Greetings from the UK! Yep, hubby and I packed up and headed across the pond to Jolly ol’ England for a few days of rest and relaxation (as well as a hint of business).
I won’t regale you with the saga of what’s really happening here (lots of sick travelers, present company included, ridiculously fickle appliances – nothing for nothing but centuries of civilization here in the UK and the plumbing is still a mystery – and what the BBC is calling “the worst storm of the winter”). In fact, I’ll bet you’re thinking that I haven’t had much time for tax at all. C’mon, there’s always time for tax.
Specifically, one of the things that I’ve been reminded of since I’ve been back (having spent a year in the northeast during college, as well as some jaunts for vacation), is the simplicity of the VAT (value added tax) really. Notwithstanding the issues, including the high rate of tax, the VAT makes shopping really simple – whether you’re in London (where I started out), Sussex (where I am now) or Cardiff (where I planned to be initially). The VAT is the VAT. It doesn’t differ from one county to the next as it does here. And even more brilliant? It’s included in the price.
Here’s what I mean. If I want to buy a Diet Coke in London and the sign says 75p, it’s actually 75p. Tax is included. If I want to buy a Diet Coke in Rye and the sign says 75p, it’s also 75p. Easy peasy.
But in the US, if the sign says 75¢, it matters where I am how much that soda will actually cost me since the tax is additional. Each state has different rules regarding what is taxed and what is not – depending on where you live, sales tax might apply to food, clothes or cigarettes. And there’s not one state that charges sales tax which has such bright line rules that it’s easy to figure what qualifies as taxable (remember this post about Milky Way bars?) and some states tax you depending on what you plan to do with the item (remember the post about eating pumpkins versus decorating them).
So, my Diet Coke could cost 75¢ – or it could cost as much as 82¢ (assuming the highest US tax rate). On lower ticket items, it’s confusing. On higher ticket items, it’s significant enough to send folks hunting for states with lower (or zero) sales tax. In my own state of Pennsylvania, we are often lured to Delaware for zero sales tax – and while Pennsylvania has a “use” tax that requires you to pay sales tax to the Commonwealth on items purchased in other states, let’s be honest – who does it?
I wonder if we’re not making things more complicated that they need to be with an additional sales tax which varies from state to state. Whispers abound about the possibility of a national sales tax – I don’t know, would that fly? Even if not, would it make sense for any state to have an “included” sales tax?
I don’t know the answers. I just know that it’s awfully nice to be able to count my money out in my hand as I stand in line this week and know exactly how much I’m paying for what I’m buying.
Hope you are all feeling better and able to enjoy the UK. It would be nice if the final price included the sales tax here in the US.
The boyfriend and I do our best to be completely correct on our taxes, which, unfortunately includes use tax… Considering we do a lot of shopping on Amazon and other websites, that can turn into a crazy amount when we figure our taxes.
I can’t remember where I read this, but I think I read that the non-inclusion of state sales tax comes from an ideological stance with its roots in the 30s. The idea was that a “hidden” tax is bad because it hides from citizens the cost of governance. There were objections to the withholding system for the same reason. Does that sound familiar? Of course, recent studies of happiness suggest that hiding taxes (including them in the cost) may well increase well-being in quantifiable ways. Maybe the states will catch on?
C’mon, Kelly, why in the world would you expect to find ANY simple solutions in the US? You know Americans are into challenge and challenge is spelled ‘convoluted’—especially when it comes to tax. After all, you wouldn’t want to to see a recession in the tax industry, would you?