Archive for November 3rd, 2011

Taxes Happen To Other People

I’ve noticed something recently which may or may not come as a surprise to anyone who regularly patronizes minority-owned businesses. You go to the Laotian restaurant or the Mexican bakery or the dollar store owned by the Vietnamese folks, and you’ll see a lot of (by white-guy standards) novel and unusual things. Stuffed chicken wings to die for. Pineapple turnovers. Transdermal pain-relief patches.

What you won’t see are pennies. Or nickels, usually.

These places are increasingly pricing things in even dollar amounts – and the price you see is the total price you pay.

Tax, in other words, is included in the (round dollar amount) price. It’s simple, it’s convenient, and it’s hassle-free. It doesn’t really work too well for grocery stories, but it’s otherwise, honestly, something I, as a consumer, wish more businesses did. What you see is what you pay, cash-and-carry is the rule of the day. No calculator or cash register required. No complicated math to screw up. No pocket full of loose change to rattle annoyingly as you ride a bicycle. (Okay, maybe that’s just a pet annoyance of mine…)

There’s a catch here, though, and it’s an ugly one: This business model, and these business owners, get shafted hard by tax increases. As the economy collapses and the budget shrinks and the state and the county and the city here discuss raising sales taxes to do this, that, some other thing, and possibly even fund a new and unwanted stadium for the Minnesota Vikings, there’s the usual opposition from the usual sources – working-class people are taxed enough already, thanks; sales taxes disproportionately affect lower-income consumers. Sure, the Vikings tax ideas probably aren’t going anywhere, and they’re mostly pretty modest, but persistent budget crises keep bringing around new tax increase proposals, and some are bound to stick, eventually.

These business owners who work on tax-included, whole-dollar pricing aren’t going to raise their prices a nickel to keep up with tax increases. They’re going to eat those increases. On every purchase, to every customer, every day of the year. If you’ve ever been to an ethnic restaurant or bakery or honestly pretty much any other store, you’ve probably noticed the thin margins they’re usually operating on. Two-for-a-dollar donuts any place else would charge $0.99 for. Five bucks for a heaping plateful of food anyone else would charge seven or eight bucks for. They’re not trying to get rich – they’re just trying to make enough to keep food on the table.

Well, for a business that has tax-included pricing and does $300 a day in sales, a 0.35% tax increase works out to over $3,500 per year in lost profit. 0.5% increases cost over $5,000 per year. Not an enormous amount, by most business standards, maybe – but I guarantee every little family-owned business will very much feel that loss.

For these businesses, in these communities, sales-tax increases aren’t spread across the population. The majority are probably pretty ambivalent about the increases, and understandably so – they’re not taking the brunt of it. The business owners are. For the average guy buying lunch or silverware or toys for the kid… taxes happen to other people, and you can’t tell me that’s right.

Published in: General | on November 3rd, 2011 | Comments Off on Taxes Happen To Other People