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I think you're missing the point here a little bit. To break this down more simply: Credit cards: Merchants pay 3% and pass the cost on to the customer, IRS g

by dangus 2y ago

I think you're missing the point here a little bit. To break this down more simply: Credit cards: Merchants pay 3% and pass the cost on to the customer, IRS gets the vast majority of business taxes paid (no way to under-report taxable income), average person gets all the benefits of a fully funded government plus 1-2% of their purchase back in credit card rewards. Average person also gets a revolving credit line with okay-ish interest rates considering how no collateral is needed and approval is instant. Cash: Merchants broadly and easily commit tax fraud and under-report earnings, average person then has to pay a higher tax rate to overcome the tax fraud rates and get the same government services in return, merchant still pays something similar to or higher than 3% in transaction costs to handle cash (shrinkage (employees stealing, miscounting, lost cash), physical storage, movement, and processing, armored truck service, etc) and passes those costs on to the customer. Customers have no access to revolving credit which is totally fine but before credit cards people would resort to much more poorly regulated/higher interest/illegal sources of short term loans. I would also point out that debit card swipe fees are already regulated to under 1% and have many of the same benefits as credit cards.

lxgr 2y ago
With your last sentence, you supply your own counterexample demonstrating that "tax-evasion-enabling cash or credit cards costing the merchant 2-3%, pick one" is a false dichotomy. As I've mentioned, another counterexample is that Visa and Mastercard credit cards very much continue to exist in the EU, even after consumer credit card interchange rates have been capped to 0.3%.
- bruce511 2y ago
  I'm shocked, shocked, to discover that in the land of the "free market" the market optimizes for corporate profit not low prices. This is not news. In the US people vote for politicians who promise low regulation, business friendly and "economy" priorities. Those politicians run with corporate money and favor corporations. Other places (like the EU) have people who vote differently and have more appetite for reigning in the "free market" while serving consumers as the priority. It's not impossible for people to change, just unlikely. We tend to assume the pond we live in has the best water.
  - AnthonyMouse 2y ago
    > In the US people vote for politicians who promise low regulation, business friendly and "economy" priorities. People vote for those politicians because that's what they want. But is the problem with what they want, or what they get? Regulatory capture that puts up barriers to anyone trying to compete with the incumbents is neither "low regulation" nor what people want, but it's the status quo in the US.
    - dangus 2y ago
      It’s lower friction and more palatable to influence what people believe they want than it is to refuse to give them what they want.
- dangus 2y ago
  I never said "tax-evasion-enabling cash or credit cards costing the merchant 2-3%, pick one." I'm absolutely all for credit card merchant fees getting capped and treated more like a highly-regulated monopoly. In that scenario my argument in support of credit cards gets even stronger.
jncfhnb 2y ago
Consumer friendly is not the only thing we should care about. It’s also utterly fucked that it’s a system that disproportionately rewards people for being wealthy as richer people have access to better cards
- dangus 2y ago
  I think it’s not surprising, the wealthy get better access to better everything. They can buy higher quality goods and be more discerning, they get better loan terms. Everything about life is better for those with more money. This isn’t to say I don’t agree with you.
- Spooky23 2y ago
  Not at all. Back in the 90s, I had an American Express Gold Card, probably the premier travel card at the time. It was expensive, but for my specific situation, the travel benefits were basically making me $500 a year, alot of money for me. People with good credit have access to better cards. It’s about people who pay their shit on time, not wealth.
  - lxgr 2y ago
    And I'd be willing to wager that the ability to pay bills on time might be somewhat correlated to wealth. What you're giving is a rationalization for why the economic landscape of credit cards looks the way it does, which is useful for understanding it, but not at all the same thing as a justification for that being desirable for society as a whole. We have a perfectly fine mechanism for making lending cheaper for people who pay on time: Interest rates. There's no economic need for tangling all of that up with rewards/cashback rates. > It was expensive, but for my specific situation, the travel benefits were basically making me $500 a year, alot of money for me. While I also greatly benefit from the system myself I still consider it a massive resource sink for society at best, and borderline predatory lending behavior at worst, and would gladly see it disappear the same way it has in the EU.
    - deleted 2y ago
      [deleted]
AnthonyMouse 2y ago
> IRS gets the vast majority of business taxes paid (no way to under-report taxable income) I guess we should dispel this one if it's really why people think financial mass surveillance is a good thing. Cash is not even close to the only way for someone inclined to do it to under-report taxable income. Business income is revenue minus expenses. Anything that lowers revenue or increases expenses reduces taxable income. Businesses can deduct things that are personal rather than business expenses, overpay for deductible expenses to anyone giving a kickback under the table, sell at a discount to anyone giving a kickback under the table, do barter transactions and then deduct the traded merchandise as shrinkage, etc. Most businesses legitimately have single-digit profit margins, which doesn't take much to zero it out. Then if they get caught they go to jail, which is the same thing that happens if they get caught not reporting cash sales. And we haven't even scratched the surface of what large businesses do to avoid taxes. Spoiler: It's the same overall thing -- reduce revenue or increase deductible expenses -- but they generally have better lawyers and rarely go to jail even when they get caught.
- dangus 2y ago
  You haven't dispelled this at all. You literally can't reduce revenue on paper when your business revenue is credit card payments. The payments get reported directly to the IRS by the card processor. You can so much more easily fudge numbers if you take in primarily cash. In both cash and credit scenarios the business owner can increase on-paper expenses to lower tax burden, but there's only so much you can do with that without doing things like spending money on unnecessary costs or risking obvious audit discrepancies. If you take cash you can just lie and know that if you ever get audited there is no paper trail apart from the one you have created for yourself. The guy running the cash bar down the street can buy half his liquor from Costco with cash that he never reports receiving, and just pretends like half the bar's sales don't exist. That person would then only report the revenue to the portion of drink sales that go to a legitimate distributor. In this scenario both the distributor and the bar's receipts all line up and look legit, so the IRS would literally have to come down to the bar and count customers to prove anything was amiss. We can call this "financial mass surveillance" to make it sound bad and scary, but what's more scary to me as an average taxpayer is businesses evading taxes so that all the things I depend on like Medicare and Social Security get underfunded. As a W2 individual, I have no way to avoid taxes in a similar way.
throw0101d 2y ago
> Merchants pay 3% and pass the cost on to the customer, […] average person gets all the benefits of a fully funded government plus 1-2% of their purchase back in credit card rewards. And if you're below-average (i.e., poor or otherwise 'unwanted') and don't have a credit card then you are paying higher prices without any benefit: * https://www.cnbc.com/2023/05/27/lower-income-americans-pay-for-wealthys-credit-card-rewards-some-economists-say.html https://www.cnbc.com/2023/05/27/lower-income-americans-pay-f... * https://www.vox.com/the-goods/22454885/who-pays-for-credit-card-rewards https://www.vox.com/the-goods/22454885/who-pays-for-credit-c... * http://archive.is/https://www.nytimes.com/2023/03/04/opinion/credit-card-rewards-points-poor-interchange-fees.html http://archive.is/https://www.nytimes.com/2023/03/04/opinion...
- dangus 2y ago
  I totally agree, but we also can’t pretend that handling cash costs zero dollars. That’s only really the case for the tiniest businesses with zero employees. I think the phenomenon of the poor subsidizing the rich is just sort of how all of life works. The more affluent in society always get the better deal on everything.
Spooky23 2y ago
They don’t just pass it on, they gain margin through more sales. I was on a private school board and helped revamp their fundraising. The previous leadership team was cheap and focused on avoiding things like transaction fees. Well, they lost dollars chasing pennies. We boosted sales 25-30% just by adding card and contactless payment.

by dangus 2y ago

lxgr 2y ago

With your last sentence, you supply your own counterexample demonstrating that "tax-evasion-enabling cash or credit cards costing the merchant 2-3%, pick one" is a false dichotomy. As I've mentioned, another counterexample is that Visa and Mastercard credit cards very much continue to exist in the EU, even after consumer credit card interchange rates have been capped to 0.3%.

bruce511 2y ago
I'm shocked, shocked, to discover that in the land of the "free market" the market optimizes for corporate profit not low prices. This is not news. In the US people vote for politicians who promise low regulation, business friendly and "economy" priorities. Those politicians run with corporate money and favor corporations. Other places (like the EU) have people who vote differently and have more appetite for reigning in the "free market" while serving consumers as the priority. It's not impossible for people to change, just unlikely. We tend to assume the pond we live in has the best water.
- AnthonyMouse 2y ago
  > In the US people vote for politicians who promise low regulation, business friendly and "economy" priorities. People vote for those politicians because that's what they want. But is the problem with what they want, or what they get? Regulatory capture that puts up barriers to anyone trying to compete with the incumbents is neither "low regulation" nor what people want, but it's the status quo in the US.
  - dangus 2y ago
    It’s lower friction and more palatable to influence what people believe they want than it is to refuse to give them what they want.
dangus 2y ago
I never said "tax-evasion-enabling cash or credit cards costing the merchant 2-3%, pick one." I'm absolutely all for credit card merchant fees getting capped and treated more like a highly-regulated monopoly. In that scenario my argument in support of credit cards gets even stronger.

jncfhnb 2y ago

Consumer friendly is not the only thing we should care about. It’s also utterly fucked that it’s a system that disproportionately rewards people for being wealthy as richer people have access to better cards

dangus 2y ago
I think it’s not surprising, the wealthy get better access to better everything. They can buy higher quality goods and be more discerning, they get better loan terms. Everything about life is better for those with more money. This isn’t to say I don’t agree with you.
Spooky23 2y ago
Not at all. Back in the 90s, I had an American Express Gold Card, probably the premier travel card at the time. It was expensive, but for my specific situation, the travel benefits were basically making me $500 a year, alot of money for me. People with good credit have access to better cards. It’s about people who pay their shit on time, not wealth.
- lxgr 2y ago
  And I'd be willing to wager that the ability to pay bills on time might be somewhat correlated to wealth. What you're giving is a rationalization for why the economic landscape of credit cards looks the way it does, which is useful for understanding it, but not at all the same thing as a justification for that being desirable for society as a whole. We have a perfectly fine mechanism for making lending cheaper for people who pay on time: Interest rates. There's no economic need for tangling all of that up with rewards/cashback rates. > It was expensive, but for my specific situation, the travel benefits were basically making me $500 a year, alot of money for me. While I also greatly benefit from the system myself I still consider it a massive resource sink for society at best, and borderline predatory lending behavior at worst, and would gladly see it disappear the same way it has in the EU.
  - deleted 2y ago
    [deleted]

AnthonyMouse 2y ago

> IRS gets the vast majority of business taxes paid (no way to under-report taxable income) I guess we should dispel this one if it's really why people think financial mass surveillance is a good thing. Cash is not even close to the only way for someone inclined to do it to under-report taxable income. Business income is revenue minus expenses. Anything that lowers revenue or increases expenses reduces taxable income. Businesses can deduct things that are personal rather than business expenses, overpay for deductible expenses to anyone giving a kickback under the table, sell at a discount to anyone giving a kickback under the table, do barter transactions and then deduct the traded merchandise as shrinkage, etc. Most businesses legitimately have single-digit profit margins, which doesn't take much to zero it out. Then if they get caught they go to jail, which is the same thing that happens if they get caught not reporting cash sales. And we haven't even scratched the surface of what large businesses do to avoid taxes. Spoiler: It's the same overall thing -- reduce revenue or increase deductible expenses -- but they generally have better lawyers and rarely go to jail even when they get caught.

dangus 2y ago
You haven't dispelled this at all. You literally can't reduce revenue on paper when your business revenue is credit card payments. The payments get reported directly to the IRS by the card processor. You can so much more easily fudge numbers if you take in primarily cash. In both cash and credit scenarios the business owner can increase on-paper expenses to lower tax burden, but there's only so much you can do with that without doing things like spending money on unnecessary costs or risking obvious audit discrepancies. If you take cash you can just lie and know that if you ever get audited there is no paper trail apart from the one you have created for yourself. The guy running the cash bar down the street can buy half his liquor from Costco with cash that he never reports receiving, and just pretends like half the bar's sales don't exist. That person would then only report the revenue to the portion of drink sales that go to a legitimate distributor. In this scenario both the distributor and the bar's receipts all line up and look legit, so the IRS would literally have to come down to the bar and count customers to prove anything was amiss. We can call this "financial mass surveillance" to make it sound bad and scary, but what's more scary to me as an average taxpayer is businesses evading taxes so that all the things I depend on like Medicare and Social Security get underfunded. As a W2 individual, I have no way to avoid taxes in a similar way.

throw0101d 2y ago

> Merchants pay 3% and pass the cost on to the customer, […] average person gets all the benefits of a fully funded government plus 1-2% of their purchase back in credit card rewards. And if you're below-average (i.e., poor or otherwise 'unwanted') and don't have a credit card then you are paying higher prices without any benefit: * https://www.cnbc.com/2023/05/27/lower-income-americans-pay-for-wealthys-credit-card-rewards-some-economists-say.html https://www.cnbc.com/2023/05/27/lower-income-americans-pay-f... * https://www.vox.com/the-goods/22454885/who-pays-for-credit-card-rewards https://www.vox.com/the-goods/22454885/who-pays-for-credit-c... * http://archive.is/https://www.nytimes.com/2023/03/04/opinion/credit-card-rewards-points-poor-interchange-fees.html http://archive.is/https://www.nytimes.com/2023/03/04/opinion...

dangus 2y ago
I totally agree, but we also can’t pretend that handling cash costs zero dollars. That’s only really the case for the tiniest businesses with zero employees. I think the phenomenon of the poor subsidizing the rich is just sort of how all of life works. The more affluent in society always get the better deal on everything.

Spooky23 2y ago

They don’t just pass it on, they gain margin through more sales. I was on a private school board and helped revamp their fundraising. The previous leadership team was cheap and focused on avoiding things like transaction fees. Well, they lost dollars chasing pennies. We boosted sales 25-30% just by adding card and contactless payment.