It’s a Matter of Presentation
Thinking about some recent debates I’ve had, I was thinking how taxes are currently viewed as a negative. It’s all a matter of perspective but also one of presentation. It’s really hard to change someones perspective, but the presentation is a relatively simple matter.
Right now, you go to a store and buy something. The price is $9.99. Here in Houston, there is 8.25% sales tax, so you end up paying $10.73. The presentation is such that it looks like you were quoted one price. and then were charged something different. It feels like a scam.
Same thing with pay. You are quoted a salary, or an hourly wage, but your paycheck is different. Say you’re salary is $60,000, you’ll actually see a take home income of $46,660 (based on the calculator on this website). The presentation is such that it looks like you’re taking a huge pay deduction.
It doesn’t have to work that way. Sales tax is easy. It’s a flat % on any item, regardless of final price, so just work that % into the advertised price. Stores don’t want to do this because it makes their prices look higher. But that’s stupid. People know they have to pay sales tax, and have to pay sales tax at every store, so if everyone had to do it, it would make no difference. It’s also more honest. It’s the price people actually have to pay.
It’s more complicated for income tax due to the progressive nature of it. But you already do a lot of the legwork upfront when you fill out a W-2. The idea behind that is to withhold the right amount so that you pay $0 at the end of the year. So why not just quote that amount as your salary?
Right now, taxes are this in your face separate entity. You have to file them every year, they reduce the amount of money you though you were going to get, they raise the price of the thing you are about to buy. If we just change the presentation, they become just a part of life.
Taxes feel like a punishment and a scam because they are presented as a scam. But if everything is up front and you know what your salary is going to be, it’s not that big a deal. Reduce some of the deductions and loopholes, make the calculations easier and quote the best estimate for the final price and taxes no longer look like a scam.
To make it easy, go a step further. Present all wages/salaries under worst case conditions. No deductions beyond standard. Then, if you have children or something, your income is actually HIGHER than you were expecting.
2 Comments
El Guapo · October 27, 2011 at 9:40 pm
Nice post.
One note in the store’s favor though – psychology. Everyone knows they are paying tax, but
a- the psychological penny ($x.99) has a strong effect on buyers, and
b- Even though sales tax does add to the final price, A person who convinces themselves to spend 49.99 will suck it up when the price jumps to 58.50, but he might not be able to convince himself right off the bat the 58.50 is worth it.
I also think that the presentation for tax sucks. But there would be resistance to changing it, probably for much the same reason the metric system failed here.
The devil you know…
Maarkean · October 28, 2011 at 8:32 am
That’s true about the psychology of the price, but stores could work it in their favor. If, after taxes, something is going to be $58.50, stores could make it $59.00 TAX INCLUDED!! and make $0.50 more. Not that I want to pay more persay, but you can get around the psychology by making everything come out as a round number.
Ah the metric system. How evident you are to America’s resistance to change.
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