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Restaurants and other low margin businesses would cease to exist under this plan.

deleted 5y ago
[deleted]
Retric 5y ago
That’s a common misunderstanding, restaurants are low margin due to competition. As long as the industry moves in lockstep with cost increases the margins stay the same. Sales taxes for example vary widely yet have minimal impact on low margin business. Lower them and customers save money but restaurants margins stay the same.
- jacobr1 5y ago
  For the same reason though, complementary goods don't necessarily have the same tax burden or margins. So the distribution of purchases might shift. Restaurant-goers might just eat at home more, or maybe even just go out to more expensive places that can operate with lower margins.
  - Retric 5y ago
    The important bit is the number of restaurants may change, but their margins don’t. The classic Starbucks at all four corners of an intersection is predicted on the total number of customers in that area. Cut them by 25% and 1 of those 4 locations but close 1 location and the the three remaining have identical numbers of customers as before the change. Cut by 75% and your down to one location, but again it ends up seeing the same number of customers before and after the transition.
- lordnacho 5y ago
  So what you're saying is this tax is effectively going to be paid by the consumers?
rootusrootus 5y ago
Why? If it were applied across the board, then every business would just treat it like any other business expense and price accordingly. On a theoretical zero-margin business it would translate dollar-for-dollar right to the customer, yes?
- Aunche 5y ago
  The problem is that you're incentivizing the creation of vertical monopolies. A small restaurant is forced to rely on suppliers who would pass the revenue tax onto the restaurant. Meanwhile, McDonald's can afford to buy their own suppliers. McDonald's suppliers would technically not make any revenue, so they get to pay less in tax.
permo-w 5y ago
that’s a big oversimplification

deleted 5y ago

[deleted]

That’s a common misunderstanding, restaurants are low margin due to competition. As long as the industry moves in lockstep with cost increases the margins stay the same. Sales taxes for example vary widely yet have minimal impact on low margin business. Lower them and customers save money but restaurants margins stay the same.

jacobr1 5y ago
For the same reason though, complementary goods don't necessarily have the same tax burden or margins. So the distribution of purchases might shift. Restaurant-goers might just eat at home more, or maybe even just go out to more expensive places that can operate with lower margins.
- Retric 5y ago
  The important bit is the number of restaurants may change, but their margins don’t. The classic Starbucks at all four corners of an intersection is predicted on the total number of customers in that area. Cut them by 25% and 1 of those 4 locations but close 1 location and the the three remaining have identical numbers of customers as before the change. Cut by 75% and your down to one location, but again it ends up seeing the same number of customers before and after the transition.
lordnacho 5y ago
So what you're saying is this tax is effectively going to be paid by the consumers?

rootusrootus 5y ago

Why? If it were applied across the board, then every business would just treat it like any other business expense and price accordingly. On a theoretical zero-margin business it would translate dollar-for-dollar right to the customer, yes?

Aunche 5y ago
The problem is that you're incentivizing the creation of vertical monopolies. A small restaurant is forced to rely on suppliers who would pass the revenue tax onto the restaurant. Meanwhile, McDonald's can afford to buy their own suppliers. McDonald's suppliers would technically not make any revenue, so they get to pay less in tax.

permo-w 5y ago

that’s a big oversimplification