Americans have this odd thing of quoting prices without tax which tends to be illegal elesewhere. OK the US does not have a sales type tax on digital goods,
There’s a reason for that: we don’t have VAT like you do.
Here’s an example: a base model iPhone 14 is $799. If I go to the Downtown San Francisco Apple Store, it is $868.12; if I go across a bridge to the Berkeley Apple Store it is $880.90; if I go from there across a different bridge to Corte Madera it is $870.91; if I go back through San Francisco down to the neighboring county to the Hillsdale Apple Store it is $875.90; and if I buy it in Cupertino, then it is $871.91. If I cross the State border with Oregon and go to an Apple Store in Tigard or Portland, then it is $799.
Which is the price Apple should be showing on the Apple Store? They tell you at checkout because what you pay at the end is calculated according to your shipping address, and it’s a line item: sales tax, but pricing is also marketing. Which price should Apple be quoting their American customers in national ad campaigns?
European states have different VAT rates too. A company advertises 999€ and then depending on the state it can be either 832,5€ + 166,5€ VAT or 839,5€ + 159,5€ VAT or 799,2€ + 199,8€ VAT etc.
In the case of Apple they sometimes do this and other times not. So for example the iPhone 14 is 999€ in both Germany and Austria, even though they have 19% vs 20% VAT rates. However in Finland which has a 24% rate the iPhone 14 is 1039€.
And does Apple have one Apple Online Store and App Store for the Eurozone or do they have separate Online and App Stores for each EU member they operate in in the local languages and currencies (for the EU and Eurozone are not even perfectly aligned)?
Almost every example I gave was within one State: California, except for the two I tacked on at the end from California’s nearest northern neighbor in Oregon. All of the California examples were within the same metro area (the San Francisco Bay Area) but different counties. There is one US website, and one US App Store.
It is not the same situation, only seemingly superficially similar until further inspection.
Local municipality taxes exist in Europe too. Some cities have an extra 1% tax for example and Apple isn't exempt from that. The price still remains what they advertise for the larger region.
The US does not have a national sales tax or VAT. Every state has their own tax, and some don't even have one.
Even within a state, sales taxes can vary at the county and municipality level.
To tell an American the full price plus tax they will pay for something, you need to know where they live. For expensive items like computers and phones, the price could vary by tens or hundreds of dollars.
Consumers, who don't have to know the ins and outs of local tax policies and exemptions to understand what the product they want to buy will cost them.
... which is used in plenty of places in Europe, yes? And not every place in the US uses FPTP. In fact, every election seems to add another locality to the list that use an alternative.
To be fair, Americans (and anyone else) are right to resent sales taxes. And I’m saying that as an American who’s far to the left of what some call “socialism” in Europe. Sales taxes are highly regressive, disproportionately impacting those least able to afford them.
It's not really sensible to look at the regressivity of a tax in isolation.
On the tax side, there are other factors you might want to optimize, like how distortionary the tax is and how effective it is at raising revenue.
On the spending side, a regressive tax + a progressive government redistribution policy can end up being progressive overall. For example, any tax can be made to be as progressive as you want by redistributing some of the revenue as a UBI.
Sales taxes/VATs are very effective at raising revenue and are less distortionary than most of the alternatives. This makes them good for funding redistributive policies. They won't tax billionaires out of existence, but they're a good tool for states to have in their toolbox.
Depends on the location. Sales taxes are determined at the state, county and municipal level and apply to different things in different places (so, for example, Illinois does not charge sales tax on magazines, but California does, and the tax rate on a single donut may be higher than the tax rate on a dozen donuts (prepared food vs groceries).
> the tax rate on a single donut may be higher than the tax rate on a dozen donuts
It’s even worse than that, which I learned unfortunately at a former employer. Two identically priced dresses could have different tax rates based on the formality of one vs the other, ie one being a simple LBD and the other being a sequined evening gown.
Does that apply to sales tax or import duties though? I’m not aware of any jurisdiction which has different sales tax rates for different types of clothing. Import duties are a whole other can of worms (in some cases, products are partially disassembled before crossing the border to lower the import duties and then reassembled after import).
> I’m not aware of any jurisdiction which has different sales tax rates for different types of clothing
I’ll have to ask someone as I’ve forgotten the specific jurisdiction, but yes, it was sales tax specifically. If memory serves, it was either a county or municipality sales tax I thought in one of the states of the United States, but I’ll see if I can confirm.
We have the same thing in Canada. Taxes are not included in the price so that people can be aware of how much tax they're paying and adjust their behaviour accordingly. Since sales taxes are charged on some products but not others, the price-conscious consumer can elect to choose the tax-free products over the tax-burdened ones.
If taxes are included in price, the consumer can just look at the price and compare rather than jumping through the additional mental hoop to determine if one item is subject to sales tax, and what its price is in tgat case.
It's one of those things that's advocated by tax-haters and seems like it might do what they say it does, but in practice just makes life more annoying while doing nothing useful. See also: having to manually file taxes, no matter how simple.
It's not about the consumer. The price is listed before tax to manipulate you into feeling like it's cheaper. If they add tax while you check out, you're basically already committed to purchasing the product.
If you have two items and sales taxes are included in the price of one but not the other, the only way you can know which one has the taxes on it is to go look at some government website that lists all of the categories the tax applies to and those it does not.
On the other hand, if the taxes are not included in prices then you will see which one has taxes at checkout and elect not to purchase the item with taxes, preferring the item without taxes.
Furthermore, with taxes included in prices you are more susceptible to unscrupulous vendors charging taxes that should not be applied and pocketing the extra margins. One example of that is with the manufacturer of Niche coffee grinders charging VAT to international customers and pocketing the extra margin.
> On the other hand, if the taxes are not included in prices then you will see which one has taxes at checkout and elect not to purchase the item with taxes, preferring the item without taxes.
Why would you care? Having taxes included in sticker prices doesn’t change how much it costs you, only what percentage goes to your government. The only situation where not including taxes is potentially useful is when you explicitly don’t want to pay taxes, but you’re still happy to pay a higher price, if it means less money to the government.
Also in Europe we have a very simple solution to this problem. Every price tag has two numbers. The number in big font includes taxes, the little number underneath is without taxes. If you’re desperate to avoid giving cash to the government, then you just need to find items with the smallest delta between the two numbers. Retailers are also obliged to display both numbers, and provide a tax breakdown on your receipt, so you penny pinch your taxes to your hearts content.
> the only way you can know which one has the taxes on it is to go look at some government website
In Europe the tax is listed separately on the bill by law, no need to visit any website.
The amount of tax charged isn't hidden in Europe, it's just that the most prominent number is the total sum. The pre-tax part and all the taxes are also available separately for your information.
Americans have this odd thing of quoting prices without tax which tends to be illegal elesewhere. OK the US does not have a sales type tax on digital goods,