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| Children choosing .10 candy in our store. |
On the surface, extending sales tax to candy and gum seems like a very obvious move for Governor Wolf to make. Soda is already taxed, and in the child obesity fearful society we live in, taxing candy places it in the same category of sugary ills. We probably all agree that candy, although a quick and easy way to get fast calories, is not food. We do not need it to survive, so extending the sales tax to include candy places it in a separate category than food, which would continue to be tax free. Candy if taxed would now be considered a luxury of sorts or a even vice, depending on how you look at it. The 6.6% tax doesn't seem like a lot. Effectively, a mere .07 on a dollar probably wouldn't dissuade anyone from buying a candy bar, right?
But what would a tax on candy look like for a consumer? Many of us grew up with penny candy. We knew as children that if we had .10, we could go up to the candy counter and buy 10 pieces of candy. In fact, the concept of penny candy is so ingrained into the American candy tradition that although the days of true penny candy, whereby a piece of candy cost a penny, are long gone, the
idea of a piece of candy costing a flat rate survives. The closest we can get to penny candy today is .10 candy. With the advent of Governor Wolf's proposal, the days of a child walking into a candy store and being able to get so many pieces of candy for a flat rate will no longer exist, for the .10 candy would no longer cost .10. It would cost .11. So instead of getting 10 pieces of candy for a dollar, a child could get nine because .05 would be needed to pay the new tax. That doesn't seem so terrible except still today, many children only have a few coins to spend. The child who before could make a simple, even exchange in our store with a dime would no longer be able to do that.
Couldn't we, as the candy store, simply adjust our prices to absorb that penny tax to preserve the sanctity of penny candy? Maybe some stores who already pad their candy prices could, but our store could not. We are located in a small, mostly blue collar community where our competition is Walmart and other regional and national chains. Walmart prices their average candy bar a few cents less than our wholesale price. That's right--Walmart charges less for a Hershey bar than what we pay wholesale for the exact same bar. Although we carry far more specialty and unique candy than Walmart, we still have to compete with the idea that candy should be cheap, so we mark up our candy the minimum that we can. There simply isn't any wiggle room to absorb Wolf's proposed tax extension. To give you a better idea of what we're talking about, last year we sold over 18,000 pieces of .10 candy. If we absorbed that penny, we would have cut into our bottom line by $180 for the year. That doesn't seem like much, right? Let's just assume that this is the only candy category where we would have to do this even though it's not. What would be the effect of that $180 loss? What would we have to cut out of our yearly budget to cover that $180? The most obvious place to cut would be some of our sponsorships of our local schools and other charities. We could no longer be patrons of the high school musical, high school basketball team, high school Shakespeare troop, mini-Thon, and so on until we cut enough to make up for the difference.
The bigger problem is that this is not the only effect our business could see. Although we are a candy and gift store, 80% of our yearly business is currently candy sales. So using a hypothetical yearly candy sales total of $150,000, our sales could decrease nearly $10,000 a year simply because our customer's buying power would be potentially cut by the addition of a 6.6% sales tax. This is not the only hit we would take. Currently, 54% of all purchases made in our store are made with credit cards, which means that $81,000 of our hypothetical sales would be assessed fees. Since 80% of those sales are candy, this means that $64,800 of our hypothetical credit card sales are candy. Because candy would now be taxed, we would increase our sales total on those sales by $4276.80 a year, which is the proposed 6.6% sales tax. Let's say our merchant services effective rate, which is the total percentage rate we are charged to process credit cards, is 3%. Processing that $4276.80 additional amount to cover the sales tax would result in $128.30 more in merchant services fees that we would be charged. Again, this may seem like a nominal number, but the potential loss to our bottom line continues to expand. We're already up to about $10,308 in loss of business a year.
Again, what does that really translate into for our business? We've been steadily trying to build our business to the point that we could hire a part-time employee to help take the pressure off our family and to better serve the community, and we're almost to that point. If we lose $10,308 a year, our ability to hire someone--a local college student, for example--disappears. If we wanted to employ someone 20 hours a week at the current minimum wage of $7.25 for 52 weeks, the wages alone would cost over $7500. Add in the taxes we would have to pay into the local, state, and federal government for this employee and the workman's compensation insurance premiums we would have to carry, and all of that $10,308 loss is eaten up. If you factor in that Wolf has also proposed raising minimum wage to $10.10 a year, the wages of that employee alone would be more than our possible loss in sales due to the sales tax being extended to candy. So by extending and increasing the sales tax to candy and gum, our candy store could not only directly lose sales but also the ability to grow our business by expanding our hours and services with the addition of an employee while someone in our community would lose a chance of employment and the potential wages we could have paid.
Wolf not only proposes extending sales tax to our industry but to 40+ previously untaxed categories of products and services, increasing the current sales tax rate, and raising the personal income tax rate as well. It's the overall effect of these tax proposals that disturbs us as candy store owners the most. Earlier we established that candy is a luxury. When people are hit by economic hardship, such as losing more of their bottom line to increased taxes, what do they tend to cut out first? You guessed it--luxuries. If this happens, our own family's bottom line could be drastically and negatively impacted by Wolf's proposed tax increases and extensions, so our buying power would also decrease. We also would not be able to employ someone in our store, so a second family's buying power would be negatively impacted as well. Using just our candy business as an example, two families will lose buying power--buying power that they would use to support other local businesses and services. Trying to quantify the effect of Wolf's tax increases and what they will do to overall buying power for Pennsylvania families is nearly impossible to do. However, logic seems to say that our loss of buying power would have a snowball effect, giving those other business owners and service providers where we would have spent money either less money to spend or be faced with raising their prices. And I haven't even mentioned the incredible increase in the cost of our private health insurance this year for lesser care or the local school district proposing once again to raise our property taxes to the maximum allowable amount or the ever-rising costs of candy due to the protectionist sugar policies of the USDA, but all of these factors have very real and very serious impacts on the economic health of our small business.
Finally, here's one last point before closing. When we were a young family, my husband often had very little money to spend throughout the day even though he was working two jobs. We were not on any form of public assistance and were barely scraping by. My husband often had little time between ending one job and beginning the next, so he made quick stops at convenience stores for food. Even though candy was mentioned as not being food or a necessity earlier, my husband did use candy as food during that time because it was a cheap, calorie-packed item that helped him get through his shifts. With all our talk of proper nutrition for the working poor, the sad fact is that many people still simply cannot afford healthy food and have to survive on what they can afford, which includes candy.
One can be sure that Wolf's proposals to extend sales tax may put into jeopardy more than just the idea of "penny" candy. Although the sales tax extension to confections may not cripple our family business, the overall effect of Wolf's proposed tax increases just might. We are a growing business--one just past the first critical five years but still not past the daily struggles of small business--and the governor's unprecedented tax increases and extensions will undoubtedly set us back like many other Pennsylvania families. We only hope if Wolf's budget passes that we will be able survive.
**Note--We are small business owners and registered Democrats.
