The Rule of ReciprocationFollow

I'm pretty sure that most states with sales tax follow similar rules with regards to unprepared food items. I'm just surprised that some people aren't aware of this. I blame modern point of sale systems. When I worked a cash register in a store, we entered in prices manually based on the price tag. The register basically had two enter keys, one for taxed and one for non-taxed items. You had to know which items were in which category, so to me this is nearly automatic.

No, it's not. I added your statement back (and put it in bold) so as to illustrate just how much they are not even remotely the same thing.



The service of the waiter is part of what you pay for when you go out to eat though. You know this when you make the decision to go out to eat. How you pay for it really doesn't matter. The total dollars you pay relative to the total perceived value of the meal does.

Edited, Dec 17th 2012 6:17pm by gbaji

Coincidentally, in another CA it works the same way. At least, in this part of it.

But you guys have a state tax, right? Is food somehow taxed in your state taxes? Or is it truly tax-free? I wish it was tax free in TN.

What do you mean by "state tax"? We have an income tax, which taxes income, and a sales tax, which taxes sales (yay, obvious!). Are you talking about other taxes (tariffs really) on food producers/suppliers/shippers/whatnot? I'm not sure, but I suppose some types of food might. That's more of a subsidy/penalty system though and it's not something the customer pays directly.

I suppose the point is that any such tariffs would apply to any source of food regardless of where it's ultimately going. So to a consumer, that doesn't really matter. However, it does matter that a burger you buy in patties in the store and cook on your own grill will not be subject to income tax, while the one you buy from McDonalds will (in addition to other costs related to someone else making it for you of course). You can see this on any receipt. Buy food at McDonalds, it's all subject to sales tax. Buy food in the grocery store and it's not.

Hope that clarifies things. And given our sales tax is like 8%, that's nothing to sneeze at.

It's missing the point because people do exactly that which you insist they don't do. They do it all the time. Repeatedly insisting that people don't take into account the fact that they'll be paying a tip when deciding whether to dine out, or what to order when they do doesn't change the fact that most people do. You may be the one unique snowflake who doesn't, but that doesn't make you right, or me wrong.

Most people don't do what you're saying they do. It's that simple.



Yup. And part of that decision is looking at the cost of items on the menu, running it through our automatic "real cost" generator and deciding if it's worth the cost. No one looks at a menu, sees that the steak is $25 and says "I can afford to spend $25, so I'll order the steak!". People assume that on top of that $25 will be another $5 for a drink, and another $2.50 for tax and another $5 for tip. They know automatically that the real cost of the meal will be closer to $40, not the $25 on the menu. If they're not willing to spend $40 for a steak dinner, they'll order something less expensive (like perhaps the chicken).



But unless you are a jerk, it's expressed as a percentage of the meal cost. So you might decide that good service gets 15%, great service gets 20%, and mediocre service gets 10%. Regardless, that calculation is always going to be a function of the base cost of the meal itself. Only a complete idiot thinks that good service gets $5, great gets $10, and lousy gets nothing. Cause you'll be pissing folks off dropping your $5 tip on a $100 bill.



I suspect that you're one of those cheapskates who don't tip properly. Which I suppose explains why you continue to insist that tipping has nothing to do with the meal itself. You're justifying your crappy tipping by telling yourself you're tipping for the service and not the meal, so your tip shouldn't reflect the meal price. It all kinda makes sense now.



Yup. Makes perfect sense now.




You've got it backwards. I'm saying that people who can easily afford anything on the menu don't ignore the relative costs of things when making choices. They don't just think "I can afford $50 for a steak" and order the steak. They think "Is the steak at this restaurant really worth $50?" and/or "Do I feel like spending $50 for a steak dinner?". I have repeatedly told you that it's not about what people can afford, but whether they think the price is worth the meal they're going to get. And that assessment is going to include the full cost, which will include the tax and tip.

I keep explaining this to you, but you keep going back to this bizarre idea about people not being able to afford the meal. That's not it at all.



Yes. And that desired price range includes the total cost of the meal, which includes tax and tip. If I prefer to drop about $50 on dinner when I go out, I'll go to a restaurant where I estimate the entire cost of the meal, including appetizers, drinks, desert, tax, tip, etc will cost about $50. Because that's my target range. And if there's a selection of things on the menu, and some will push that total cost outside my desired range, I'm more likely to order something else instead.

The point being that if you increase all the prices on the menu by some set amount to account for higher wages for your waitstaff, it will push the cost of your meals outside that range for some people who might otherwise eat dinner at your restaurant. Again, it's simple supply vs demand.



Yeah. You have no clue how "financially aware people" do things. Seriously. I haven't sweated the cost of anything I've purchased for a decade or more, and certainly not the cost of a dinner bill. But that does not mean that I don't look at the prices on the menu and decide if the meal is worth the price. You're still kinda stuck on the idea of what someone can afford and failing to get that people who can easily afford to eat anywhere they want still think in terms of cost vs value. They can afford more things because they don't base what they spend on what they can afford.

This is a hard concept for most people to grasp because most people never step outside the assumption of increasing consumption to equal (or even exceed) income.



Yeah, still completely missing the point. I may make the decision to order one dish over another at a restaurant because one is $5 more than I think it's probably worth. I don't make that decision because I can't afford to spend the extra $5, but because I don't think that dish is worth the amount being asked. Not sure why I have to keep explaining this to you over and over, but there you go.


If you go into a restaurant, and the NY strip is $40, and the chicken salad is $35, you'd be right to think the chicken salad would have to be some amazing salad to be worth $35 (Or the NY strip is particularly terrible). It has nothing to do with the final price, or whether you can afford it, but simply an assessment of the relative value of things on the menu. Similarly, if you go to restaurant A and they are charging $40 for NY strip, and restaurant B is charging $60, unless there's something significantly better about restaurant B (the decor, service, or food) to justify the price, you'll probably go to restaurant A instead. If the only difference is that restaurant B pays their waitstaff a higher wage and all their dishes are similarly higher priced, and the service is otherwise identical, decor is the same, both expect a tip, and food is the same, I'll be going to restaurant A instead. Only an idiot would choose differently.

Edited, Dec 17th 2012 8:20pm by gbaji

Eh, I wouldn't call it that messed up. If they taxed it, it'd be taxing tax money...

I decide to give you 10 dollars because you can't afford to buy food and it's been determined that what you need to get the food required is 10 dollars. But if you buy food with that 10 dollars I take 1 dollar of it, meaning you only get 9 dollars worth of food. So instead I give you 11.11 dollars, and take the 1.11 when you buy it your 10 dollars worth of food.

Or I just give you 10 dollars and say "Hey, since this is money from me, I'll just keep the 1.11 you would pay me and let you buy this food without taking money back.

Except that the normal price of that food in the market is $11.10, since that's what it cost before you created the food program. So making it cost less for the food program only hides the actual cost. You're using the fact that the same agency which is funding the food program is also charging you taxes on food to hide some of the cost.



You're forgetting where the money comes from. Let's start by assuming this is all state funding (it's not, but we'll pretend it is to make this more clear). That money comes from your fellow citizens, right? So we start with no foodstamp program. $10 worth of food costs $11.10 to buy because we have a tax on all food. Then you introduce a foodstamp program. But you decide to not charge sales tax on food purchased through the program (but still charge it to everyone else). But because of this, your total tax revenue from food purchases will decrease by the amount of foodstamps you are printing. So you will lose $1.10 for every $10 of food stamps in this example.

In order to make up that difference, you will have to raise taxes slightly (or shift tax dollars from somewhere else) in order to allow the food stamp program to buy food at a lower price than everyone else. It may seem like a minor accounting issue, but it's actually kinda significant. The money doesn't come from the state and back to the state. It comes from the people in the form of taxes. The point being they're paying for $11.10 worth of food, but the government's making it look like they're only paying $10. The other $1.10 is hidden in the increase in other taxes that have to make up the difference. So when the government is asked "how much are we spending on food stamps" they can give a number that is lower than the actual market cost of the food itself. The extra money is hidden from view, but "the people" are still paying it one way or another. They have to be.


This is also beyond just the terrible incentives this creates. You're creating a bigger "gap" between those who can afford food and those who can't. I'll point out again that if the food stamps aren't themselves subject to tax, you'll have to make up the difference by raising taxes on everyone else (just a bit). This means that some number of more people now wont be able to afford food, and will have to go on food stamps. This requires more tax burden to shift on everyone else, rinse, repeat.

It makes it harder for people to move off food stamps as well, and may encourage people right on the edge to find ways to qualify for EBT if they can. Not having to pay sales tax on food is a great incentive for people to get onto the program. Presuming that we want such programs just for those who absolutely could not afford to buy food without them, and we want to encourage them to get off the programs as soon as they possibly can, this would seem to be exactly the wrong thing to do. You're making the jump from the weekly grocery bill while on EBT to that off EBT that much higher than it would be otherwise.


I could probably list off reasons all day long why it's a terrible way to do things. Unless your objective is just to maximize the number of people you can get on public assistance, that is. And yes, some of us suspect that is exactly why some of these programs are set up the way they are.

While I'm sure your meaning behind this was more "omg, evil liberals securing votes through public assistance." than mine, but I'm sure this is pretty much the idea. Maximize the people you can provide for with the resources you have available, by subsidizing their purchases.

Let's pretend we are dealing with a closed loop system here, with as few interacting parties as possible. 10 dollars is "bare minimum" for food required to live in this example.

There is a source of 100 dollars in tax from other, non 'leeching' folk. They have enough income to cover their 11% tax on food stuffs, and don't have to worry about not getting their 10 dollar value of food intake to survive. They also spend enough on food stuffs to fill that 100 dollars each 'period' (why not?)

That 100 dollars goes to provide 10 people with 10 dollars of tax free food.

Now, instead, that 100 dollars goes to provide 9 people with 10 dollars of taxed food.
11.10*9 = 99.90 = 0.10 remaining in the pool
1.10*9 = 9.90 collected tax on that food sales.
9.90+0.10 = 10.00, not quite enough to provide the necessary 10 dollars of food to a 10th person.

Yes, the Government is subsidizing that 10 dollars of food and making it cheaper for the person on assistance, but they are already giving them 100% of the funds anyway.

Maybe I"m too tired to see the problem (It is about a quarter after one here).. It's like if I was charging myself to wire my own basement. Sure I'm losing out on revenue, but it's revenue from my own existing revenue. I won't make more money by giving myself a portion of the money I already have.

Edit:
I just realized I was working backward on my 10%, so I just changed it to 11% to make up for it. The tax rate doesn't really matter.

Edited, Dec 18th 2012 1:21am by TirithRR

Hmmm. Ok. That was way longer and more complicated than intended. Let me shorten it and explain just the math part (and make sure it's right):

Before, you were collecting $100 of taxes on $1000 worth of food purchases. These taxes are paying for whatever your state needs taxes for. To pay for 10 people's food, you need to raise an additional $100, for a total of $200 in state taxes. Right? This amount is identical no matter how you manage the taxes:

If you charge taxes on all food, including those purchased with food stamps, then the food stamp program will cost you $110. $1000 worth of food will be bought, and $100 worth of taxes will be paid on that food. The people's share is $900 in food costs and $90 in taxes. The government's share is $100 worth of food costs and $10 worth of taxes. Thus we collect the same $100 in taxes which pay for existing state programs. $90 comes from the people, and $10 from the food stamp program (which also came from the people of course). Total cost is $200.

If you don't charge taxes on the food stamp purchased food, then the food stamp program will cost us $100 in direct taxes. $1000 worth of food will be bought, but only $90 worth of taxes will be paid on that food. The people's share is $900 in food costs and $90 in taxes. The government's share is $100 worth of food costs and no taxes. Thus, while we appear to save $10 on the cost of the food stamp program, we only collect $90 in taxes to pay for other programs. We must raise taxes somewhere else to make up that difference in revenue. Assuming we do this, the break down ends out being $90 in food taxes, $100 in food stamp program taxes, and $10 in "other taxes".

In both cases, you end out with the exact same $200 dollar tax bill. In both cases, the actual cost of a program to provide 10 people with food stamps is $110. It does not matter if you charge taxes on the food when purchased, or charge taxes elsewhere to make up the difference, the total cost still ends out being the same. It must include the cost to actually buy the food plus the cost of the tax revenue that would normally be collected for that purchase.

Make sense? I think I messed up the math a bit in my first post, but the general point is the same. It's the same total tax bill either way, but one method makes it seem like the food stamp program doesn't cost as much as it really does and creates a larger cost differential for those on food stamps versus those not.

It's the same as the $10 I didn't steal from you.