Fast tax is coming soon

[Luke T.]

Current Oregon minimum wage: $7.25. Second only to the state of Washington, which is at $7.35.


Since it will probably come up, edited to add: current rates of unemployment by state

 

[shanek]

Re: Re: Re: Re: Fast tax is coming soon

Good luck. Two words: Marion Barry.

D.C.'s mayor caught on film snorting coke. Went to prison. Skipped one mayoral election, then ran again, was re-elected. Finally left office, then got elected to the D.C. city council last year.

You'll pardon me if I don't consider someone putting coke into his own body on his own time as anywhere near agregious to myself and my liberty than by wasting and misusing tax dollars that I paid into. Maybe the voters felt the same way.

 

[CBL4]

That's not even an applicable anecdote.

It is because frequently lessons can be drawn from extremes. If a 40% rise in prices drops my eating out by about 40% (3 times a week to 1.8 times a week), it is reasonable to assume that a 2% rise in prices will drop my eating out by about 2%.

Clearly this is an oversimplification but the laws of supply and demand are real. If prices go up 2%, consumption will go down by some amount. There will be a job loss in the fast food industry because of this. Without more information it is impossible to say how much or whether the jobs will be replaced and if they are replaced whether it will be in other Detroit businesses or in another city.

Whatever you tax, you reduce. This is true for income taxes, fast food taxes or carbon taxes.

A $6.00 fast food meal will now cost $6.12.

I am not sure if I am unique but I go by whole dollars. A cost of $6.12 is $7 dollars, so I perceive this as a 17% price rise. Alternately, you can raise the price from $6.12 to $6.95 and I do not care. Also there are some magic number - e.g. $5. My favorite meal was $4.95. At the first price rise, it went to $5.50 and I started to buy something cheaper most of the time. (No sales tax in Oregon.)

BTW, I think I need some Carne Asada for lunch.

CBL

 

[shanek]

I think laws like this are a bit silly, but on the other hand, Evanston did have a slightly different, and rather pleasant, character as a result of these laws. Burger King still operated, but there were fewer fast food restaurants, presumably because the restrictions made operation more difficult. I'm not sure that was a good thing, but it had an effect. Still, I would be opposed to any such law.

I'm positive it's a bad thing. I submit that any law or regulation that interferes with voluntary exchanges in the free market is a bad thing.

 

[BPSCG]

Re: Re: Re: Re: Re: Fast tax is coming soon

You'll pardon me if I don't consider someone putting coke into his own body on his own time as anywhere near agregious to myself and my liberty than by wasting and misusing tax dollars that I paid into.

He did that, too. Make-work political patronage jobs for all his friends and family, including his wives, summer jobs programs that paid kids who never showed up for work. Plus his good friend Ivanhoe Donaldson embezzled a hundred thou from the city, and when he got out of jail, Barry embraced him on the steps of city hall instead of having him thrown off the property. He was the master at spreading tax money around so the voters would remember him in November.

 

[shanek]

Now, granted, this is a stupid idea. But I can't help but think people are overreacting just a weensy little bit.

Does anyone really think massive number of job cuts are going to result because people have to pay an extra 15 cents for their Xtra Valu Meel?

Um, yes. What this will effectively do is push the supply curve to the left, since they won't be able to supply the same quantity of items at a particular price level as they would without the tax. If this is confusing for you, it may help to think of the supply curve as being pushed upward, which is the same as pushing it to the left although economists don't usually put it that way. But if you think of the curve moving in that direction, you will see that to sell x quantity of a good will require a higher price.

Either way you look at it, the new equilibrium price is higher, and the new equilibrium quantity is lower. Since there are now fewer good being sold, that directly translates to fewer jobs.

You can dispute the number of job cuts there will be; there may not be a "massive" number, but there is no way that this is not going to result in a net loss in jobs, ceteris paribus.

 

[Luke T.]

It is kinda ironic. The government attempting to get the public to diet.

 

[shanek]

You mean less unhealthy?

It's all relative. Actually, aside from the calories (which, granted, are pretty substantial—450 calories for a medium size, according to McDonalds own website), they're really not all that bad for you. No trans fats, only 4g of saturated fats, 30% of your daily allowance of Vitamin C and 6% of iron.

 

[Cleon]

It is because frequently lessons can be drawn from extremes. If a 40% rise in prices drops my eating out by about 40% (3 times a week to 1.8 times a week), it is reasonable to assume that a 2% rise in prices will drop my eating out by about 2%.

Sorry, I just don't see that assumption as reasonable. I mean, we're talking 12 cents here.

I am not sure if I am unique but I go by whole dollars. A cost of $6.12 is $7 dollars, so I perceive this as a 17% price rise. Alternately, you can raise the price from $6.12 to $6.95 and I do not care. Also there are some magic number - e.g. $5. My favorite meal was $4.95. At the first price rise, it went to $5.50 and I started to buy something cheaper most of the time. (No sales tax in Oregon.)

Ah, see, that's where we're not seeing eye to eye. I see $6.12 being equal to, well, $6.12, not $7.00. I see $7.00 as being more than $6.12. Maybe my math is wrong.

Hey, you might be right in the long term, but I still think the comments I've seen here are major overreactions.

BTW, I think I need some Carne Asada for lunch.

CBL

I could live on Carne Asada and Carnitas. Since I moved to Atlanta it's been great; this place is littered with Mexican restaurants owned by actual Mexicans. The food is fantastic. Taco Bell and Chi-chi's can kiss my hairy yellow butt.

 

[shanek]

Current Oregon minimum wage: $7.25. Second only to the state of Washington, which is at $7.35.

Since it will probably come up, edited to add: current rates of unemployment by state

Pretty substantial, for both states. On the other hand, there are numerous other factors for unemployment other than the Minimum Wage. What you want is to control for those other factors. If you want a source that can't in any way claim to be Libertarian, how about the US House?

http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm

Historically, defenders of the minimum wage have not disputed the disemployment effects of the minimum wage, but argued that on balance the working poor were better off. In other words, the higher incomes of those with jobs offset the lower incomes of those without jobs, as a result of the minimum wage.

In other words, you're using force to put some people out of work in order to give other people more money.

Oh, and BTW, the Card/Krueger study mentioned in the above link was specifically refuted in a later study:

http://papers.nber.org/papers/W5224.pdf

Whereas Card/Kreuger did phone polls, asking workers if they felt like they were making more money and if they intended to switch jobs as a result, Neumark and Wascher actually did an extensive study of payroll records in New Jersey compared to a Pennsylvania control group.

 

[Luke T.]

Sorry, I just don't see that assumption as reasonable. I mean, we're talking 12 cents here.

.12 x how many sales a day? It adds up. It is possible to be nickel and dimed to death, especially if you are talking about a family and not a single purchaser.

12 cents a gallon on gas gets everyone's bowels in an uproar.

 

[Cleon]

.12 x how many sales a day? It adds up. It is possible to be nickel and dimed to death, especially if you are talking about a family and not a single purchaser.

The difference being that it isn't a single individual going to the register each of those times of day. Even for a family, we're talking a difference of maybe 50 cents.

12 cents a gallon on gas gets everyone's bowels in an uproar.

Er, yes, because most of us drive every day, to and from work; and because trucking relies on said gas to get goods between destinations.

The only way gas is comparable is if people eat fast food for breakfast, lunch, and dinner every day of the week and inter-state commerce relies on it to get goods between locations.

 

[Luke T.]

The difference being that it isn't a single individual going to the register each of those times of day. Even for a family, we're talking a difference of maybe 50 cents.



Er, yes, because most of us drive every day, to and from work; and because trucking relies on said gas to get goods between destinations.

The only way gas is comparable is if people eat fast food for breakfast, lunch, and dinner every day of the week and inter-state commerce relies on it to get goods between locations.

I feel about taxes the way Amateur Scientist feels about surveillance cameras. You let one one into your neighborhood and pretty soon there will be hundreds. This fast food tax does not exist in isolation. It is one more in a long line of hidden taxes, and I'll be damned if I'm going to let french fries grease the skids even more.

The fat is not in the Big Mac. It's in the government budget.

 

[CBL4]

First of all, does anyone really think the tax will remain at 2% once it is passed. This will be considered another "sin" tax to be raised for schools - "You can afford another 12 cents to pay for our future. Won't somebody think of the children?"

It is also part of governments attempt to create (or raise) numerous taxes on select minorities in the hope that each tax will be popular with the majority. It is a divide and conquer mentality that works. Cosmetic surgery tax, fast food tax, cigarette tax, liquor tax.

Aside from the duplicity of it, it is inefficient. My city had a budget shortfall of $60,000 out of a 13 million dollar budget. They decided to raise the money by making certain residents pay to park in front of their own houses. It turned out that approximately 50% of the revenue would have been spent on implementing the tax. To get the could have raised the property tax by about 0.01 percent with virtually no overhead but this would have been unpopular because everyone would have paid it.

CBL

 

[aofl]

Let me throw another idea in the ring and look at this from another angle.

We've been bandying the number .12 around, so I'll use that. It assumes $6 a meal, which I think is a little high, but these are SWAGs.

Let's say your typical McDs serves 50 meals an hour between 9am and 6pm. I think that's low, but it is a nice round number.

That works out to $6 an hour the restaurant pays to the government from what it takes in.

That means, by the government's own minimum wage standards, the government is taking enough money from each restaurant each day to pay one employee for that day's work.

Assuming 10000 McDs in the US (this number is low, but very round), that's 10000 potential jobs the government takes away.

Of course, McD franchisees are by and large notorious capitalists, so if we assume only 5% would invest the money in their employees rather than lining their own pockets, that's still something on the order of 500 jobs the government is taking.

And that's not counting your Taco Bells, your KFCs, your Burger Kings, etc.

It seems clear to me whether or not a fast food tax turns away customers, it does have an impact on jobs. If I'm going to pay 12 cents extra for something, I'd rather it went to someone's salary, not to the government.

A

Edited because of my weak math skillz.

 

[Cleon]

Let me throw another idea in the ring and look at this from another angle.

We've been bandying the number .12 around, so I'll use that. It assumes $6 a meal, which I think is a little high, but these are SWAGs.

Let's say your typical McDs serves 50 meals an hour between 9am and 6pm. I think that's low, but it is a nice round number.

That works out to $6 an hour the restaurant pays to the government from what it takes in.

The problem with your analysis is that this is a sales tax; McDonald's doesn't pay the government anything, it's paid directly by the consumer at the register. So no cut in McD's profits (unless you assume, like CBL, that this will result in fewer people going there; I'm still skeptical).

 

[shanek]

The difference being that it isn't a single individual going to the register each of those times of day. Even for a family, we're talking a difference of maybe 50 cents.

You're looking at the wrong curve. The demand curve doesn't change. The supply curve does. If a 12¢ tax translates to a million dollars a day, then it's obvious that the restaurants are going to have to cut back on what they sell, and let people go as a result.

 

[SlippyToad]

Current Oregon minimum wage: $7.25. Second only to the state of Washington, which is at $7.35.


Since it will probably come up, edited to add: current rates of unemployment by state

You also need to correlate minimum wage rates by state, before you come to any conclusion (such as, raising wages ALWAYS drives away business). Or, the tautological raising taxes always drives away business.

 

[Cleon]

You're looking at the wrong curve. The demand curve doesn't change. The supply curve does. If a 12¢ tax translates to a million dollars a day, then it's obvious that the restaurants are going to have to cut back on what they sell, and let people go as a result.

How exactly do you figure? Again, this is a sales tax--the restaurants aren't paying squat, just the consumers.

 

[shanek]

How exactly do you figure? Again, this is a sales tax--the restaurants aren't paying squat, just the consumers.

I run a fast food restaurant. I've decided that I would sell 100 Big Pounder Combos a day at $4.00, 120 at $4.20, and 140 at $4.40. Plot that out on a chart, with the quantities (100, 120, and 140) on the x-axis and the prices on the y-axis. Connect the dots and you have a very simple supply curve,

Now, when I introduced the Big Pounder Combo at $4.00, my customers were demanding 140 a day when I was only producing 100. So I hired some people and raised my price to $4.40. But then my customers only demanded 100, when I was producing 140. When I dropped the price to $4.20 (unfortunately having to let a few people go), I was producing 120 a day, and my customers were demanding exactly that much.

So, plot out $4.40 at 100, $4.20 at 120, and $4.00 at 140 and you have the demand curve. The equilibrium is at $4.20 at 120, the place where the two lines cross.

It looks something like this:

$4.40|   *__         __* Supply
     |      --__ __--
$4.20|        __*__
     |    __--     --__
$4.00|   *             * Demand
    -+-------------------
        100    120    140

So I take in $504 in sales of the Big Pounder Combo.

Now, the government comes along and levies a 20¢ sales tax. With the people and resources I have, I can no longer produce 120 Big Pounder Combos at $4.20. I have to add the sales tax to the price and get $4.40 from my customers. So, on the supply side, when I want to produce 100 Big Pounder Combos I have to charge my customers $4.20, $4.40 when I want to sell 120, and $4.60 for 140. The new supply curve is essentially pushed upward (although economists would say it's actually pushed to the left) and our graph now looks like this:

$4.60|               __* Supply
     |           __--
$4.40|   *__  __*    
     |    __--__ 
$4.20|   *      *__
     |             --__
$4.00|                 * Demand
    -+-------------------
        100    120    140

Notice: THE DEMAND CURVE HAS NOT CHANGED. AT ALL. Only the supply curve. And the new equilibrium is now apparently at a price of $4.30, where I will sell 110 a day. So my sales are lower, and the sale price is higher.

In this example, the amount I generate in Big Pounder Combo sales drops to $473 per day, a loss of $31. But even worse, I don't get to keep 20¢ of what is now the final price of the Combo. $22 is how much I will have to give to the state in taxes, increasing my loss to $53 a day. That's over 11% of my revenues, GONE! For a tax that is less than 5% of the sale price. And that's revenues! The figure for my lost profits will be much larger!

You can say the restaurants aren't paying the tax since they're passing it on to the consumers, but as this example shows, the restaurants are paying, dearly.