Portland voters put a 1% tax on large retailers, complain when retailers pass it on to them

One of the great myths of public policy is that politicians decide who pays a tax. They might call it something like the ‘Medical Provider Tax‘ in the expectation that medical providers will pay it, but whether or not they do or pass it on to medical consumers instead is outside of the politician’s control.

I wrote this back in May explaining how elasticities determine the ‘incidence‘ of a tax, i.e. who really bears the burden.

An example comes from Portland, Oregon.

Terry Wiesner stared down at his Safeway grocery store receipt in confusion in mid-September after he noticed being charged an extra 3 cents for buying a package of $2.99 napkins. The 3 cent charge was listed as a tax.

He called over a store attendant while still in the self-checkout line at the Southeast Woodstock Boulevard branch and asked about the charge. The worker pointed to a laminated sign nearby.

Portland instituted a voter-approved clean energy surcharge in January, imposing a 1 percent tax on paper products, wine, beer, household items and other products, the sign said. The surcharge began appearing on Safeway customers’ receipts on Sept. 9 and people should contact the City of Portland if they had any concerns, according to the notice.

“I didn’t remember voting for any kind of tax,” said Wiesner, 74. “I later learned that this was meant to be a tax on businesses, not the people. Frankly, it just made me angry. It wasn’t about the 3 cents, it’s about the spirit of this charge and how it’d been passed off to me.”

Research has long shown that corporations don’t actually pay corporate tax. These studies suggest that labor bears between 50% and 100% of the burden of the corporate income tax in lower wages, with 70% or higher the most likely outcome. Events in Portland are one more warning for those who push for higher taxes on businesses: Be careful what you wish for.

John Phelan is an economist at the Center of the American Experiment.