What is a hidden tax?
Consumers are unaware of hidden levies on things they purchase. The hidden tax is based on the idea that if you can’t see it, your buying habits won’t change. With current transactional systems, hidden taxes like highway tolls paid with automated transponders and music downloads are becoming less visible.
Dissecting Hidden Taxes
Hidden taxes are ubiquitous, boosting the price of many everyday things. Most customers know sales taxes in most states, but few understand the hidden taxes in product prices.
Hidden taxes aim to stay hidden, but cable bills may be the most obvious. Cable and mobile phone providers must include all fees and taxes on their bills, but few customers read them. According to the Balancing Act, this tax system aims to increase government income without increasing consumer prices.
Other hidden taxes include cigarettes, alcohol, gambling, fuel, and hotel rooms. A usual transaction collects these taxes, burying them in the final price, which is greater than without the hidden tax.
Import tariffs are another example. Tariffs during global trade wars resulted in economic downturns such as the Great Depression. If they wish to ship internationally, they must pay tariffs. In this interwoven global economy, most suppliers cannot afford to lose international market share; therefore, they bury new expenses in product costs to avoid slowing demand. These increases reach consumers through wholesalers and distributors, who have margin obligations.
Pros and Cons of Hidden Taxes
No one likes to pay more taxes, but there is a discussion about whether taxing individuals who use “sin products” is fair, considering that they utilize social services more than others: cigarettes, booze, and gambling. One side claims that hidden taxes will lower consumption by making these items more expensive. Ironically, hidden taxes make it difficult for consumers to recognize a fee and change their behavior. The opposing view is that we live in a free society where individuals should pay a fair price for everything. Higher pricing may not change customer behavior for addictive items like cigarettes.
Hidden taxes are now easy to include because of technology. Smartphones with facial and finger recognition allow users to buy in seconds without checking for hidden taxes or fees. Automated tolls on highways are another example.
