Wednesday, December 03, 2008

Sticky prices: an application

Some may be surprised to know that I rarely watch local TV news. Just too many fires and murders. But I caught a bit of local news last night and there was a segment on the rollback of the county drink tax from 10% to 7%. The reporter ended his segment with a statement to the effect of.. it remains to be seen if local tavern owners pass on their tax savings on to their customers. Could be an unintended consequence if the public campaign against the drink tax gets vented back at the tavern owners.

But it begs a couple questions. Do we know the tax was passed on to the customers in the first place? Or how much of the tax was passed on? (all, some, none, or possible more than the tax?) How many taverns sell beer for prices that are not whole dollar prices which would make it hard to give back 3%?


Anonymous MH said...

Of course 3% will be nearly impossible to give back to the consumers. The only exception I could think of would be prices for very expensive bottles of wine. I'm still glad they at least cut some of the tax (and I would have happily voted for its repeal).

That said, I don't see why letting businesses make a profit is somehow a negative result. I'd rather see a bar owner make money than the county. If I don't like a bar, I can go to another one, but I can't stop dealing with Allegheny County (at least not without huge transaction costs). The last thing I want is for local government to figure out how to get better at "divide and rule" by using selective taxation to try to raise money without pissing off voters.

Wednesday, December 03, 2008 1:45:00 PM  
Blogger Matt H said...

Every place I frequent passed the cost on. A lot even had it specially marked on the receipts.

Wednesday, December 03, 2008 6:38:00 PM  
Blogger Brent said...

The place to watch will be sports venues. They got some heat for rounding up to the next quarter on already ridiculous beer prices. Also small neighborhood bars that don't often print tabs.

Wednesday, December 03, 2008 9:14:00 PM  
Blogger illyrias said...

A lot of places added 10% to the bill, a few places refer to it on the receipt as "ONORATOTAX" which always makes me smile. Those places will certainly drop down to 7%.

Mellon Arena, in particular, will be making an extra 3% on top of the 10-20% they raised drink prices in January because they just had to keep their prices even dollar amounts.

The few actual bars that changed their prices to make the new final number will probably take benefit from the 3% and their patrons won't care. i.e. Jack's on the South Side.

Please, remember that the bar-owners wanted to basically eliminate the drink tax (.5%) and that they were not fighting for this negligible decrease, small relief though it is.

Thursday, December 04, 2008 10:11:00 AM  
Anonymous piouslop said...

Just saw a full page City Paper ad for Jack's Bar touting $1.14 cent Coors Lite bottle on Wednesday night. With 10 percent tax, that comes to $1.25.

Thursday, December 04, 2008 2:22:00 PM  
Blogger C. Briem said...

that they listed the tax on receipts does not really say much in itself about how the prices changed. For example, was the price at Jacks $1.14 before the tax? I bet not, but it has been an awfullly long time since I was in Jack's I have to admit. Was Coor's $1 before? and now will that price be $1.14 +7% which would be $1.22? I bet not. But that is just one example. Would be curious if there was any more comprehensive data out there.

Thursday, December 04, 2008 10:01:00 PM  
Blogger illyrias said...

As I said, no one who goes to Jack's will care. I will happily hand Jack's over their 3 extra cents.

Friday, December 05, 2008 10:03:00 AM  
Blogger EdHeath said...

The implication of the last comment being that some establishments might raise prices to keep the net price even?

Saturday, December 06, 2008 5:30:00 PM  

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