Tag Archives: Taxes

Taxes and Perrier a Study in Law

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Perrier

Do you think of Perrier as water? I do. I’d imagine the vast majority of people reading this do. Do you consider it soda? I don’t and I’d think the vast majority of people agree with me, including Perrier itself.

Sparkling Natural Mineral Water is what it says on the bottle. It is naturally carbonated, whatever that means and sourced and bottled at the site it emerges from the ground. I don’t drink a lot of Perrier, nor do I drink much soda but then again, as the saying goes, I don’t know art, but I know what I like. Perrier is water.

Why am I asking you about the nature of Perrier? Because the United States legal system decided Perrier is soda. Why you ask? Money. Taxes.

The Perrier is Water Lawsuit

Jennifer Montgomery filed a lawsuit in Pennsylvania when she paid a tax of twenty-four cents on a 16-ounce bottle of Perrier. She wants a refund because it is illegal to tax water in the United States. It being considered essential to life and all.

Let me pause for a moment to praise Montogomery. Filing this lawsuit required time and money. When the original case was decided against her, she appealed. You go, girl! Sadly, the Pennsylvania Department Board of Revenue Appeals court decided that revenue is the most important factor. We need those tax dollars and nothing is going to stop us from getting them.

Nix v. Hedden

I haven’t put on my Time Travel hat in a while and there was a case back in 1883 involving a similar tax situation and tomatoes. Something about fruits and vegetables. Let’s go back and see what happened then. Now, where is the cap, we did a bit of Spring Cleaning involving the We Got Junk people recently and I hope it didn’t get tossed out along with that hideous lamp.

Hmm, not in the closet. In the fridge? Nope. Here it is, in the Gloomhaven Box, what’s it doing there? Well, never mind, let’s plop it on, spin three times, focus on 1883 and kapow! Here we are. Wowzer, am I poorly dressed, look at all those suits and dresses. I’ll just observe here in back, that constable with the baton looks like he’s ready to use it.

“A tomato is a fruit,” says the lawyer holding the delicious red object in one hand and a large book with the other. “Right here, your Honor, it’s science!”

Bang, down comes the gavel. “It seems obvious, any counter-argument?” says the judge looking at the other lawyer.

“If a tomato is a fruit it’s exempt from the vegetable tariff.”

Bang, down comes the gavel again. “I declare a tomato is legally a vegetable in the United States forevermore.”

“Your Honor …,” says the first lawyer.

“Shut yer yap, contempt of court. Ten days.”

Oops, that constable is giving me the side-eye, spin three times, poof, back home! Remember where I put the hat, I say to myself as I toss it on a shelf.

Well, I guess it’s good to know some things haven’t change. Tax revenue is more important than reality. Yay!

Conclusion

Perrier is soda, the courts have spoken and the courts can’t be wrong.

Tom Liberman

Tipping is Taxes at best Stealing at Worst

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Tipping is taxes

I just read an interesting article about how little restaurant workers are paid and it reminded me that tipping is taxes. I’m not certain exactly how tipping at restaurant became ubiquitous in the United States but I suspect it was nefarious from the beginning.

The article in question details how a waitress at a restaurant got a paycheck for $9.28 after working for seventy hours. That’s quite a bit below what the government considers her lowest possible wage of $2.13 an hour but apparently taxes reduced her paycheck from $150.81 to the aforementioned amount. She posted the article to illustrate why you should tip your waitstaff when dining out. I have a different take.

Tipping is Taxes on you

When you tip, you are paying a tax. The tax is simply the restaurant’s way of charging you less for the food up front by paying their employees ridiculously low wages. The wages for restaurant employees are so low that no one would do the job if it wasn’t for tips. Working for that pathetic a wage is simply not a feasible alternative.

At some point someone got the idea we should tip restaurant workers. As I said, I suspect it was a restaurant owner who simply didn’t want to pay workers a reasonable wage. We think of tipping as a way to compliment the staff for their service but it is merely a tax, and a big one at that. One the state and community doesn’t track. Every time you pay twenty percent extra, or more, for dining out, you are paying a tax.

You Pay Taxes on the Food Too!

Not only do you pay a tax to cover the cost of employing the staff but you also pay the government a tax to eat the food. The restaurant owner forces you to pay for their staff and then the government swoops in and gets a cut as well.

I’ve written before that I’m not opposed to taxes altogether. The government collected money from citizens to build the roads leading to the restaurant and to create the infrastructure bringing utilities to the restaurant. I don’t mind this, that’s all well and good. What I mind is paying the staff. That’s the job of the restaurant. Do I tip when I shop anywhere else?

Not only is Tipping Taxes but it’s Essentially Theft

Basically, the restaurant is stealing from the employee every time the total income is less than what the market would bear if wages were based on work rather than tips. It’s the restaurant’s way of not paying their employees.

When tips exceed the normal payment of such an employee then the restaurant is stealing from you. You are essentially overpaying the staff for the food you got. That is a determination that belongs solely to the employer, not the customer.

Stop Tipping and Start Paying a Competitive Wage

People get all angry when a new tax is floated by the government but we pay a huge rate for simply sitting down to eat food.

Naturally, if restaurants pay a fair wage to keep good employees, the cost of eating at the restaurant will go up. That’s the price of doing business. You pay your employees their worth and if you still make a profit, you stay in business. That’s capitalism.

Conclusion

Tipping is not capitalism, it’s a tax. It’s not even a stealthy, hidden tax that we don’t notice. We all know about it. Many of us pay it although some people don’t tip at all. I don’t think anyone should tip. Pay your employees their worth and charge me accordingly.

Tom Liberman

The Bleating of a Conservative about Taxes Funding Our Communities

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Taxes Funding Our Communities

The other day on Social Media one of my self-proclaimed Conservative friends posted a missive about taxes funding our communities. After I cleaned the vomit from my mouth, I decided to write an article about why this is utter insanity rather than berate said bleating Republican in a scathing reply.

You see, loyal readers, my social media friend can certainly call himself a Conservative but his attitude about taxes funding our communities shows his true colors as nothing more than an odious Republican who long ago gave up on all but the word Conservative.

The post in question was in regards to a mall that had long ago lost most of their stores through natural economic forces, a process I discuss in other blogs. The space was being used as a sporting venue for citizens to play games. My self-proclaimed Conservative friend wrote: It is a frequent re-purpose but sad for the economy. The drop in property value, lower property taxes, and less sales taxes to fund our communities.

The mere idea that it should be taxes funding our communities, let alone the delusion they are actually funding our communities is the worst sort of liberalism. Taxes do not fund our communities. They are collected by the government in order to provide services for the citizens. The community funds the government not the other way around.

Government does not build the roads. Roads, pipes, electric lines, green spaces, security, and fire protection is built because of our needs. Yes, the government uses funds collected through taxes to pay construction companies, police officers, and others but that is not funding our communities that is merely streamlining from a central point.

Let me illustrate with the example of the original social media post. My self-proclaimed conservative friend laments the loss of tax revenue from giant malls that no one has an interest in going to anymore. Doesn’t that say it all. Darn it, I can’t steal your money to prop up a business endeavor no one wants while paying myself a hefty salary to do so. Why should we pay taxes for utilities, roads, parking lots, emergency services, and a myriad of other things that go to a place no one uses anymore? Hint, we shouldn’t.

That’s the misguided role of government in a declining nation. To prop itself up with money stolen from citizens for things they don’t even want and certainly don’t need.

We want roads that go places useful to us. When a sales tax isn’t collected because no one is going to the store, that’s not a bad thing. That’s not a loss to the community. It’s a natural economic impact and the idea government is responsible for that store in the first place is misguided at the least. We were responsible for the store’s existence and now we don’t need it anymore. Good riddance.

It’s ass-backwards what my so-called Conservative friend advocates. It is not taxes funding our communities. It is our communities funding government and we should only fund what we need, not its bloated and endlessly empty belly.

Tom Liberman

The Airline Industry is a Gigantic Government Boondoggle

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Airline Industry

The Airline Industry in the United States was largely brought into existence and continues to be propped up by your tax dollars. It now looks like another $54 billion is going to be spent to keep it going. Yikes. Why are we propping up an industry that has largely failed to be profitable since its inception?

To fully understand how much of your tax dollars have gone into the airline industry we have to go back to the beginning. The Contract Air Mail Act of 1925 essentially allowed airlines to exist and they would not have turned a profit if not for government contracts. Since then the airline industry has continued to be largely dependent on the government for survival.

Without government contracts, military and government passengers paid for by you, employees trained at taxpayer expense, military breakthroughs in aviation, funding for research, the Essential Air Service, propping the industry up after the 9-11 terrorist attacks, ongoing payments to maintain staff and service airports, the industry would not exist in its current form.

In addition, the result of all these tax dollars put into the airline industry by the government was the utter destruction of the profitable and highly used passenger rail system that largely no longer exists in the United States but is functioning with great success in almost every other country in the world.

So, now, after all this, we are being asked to once again save the airline industry from bankruptcy. Hey, how about we let the unprofitable airlines fail, allow autonomous cars to transport us relatively short distances on our own schedule, and rebuild the passenger rail system without tax dollars? Those airlines that can run profitably without taxpayer dollars will do so.

Your tax dollars are the only reason many small airports across the country exist. That’s what the Essential Air Service act ensures. The government keeps small airports open even though they have no hope of ever being financially independent.

We never should have used tax payer dollars and government mandates to create the airline industry and now, all these years later, we’re continuing to pay for that mistake. Let’s put a stop to it, now is the opportunity to do so.

The mantra of a Libertarian: Let them fail.

Tom Liberman

Taxed by Miles Driven – An Oregon Proposal

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Gasoline TaxThere’s an interesting idea being tested in the Beaver state of Oregon and it has the potential to have a negative impact on me. The state has started a pilot program wherein drivers will pay a tax of 1.5 cents per mile driven instead of the 49.5 cents/gallon they currently pay in taxes. This includes the 18.5 cents/gallon federal tax.

The reason for this idea is that cars have become significantly more fuel-efficient in the last twenty years and that has greatly reduced the revenue generated by gasoline taxes. Adjusting for inflation it seems as if the revenue stream has dropped by about 40%. The money from such taxes are supposed to be used to pay for both the upkeep on existing roads and bridges and any new construction.

According to most surveys, the roads and bridges in the United States are in abysmal condition and that is a dangerous situation for anyone who travels on them.

The reason this method of taxation has a negative effect on me is because I own a Prius and get about 45 miles to the gallon. This means I fill up my tank about half as much as someone getting 23 miles to the gallon. Thus I pay about half the Missouri gasoline tax (35.7 cents/gallon) as my fellow Show Me state brethren.

The new system means that I would pay exactly the same amount as someone who drove an equal number of miles in a year.

As a Libertarian I’m often criticized for not wanting any government but that is an over-generalization. I think roads are one of the most important services the government provides and I think it is only equitable that I pay for the use I get from them. Not only my own driving but that of goods that are shipped over them to the stores I frequent.

However, this new per mile method doesn’t take into account the weight of the car which is a hugely important factor in damage to the roads. Lighter cars do far less damage to the roads than do heavier vehicles, particularly trucks. Now, roads are damaged not only by heavy vehicles but also by weathering and even the government is going to be hard pressed to find  a way to tax the weather (although I wouldn’t put it past them).

So, what is an equitable solution? I think Oregon is going in the right direction but it could easily be a multiple of the miles driven by the weight of the car. It seems like a formula would not be difficult to derive.

We all like our roads and benefit from them in many ways. The lifestyle we lead is in no small part based upon the transportation system in the United States. It is in our best interest to maintain it at peak efficiency.

All taxes should be based upon the service that government provides. If my Prius does X amount of damage to the road then I should be taxed X with Y added for the general weathering damage. People who drive more, who use heavier vehicles, should be taxed more than those who drive less or not at all.

This is an important argument in the Libertarian arsenal. We are not against taxes but we think that taxes must be justified by expenses. If the gasoline taxes, if all taxes, are designed to generate exactly the revenue necessary to maintain that particular service I will gladly pay them.

I applaud Oregon’s effort, which faces a number of tests including how to determine the number of miles driven and miles driven by out-of-state visitors. The idea is a move in the right direction, let’s see how the implementation goes.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Ideology
Current Release: The Spear of the Hunt
Next Release: The Broken Throne

NFL a non-Profit is that a bad thing?

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Non-Profit OrganizationCorporate tax status is in the news lately with Apple but I just read another interesting story about the NFL. It turns out that way back in 1966 in a deal negotiated by then commissioner Pete Rozelle the NFL and sports leagues in general were declared non-profit organizations. What this means in practice is that the NFL doesn’t pay taxes. This despite the fact that the NFL earned about $10 billion in revenue last year.

If the comments on the story are to be taken as any indicator then most people are fairly upset by this state of affairs. Just as many people are upset with GE for paying no corporate taxes or by Apple avoiding paying taxes by shipping billions overseas to phony companies in Ireland.

The question I want to pursue today is the effect of the fact that the NFL doesn’t have to pay taxes. That NFL employees don’t pay taxes on hotel rooms when they come to visit your city, but I pay huge tax rates on my hotel room, on my rental car, on my airline tickets. Those are the taxes everyone is for, taxes on visitors to the city.

The result of this tax-free status is that the NFL has more money to spend on salaries. They have more money that they didn’t spend on tax lawyers. They have more money to build their league. The result is the NFL pays great salaries (which are taxable) and puts out a product that people apparently want to see. I do, I have season tickets to the Rams and gladly fork over my money every year. The result of the NFL not paying taxes is good for everyone. Now, could the NFL do things differently, do I quibble with the way they’ve run their long-term disability insurance for former players injured while playing the brutal game? Yes. But, would taxes help? To my way of thinking absolutely not.

Are corporate taxes, as they are structured today, totally counterproductive? In my opinion yes. Basically, the way it works today is that any business large enough to help Congress members get elected gets laws passed that make it relatively easy for them avoid taxes while small businesses, who can’t afford to bribe congress members, bear the brunt of the corporate tax burden. Now we begin to understand the root of the problem.

Congress passes laws not to help businesses in general but to help a particular business. Generally the one that pays for their political campaigns. When Congress passes laws that will supposedly ensure the safety of our food in reality they are passing laws making it impossible for a small cattle rancher to slaughter cows because the owner of the feed lots foots the campaign bills. When Congress passes a law to help the technical industry with overseas business they are actually passing a law that allows Apple to store huge sums of money overseas to avoid paying taxes while a company like Acumen Consulting gets stuck with the real tax bill.

These laws, passed by supposedly pro-business Congress members discourage competition and destroy business. These laws help huge companies like Pfizer and make it an unfair playing field for small companies like Jost Chemical Co.

Congress is currently in the business of deciding which company will succeed and which will fail. This is not capitalism. This is Crony Capitalism.

Detractors will argue that a business that gets to keep all its profit will simply pay the upper management even larger sums and there is that possibility. The pay structure of average employee to CEO is way out of whack but I think part of that is the unfair business model that Congress has created. When the model is biased towards large companies, and it is, then smaller, vigorous companies have a far more difficult time supplanting the behemoths. Not to say it can’t happen, it’s just more difficult. If a huge multinational company pays all its top executive outrageous sums but neglects its best workers then they will quickly lose all their talented people to smaller companies that treat their employees better.

The current system allows huge companies to pay little or no taxes while small businesses pay close to the ridiculous 35% rate. That’s one reason big companies aren’t all that eager to encourage the Obama administration to lower the corporate tax rate. Or at least those businesses that benefit from the current system. Walmart, for example, doesn’t have a huge corporate tax law division and largely pays their taxes. They want to lower the rate. GE, they like things just the way they are.

I’ve gone on a little long here but I want to sum up. The corporate tax rate as it stands today helps only the largest businesses that help fund the election cycles. It doesn’t help small businesses. It doesn’t help employees, it doesn’t help anyone. One look at the tax-exempt status of the NFL proves it. Their league is doing great and generating profit for many people; jersey sales, parking lots, hotels, construction companies (Jerry Jones spent $2 billion out of his own pocket to build a stadium), and many others. It’s a model we should at least consider. Don’t tax business profits at all. Tax salaries, capital improvement projects, purchases, whatever. At least give it a try because the current system is broken.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
Current Release: The Sword of Water (Jon Gray v. Eleniak the Golden Flame c’mon, that’s awesome stuff)
Next Release: The Spear of the Hunt

Internet Sale Tax – Coming Soon

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Internet Sales TaxLegislation is slowly making its way through Washington D.C. that will institute a Sales Tax on internet purchases. Those in favor of this tax, although most refuse to call it a tax instead using the phrase Collection Issue, say it is unfair that internet sales do not have a sales tax whereas brick and mortar stores do have such a tax.

To understand why it is completely fair that Internet Sales don’t have a sales tax while Brick and Mortar do have one we have to understand the purpose of a Sales Tax, or any tax at all.

The rationale for such taxes is that in order to sell something to a consumer, the product and the customer must get to your store by state and federally built roads. They park in your store on free use parking lots generally built and maintained by municipalities. Stores use utilities; gas, electric, water, sewage, whose infrastructure requires government moneys. Internet sales clearly do not require this upkeep although if there is a warehouse where the product is delivered in the state it does require such resources. The roads used to deliver such a package to your door are also under that umbrella of activity.

However, the trucks that deliver goods pay gas taxes for the upkeep of the road. Gasoline taxes are generally justified as a way to pay for road and bridge building and maintenance. That makes perfect sense to me.

The only real justification for this new tax is the warehousing of goods which need employees to unload and load product for the consumer. These employees need water, heat, parking, etc. That is why Amazon is working out its own sales tax scheme with various states because they are building a network of warehouses all over the U.S. to ensure that your product is delivered promptly.

Now, here is my main point. If we become a society that orders our goods online we will significantly lessen the burden on utilities, parking lots, roads, and other government provided services. Brick and mortar stores will disappear and parks will appear. If we stop driving our cars all over to pick up toothpaste then the government spends less money and our taxes should likewise decrease. But, if we tax internet sales, whose price is lower for natural, capitalistic reasons, we are unfairly benefitting brick and mortar stores! Taxes should be lower on internet sales. This will, and is, creating many positive effects on consumption of gasoline, water, electricity etc! Not that the government should decide this one way or the other. If one business practice is cheaper and people like it then it should win out.

I’m not totally opposed to taxation on internet sales whose goods go through a warehouse in that state or municipality. I’m just saying it should be significantly lower for those specific cases and if there is no warehouse, there should be no tax at all. The reason it is lower is that only large trucks have to deliver the goods as compared to many cars coming and going. Warehouses have fewer employees than equally sized brick and mortar store where one warehouse might replace fifty or more traditional business locations.

The benefits of internet sales are many and we shouldn’t be discouraging this with unfair taxes that help brick and mortar stores under the misguided guise of “fairness”.

Tell me what you think in the comments!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
New Release: The Hammer of Fire

Soda Tax – Good Idea?

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Sin TaxAs the Federal government continues with their financial woes and bond rate manipulation costs state and municipality millions if not billions of dollars those entities are coming up with creative ways to tax. One of the most common and popular way to raise revenue is so-called “Sin Taxes“. One new idea coming to a city near you is to tax soda consumption.

I’m going to explore the idea of a Sin Tax and whether it is a reasonable way for municipalities to raise money for their operations. I don’t want to get too deeply into the idea of waste and government overspending but focus more on whether these taxes are useful.

The Wiki article details the proposed benefits of such taxes which include the revenue raised and the societal benefit of increased cost and the accompanying discouragement of sin. In this case the societal good is the weight loss that might be associated with reduced soda consumption and its attendant health benefits.

Sin Taxes have a long history in the United States with tobacco taxes being the most prominently known. For those of you, like me, who love history, you’ll be interested to know that Alexander Hamilton proposed the first tobacco tax back in 1794. The current federal tax is $1.01 per pack while state and even city taxes vary. In Missouri, my home state, the tax is $.17 per pack. It turns out this tax burden is far less than I was led to believe by tobacco companies and smokers in general although that is to be expected. Missouri’s tax is the lowest in the nation.

There is, in fact, a correlation between higher taxes and reduced consumption. So that part of the argument seems to be true. If the price point rises to a certain level then a segment of the population will stop using the product. However, at least one study indicate that smokers and obese people are actually less of a financial burden on the health-care system because they die much earlier than healthy people.

One of the main arguments against Sin Taxes, and proposed nationwide consumption taxation, is that they are regressive in nature. What is meant by this is that two people who smoke a pack a day are taxed equally but one is wealthy and the other poor. Thus the poor person is paying a far higher percentage of their total income. In essence the tax forces poor people to quit or bear a much higher percentage burden. This could be deemed discriminatory.

There is no doubt that companies push such tax hikes onto the consumer but that is really beside the point. Studies indicate that raising taxes on soda will generate revenue for cities and will drive down consumption. Whether that consumption rate decline will result in less obesity and medical expenses is in doubt. It is certainly the right of cities, states, and the federal government to tax.

As a Libertarian I think people should largely be allowed to make their own decisions and government shouldn’t be in the business of discouraging or encouraging personal lifestyle choices. Contrarily I also think that all people and businesses enjoy the benefits of government building and maintaining roads, bridges, sewer systems, schools, and utility infrastructure and should pay for that boon. Back to the other side, I think taxing “sin” sends a bad message. We don’t want you to do something but we’ll happily take your money for doing it.

It’s a tough question. Certainly they have the right to tax soda but is it a reasonable exercise of government power?

I have to come to the conclusion that it’s legal but I don’t like it. I like taxes to be directly related to a function of government. A gas tax should go directly to roads and bridges. A property tax should go to schools. An airline tax should go to airports and their employees. Cigarette and Soda taxes should go towards public health-care costs if they are deemed to be an expense. When all the tax dollars are mixed and mingled strange accounting starts to happen and it becomes a magnet for waste and theft. Just as a quick example; let’s imagine all the money taken for Social Security was put into safe, low-interest bearing accounts and doled out only to those who paid in. It would be fully funded and not only fiscally solvent but be running huge profits by now.

I think that is a better solution than taxing soda but it would require a large effort. An effort that is worthwhile in my opinion. Have taxes support the specific government function to which they are related. If soda costs money in health-care then the tax should be used for that purpose. I’m not convinced reducing soda consumption will reduce obesity and even if it did that such effect would lower health-care costs. Thus, I don’t think a soda tax is reasonable.

What do you think? Tell me in the comments.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
New Release: The Hammer of Fire