Posts Tagged “taxes”

I’ve been critical of Whole Foods management in the past, but don’t get me wrong, I’m a loyal customer, and its in that spirit that I offer some free advice on bags. Like many markets, Whole Foods is wisely encouraging shoppers to bring their own bags. The display below is hawking 99 cent bags made from 80% recycled plastic. And if you use these bags - or any others that you bring - you save 5 cents per bag at the checkout. Markets stand to save a lot of money by reducing their need for buying and stocking paper and plastic bags.

Does this plan go too far? Au contraire, this plan doesn’t go too far enough! [nod to Futurama episode 7 in season 2] Whole Foods is the sort of place where you can pay $7.99 for a single fancy lemon. I just don’t see 5 cents as changing behavior in anybody who’s not already predisposed to this sort of ecofriendliness. Does the 5 cent container deposit change a lot of behavior for the busy soccer mom?

Also, I think WF has got their carrots and sticks mixed up here. A 5 cent reward for bringing your own bag is measly, and it means that people who are oblivious to the existence of the rebate still think that bags are free. They should charge people for each bag they use, as is done in many other countries., and it should be a price high enough to make people think.

I’m not going to get into the paper vs plastic thing, let’s just call a bag a bag for now. Let’s recap my modest proposal: Sell reusable bags as they already do, and charge customers a fee for each disposable bag that the market provides. I don’t mean sell a paper/plastic bag for $x, but rather, I mean that WF should collect a fee of some sort, like the bottle deposit or the environmental fees charged by your mechanic for disposal of tires and used motor oil. This is not a profit center, this is an attempt to change consumer behavior for the good of the environment.

So, what’s the right price? I’m saying that 5 cents is not enough, and WF has set the upper bound at $0.99 by selling reusable bags for that much. I’m inclined to the higher end of the scale. Even a buck a bag might not change a lot of rich folks ways, but at least it would raise a bunch of money for carbon offsets or recycling or something. And I don’t think there’s much risk of WF losing customers since price is hardly a differentiator for Whole Foods, but eco-friendliness is. Setting the price of a disposable bag equal to that of a reusable one certainly makes the point, doesn’t it?

It’s a critical part of my thesis that WF customers are not very price sensitive, but of course that’s a sweeping generalization. Some are very very price sensitive, and some will be just plain offended by my pay per bag plan. I can foresee some difficulty at the bagging station for these customers, as the increased price of bagging could lead to some dangerous over stuffing or a reluctance to double bag when needed. I would hate to see arguments break out between beleaguered baggers and cost-conscious customers. We could moderate my harsh regime with one free bag per transaction or perhaps a “bag tax” of some percentage of the grocery bill for all the bags you want.

Speaking as someone who just bought $75 worth of groceries at Whole Foods and got it all in one paper bag, I’m ready and willing to crunch the numbers on this one.

This weekend in Massachusetts, there was a state-wide sale: 5% off everything in the store! Except clothes, cars, and anything over $2,500. It’s an event known as the Tax-Free weekend, and it seems to be quite a big deal. But I’m not sure why.

Five percent off is hardly enough to get today’s shoppers off their duffs, so why would so many people get so excited about temporary relief from MA’s 5% sales tax? There’s a cap of $2500, cars are not eligible, and clothing isn’t subject to the sales tax in the first place. A friend suggested - and the Globe agrees - that some people are so irrationally averse to taxes that they get off by sticking it to the government, even in a small way. “Many acknowledged a certain frisson at the idea of saving 5 percent from the state — shopping as civil disobedience.” says the Globe. Wow. Frisson for 5%.

My second question about this is, what’s in it for Massachusetts? Why would they do this? Why make more paperwork for yourself and give up tax revenue to encourage some mid-summer commerce? I guess my indifference to a 5% discount is not so widely shared, as the Globe says that retail receipts this weekend will be $500 million, instead of he mid-August average of $150 million.

I’m sure that some portion of the $150 or $500 million is for sales of items not subject to sales tax or items over the limit for the exemption, but let’s leave that out for now. Let’s also assume for the moment that the entire $350 million extra is new business, not business moved from some other time period to get the discount.

So, by doing this, the state loses the 5% sales tax on the $150 million in retail sales that would have happened anyway. That’s $7.5 million not collected. What does the state get for this? Good PR? Happy shoppers? Campaign contributions from the retail industry? What about extra corporate income tax on the extra profits? If there were $350 million in additional sales, 5% state income tax on 2% profits is only $350,000 in extra corporate income taxes. I’m having trouble understanding why Mass would bother.

Let’s reverse the second assumption completely - let’s say that all of the additional sales were going to happen anyway, but were transacted this weekend due to the tax break. In this case, the state gave up sales tax on the whole $500 million, for a loss of $25 million, and didn’t generate any additional net business for corporate profits. That’s even worse. The truth probably lies somewhere in between.

The Institute on Taxation and Economic Policy takes a pretty dim view of sales taxes across the board, noting that they are highly regressive, but ultimately doesn’t find much material benefit to anybody in a brief repeal of sales tax. Read the whole story in the ITEP policy brief, “Sales Tax Holidays: Boon or Boondoggle?”

So what’s going on here? Is it just some feel-good consumerist propaganda? A small but well-intentioned transfer of tax burden from the not so rich to the somewhat richer? An elbow to the face of neighboring New Hampshire (where there is no sales tax ever)? I just don’t get it.