Tuesday, March 21, 2023

Cost, Economics, and Transparency

If you cannot see it, there is every chance it may nonetheless still be there. This applies to the oxygen you breathe, the gravity that keeps you from floating away, and more. If the world were more transparent, perhaps we could perceive such things more readily. So, while seeing is believing, there is some necessity perhaps to believing despite not seeing. I thought of this when I ran across an article on the Dailydot regarding a complainer on TikTok.

This TikTok influencer was troubled by a visit to a retailer. When the influencer checked out, there was added to the receipt a "public improvement fee, which was 2.5% per item.” That seemed like a tax, and the influencer questioned "wondering, like, ‘public improvement,’ isn’t that what sales tax is? Like, what do we pay sales tax for?” Like, it is like a tax in like that it is like a percentage. Like, totally. See also Valley Girl (Atlantic, 1983). 

But, does similar in math make it same? Is this the Associative principle? The article proceeds to explain that these "public improvement fees" seem to be an invention originating in Colorado. But, it is not the government that is seeking a little something on each sale, it is the landlord from whom the retailer has procured space. There are apparently several in that state and they have garnered some media attention. 

The Dot says "it all boils down to landlords who levy the fee," which shoppers pay (or don't). There are shoppers that find the fee troubling and complain. They think perhaps that landlords the world over do not share in the success or challenges of those to whom they rent space. While this example is perhaps apparent and noticeable, is it really a distinction? And, back to the "or don't," shopping is almost entirely a voluntary sport. If a retailer is not providing what and how you wish, wait for it and another retailer will be along in a minute. 

The Dot author notes that these landlords are getting "a slice of all the goods sold on their turf in addition to the monthly rent business owners pay." Would it make the consumer happier if the 2.5% was not on the receipt as a "fee," and the price of the products on the shelves was simply 2.5% higher? Would the consumer even notice? Some have noticed that shopping inland saves the beach tourists money. Groceries close to attractions and theme parks are apparently more expensive (maybe I should make a TikTok?). If the rent on the Colorado property was 2.5% higher, then the retailer would have to account for that in the price of goods or services, 2.5% higher prices. 

Is this the Associative property of rents and fees? In either instance, the landlord receives payment for the property. In one instance, that rent remains at a sum certain whether the retailer sells goods or not. If the rent is flat, perhaps the landlord potentially cares somewhat less about contributing to the retailer's success (cleanliness or safety of surroundings)? Does the 2.5% give the landlord some incentive to facilitate the tenant's success? Does that 2.5% reduce the monthly rent sufficiently to attract tenants in a marginally less desirable location? 

Is the challenge for the influencer and the customers generally in that they know about the 2.5% in this instance? Need the retailer make such a public display? How is the retailer benefit by selling a $10.00 item and then displaying the $.25 fee? Is the retailer not as well-served by charging $10.25 for the item?

Who else benefits or not? Is the sales tax in either instance different? In other words, if the product is $10.00, is the 2.9% Colorado sales tax calculated on that amount or on the $10.25 total after the contribution of the "public improvement fee?" The tax on $10.00 is $.29 and on the $10.25 it is $.30. That $.01 might seem inconsequential in this instance, but perhaps little amounts add up?

Both Lex Luthor and the crew in Office Space (20th Century, 1999) thought those pennies would add up. And, they likely do. Perhaps the landlord's effort with the "improvement fee" is a detriment to the government in terms of diminished tax revenue? Perhaps the government has noticed and levies the taxes without regard to this accounting decision?

But, in the end, it is likely that the improvement fee is not making products more costly to any greater degree than the premises rent generally. The cost of the rent is going to be reflected in the price of goods and services. The difference with the "fee" is that its appearance on the receipt raises awareness of the premises' cost. And that, may, like totally lead to questions. The "add-on" at the register perhaps makes the shopper angry, or at least surprised. But, it is unlikely that this fee actually changes the price. Thus, we return to the questions at the outset. If you cannot see it, is it still there? The question in this regard is likely yes.

How does this influence the rest of us who are neither in Colorado, subject to such "fee," or perhaps even attentive enough to notice? It is a reminder that in all things consumed, there are various costs. These may be apparent as in this example, or the costs may be less obvious, integrated into other totals or components. Those costs are there, nonetheless. If you cannot see them, they are no less real. 

In the world of workers' compensation, the convenient location of a service provider may influence cost. When a law firm hires a paralegal in Kansas because that is a less expensive place to live than Tampa, that savings is in the price of services (the customer price is lowered or the law firm profit is increased). When an MRI is read by a radiologist around the world, the impact is similar. In this marketplace of workers' compensation, examples such as this abound. To compare prices, one must compare totals. 

In a great variety of instances, there are economic choices, contributing costs and savings, and complexity. A great many factors are part of the resulting economics and expenses. Just because you cannot see them, that does not mean that they are not there. The point is, there is much to consider in the economics of any situation. There is both benefit and cost in all things. This remains true whether we see them all or not. That is worthy of our consideration periodically. 

Aren't we fortunate to have influencers? Without their wit, wisdom, and curiosity, such examples might require so much more of us. In the old days, I would have had to like totally venture to Colorado to learn of such questions. Now, I can sit on my couch reading the Internet and accomplish similarly? But, I miss the beauty and peace of Colorado. Perhaps I should be comforted knowing that despite my not seeing the beauty, snow, and nature it is all still there?