Deal’s refusal to release tax return info proves that he is hiding the fact that he has, indeed, greatly benefitted from unethical behavior.

PLEASE help him see the contridiction in his response to these two issues.

Dave

August 24th, 2010
12:31 pm

How about not taxing businesses at all? All they do is collect tax from their customers and remit it to various governments. Then we’d have a much clearer picture of what government costs us.

left wing

August 24th, 2010
12:36 pm

Jimmy62 @ 12:23 – It’s an explicit part of conservative dogma that markets ’self regulate’ which is why we supposedly don’t need government regulation. Of course corporations seek profit, even at the expense of society. Which is exactly why we need some entity (aka, the government) to protect us from them.

Do the rich, or corporations for that matter, get special laws created for them? Absolutely. No disagreement from me. Which is why we need to hold those politicians responsible. But I do believe that government, for all it’s beaurocracy, does work for the people, and that corporations work for their interests.

Hillbilly Deluxe

August 24th, 2010
12:38 pm

I’m opposed to a VAT for the very reason that it would be hidden and people would have no idea what they are paying. I’d also like to see all tax breaks done away with. There’s no telling how many dollars are involved in those and all they really do is shift the burden from one group to another. I’m for some sort of flat tax. Let us all know exactly what we are paying and let us all pay the same.

Linda

August 24th, 2010
1:09 pm

There’s only one state whose residents pay no state income tax, no state sales tax & no property tax. Residents actually receive checks from the state.

How? Energy dependence. If we were allowed to drill on American soil for our own natural resources, we would be well-supplied for the next thousand years, pay no more taxes, be debt-free & safe.

StJ

August 24th, 2010
1:24 pm

“government, for all it’s beaurocracy [sic], does work for the people”

Since when? The government wishes to give itself more power at the expense of the people, while claiming it needs all this power for the “benefit” of the people. See “health care reform” (aka another tax), “Patriot Act”, “immigration law” (as in failure to enforce), et. al.

I agree with Kyle – EVERY tax should be itemized on receipts whenever possible. It might jolt the clueless people into realizing what’s actually going on.

HDB

August 24th, 2010
1:25 pm

Linda

August 24th, 2010
1:09 pm
There’s only one state whose residents pay no state income tax, no state sales tax & no property tax. Residents actually receive checks from the state.

….and that one state (Alaska) gets 87% of its revenue from oil!! As soon as the oil revenue stream drops….watch that paradigm shift!! Plus…you only get the tax refund IF you’ve been a resident for 5 years…so you get nothing if you work there on a temporary contract!!

Jefferson

August 24th, 2010
1:25 pm

You can do it in GA, open casinos on Jekyl Island and there would be enough jack to eliminate sales taxes.

Ayn Rant

August 24th, 2010
1:51 pm

Kyle, in New York as in Georgia, groceries are exempt from sales tax, but takeaways and restaurants are not. To be fair, we should apply the sales tax to all transactions across the board, including groceries and medical services. Would that satisfy you?

VAT is different from a sales tax in that it is applied at every step of processing from the initial sale of the raw material to the final sale to the end-user. VAT has to be “baked” into the consumer price tag because the VAT worksheet might require several pages of computer printout.

VAT generates lots of revenue. It’s a far better way to tax businesses than an income tax on net profits. Big US corporations with smart lawyers and overseas locations get away with paying little or no income tax to the US. All businesses have to pay their rightful share in European countries with VAT.

VAT is also a subtle way to favor domestically-produced goods over imports, without violating international trade agreements. That’s why you don’t see a lot of China-made products in the Wal-Mart-like stores of Europe.

@@

August 24th, 2010
2:02 pm

Somebody needs to tell Mr. Greene there’s always a way to outsmart the politicians.

My suggestion would be disposable knives and condiment packages…more plastic.

In retaliation, the politicians in Albany would likely tax Mr. Greene for heating the buns.

Overtaxed

August 24th, 2010
2:05 pm

@ lefwing: every business is comprised of a collection of individuals, each and every one of which is motivated primarily by profit. Each of those folks obligation to society is limited to “don’t violate their individual rights”. Beyond that, do whatever! Someone above said it: markets are self regulating. Some genious decides to make an “infant chaninsaw”? Decidedly not in the public’s best interest. Also not likely to be a big seller.

As for the Econ stuff, you clearly suffer from that same disease that most liberals suffer from: believing that government actually adds to the size of an economy. By definition, a government, reliant on tax revenues, is only capable of shrinking a free market economy. The only variable is how much harm is caused. Government spend in GDP is only a proxy. Actual GDP would be total consumption and savings, which is difficult to measure. Go read some Kotlikoff and get back to me.

left wing

August 24th, 2010
2:06 pm

Linda @ 1:09 – Alaska also receives by far the highest per capita amount of government funding of any state in the union. Second place isn’t even close.

JM

August 24th, 2010
2:06 pm

I too think U.S. tax code is unnecessarily complicated and should be overhauled, but do you think the accountants, lawyers, bankers and bureaucrats whose businesses rely on dealing with or circumventing the red tape will let that happen?

Jefferson

August 24th, 2010
2:06 pm

Groceries are taxes, just not at the same rate. Don’t forget your local self shaft taxes.

Jefferson

August 24th, 2010
2:07 pm

s/b Groceries are taxed, not taxes.

left wing

August 24th, 2010
2:08 pm

Overtaxed @ 2:05 – So, all that spending the government does for defense does not add to the size of the economy? Clearly you and I disagree.

left wing

August 24th, 2010
2:12 pm

And Overtaxed With regards to markets self regulating, Alan Greenspan, who used to be a big proponent of that, seems to have learned the error of his ways.

http://www.nytimes.com/2008/10/24/business/economy/24panel.html

Horrible Horace

August 24th, 2010
2:16 pm

lw…agree somewhat. Greenspan was referring to his “misunderstanding” of derivatives as that is what brought down the economy. Look up Brooksley Barnes. She was the whistle-blower but was basically told to shut up by those in DC…Rep, Dem and The Fed.

Overtaxed

August 24th, 2010
2:16 pm

@ left wing:

You’re right. Those trillions that are taxed would NEVER make it into the economy without the governement. Heck, if we just shown down the military, all of those jobs would be lost, and those tax dollars would be refunded, and the folks that actually earned those dollars in the first place would probably, I don’t know…just BURN the money!

You need an Econ lesson. Or three.

Horrible Horace

August 24th, 2010
2:18 pm

On the other hand. The Imam Obama has seen fit to pursue this drawdown. Hmmm…wonder where those fine fighting men/women will find jobs, should they elect to not re-enlist.

Perhaps staying in the military, for now, might be a better alternative.

CJ

August 24th, 2010
2:21 pm

Actual GDP would be total consumption and savings,…

That’s the great thing about freedom of speech. We can just make things up and pass it off as fact.

This gem from Overtaxed is a classic: “…markets are self regulating. Some genious [sic] decides to make an “infant chaninsaw”? Decidedly not in the public’s best interest. Also not likely to be a big seller.”

Hillbilly Deluxe

August 24th, 2010
2:27 pm

JM @ 2:06

You hit the bullseye. Those people write the laws, or influence the writing of them, and the laws benefit them.

left wing

August 24th, 2010
2:38 pm

Overtaxed So as I understand conservative economics, there are 2 schools; the supply side and the austrians.

The supply side I already covered above; deficit spending by the government to compensate for inadequate demand by the private sector, which is less than the gap in spending by the private sector.

The austrian side is crash & burn baby. Let businesses fail because they were meant to fail. Screw the people who get affected; it was probably their fault to begin with. So, the 2.5 million who got or maintained their jobs thru the stumulus, plus the 3 million who got to keep their jobs because GM & Chrysler didn’t go under would now be out of work. What’s another 5.5 million unemployed?

I’ve already pointed out in previous posts that Goldman Sachs and the Council of Economic Advisors have both said that stimulus added about 2.5% to GDP. Go look it up for yourself if you don’t believe me.

Go ahead and ignore facts. Why let them get in the way.

Overtaxed

August 24th, 2010
2:50 pm

@ Leftwing: Yes, it added to GDP, in the form of less damage.

For example, the maximum welfare of the economy by whatever measurement is 100. Government taxation and inefficiency reduces total welfare to 85. Goverment taxation and inefficiency coupled with some borrowing increases total welfare to 88. There’s your increase. But still not optimal.

Austrian Economics, even Chicago, is close to correct, particularly when measured against the failed Keynesian folly.

By the way, I’d never truly advocate NO goverment or regulation, as self correcting market forces might move too slowly to save the damage done from, say, hundreds of millions of gallons of oil leaking into the water from some careless person with a big drill and no stopper.

@CJ: you caught me on the GDP definition. I’m making a point on how to accurately measure total economic welfare. And yes, you caught me spelling error. You’re a genius (genious). Here’s your gold star.

Overtaxed

August 24th, 2010
2:51 pm

MY spelling error. Just in case. Have to cover your bases with these facists.

Sam

August 24th, 2010
3:00 pm

Left nuts are so hopelessly naive and gullible about about human action and and human nature. And painfully ignorant and misguided about money and economics and the proper role of a constitutionally limited government.

But left nut collectivists aint bringing the individual down with them. Grossly hypocritical left nuts can go F themselves and huddle with the sheep. Left nuts are gonna be on the outside looking in, before long.

Poor poor left nuts.

killerj

August 24th, 2010
3:01 pm

A scam is a scam,big gov out of control,rich people who supply Jobs are leaving the country and renouncing citizenship and your stock market is putting your investments into CHINA,your screwed. O-ne B-ig A-ss M-istake A-merica. Somebody needs to investigate Harvard.