Unless tax law has changed since I took it. As I recall it, "The producers took care of it," was one of the defenses he put on or wanted to put on but which has no basis in law. It certainly wouldn't explain why he didn't pay taxes on a bunch of other income from the year in question.

Except that due to the properties of supply and demand, the purchase price ends up being lower than it would if there weren't a tax for any goods that are not perfectly inelastic (namely, everything). So something that would cost $10 in a non-taxed world would not cost $10.42 (which would leave the seller with $10 revenue after the exise), it would be somewhere in between $10 and $10.42. As long as there is elasticity in demand, the producer will always share some of the cost of tax with the consumer.

I don't think race was a part of it either- but SL seems to- but he has not explained it.

Which is why I have my theory. I bet his contract said something along the lines of, "We're including extra cash to cover the taxes," and he played dumb. "They said they were covering taxes."

Except they don't. Everything you buy in Hawaii has (had, anyway) 4.17% added. I never saw anybody competing on price by eating some of the tax.

And industry wide I'd wonder as well since almost everything sold in Hawai'i in imported from somewhere else so that purchase price is dictated by forces outside of the tax structure in question.

But yes, there is undoubtedly some price suppression caused by the tax, but the point was to demonstrate the recursive taxing that turns a 4% announced tax into a 4.17% real tax. And that it would work the same way if you want to give someone $1 million, after taxes.

In a system where the tax always existed, it's not really visible. If the tax were to suddenly disappear, I bet 4.17% of my income that prices would not simply fall down to the sans-tax level, they'd settle somewhere above it. How much so depends on the price elasticity of the product.

Surely an added wrinkle complicating things, but the importers and resellers still mark up the price from whatever they're paying to import. The amount of that markup is still subject to the laws of supply and demand.

Yeah, I know. I just like to bring up that finer point of sales tax that most people aren't aware of. A X% increase in sales tax does not translate directly to an X% increase in prices to consumers.

Yeah, I'm aware of it, but if we want to get in the nitty gritty of it all, price elasticity isn't the only major factor to take into account. 2 applie pies at McDonald's are going to have a base cost of $1, no matter what the tax environment (and for reasons that have nothing to do with price elasticity; demand will not fall significantly if they charge $1.05 instead of $1.00). So in this case, the full tax weight is born by the consumer.

The more perfect the marketplace in question, and therefore the more perfectly margins have been driven out of pricing, the more perfectly the tax will be a direct burden on the consumer. So the price impact of taxes will vary quite a bit from product to product but will be most felt in low-margin products with rigid production costs.

Yes, I know those are all factors. My only nitty point in the first place was that it's not quite a perfect parallel to the "We'll cover the taxes" situation because while the value of my ipod was guaranteed to be $250 no matter what extra money was paid to me to cover taxes, the price of a product to which sales tax/exise tax is applied stands the chance of being a moving target depending on the specifics of its S&D curves.

But yes, assuming the price stays stable and the full burden of the excise is passed to the consumer, the math is the same.

Except it didn't. He got $1,010,000 from the show. I guess the $10K was an appearance fee. He wanted to show, but I believe was not allowed to, that the producers agreed to pay his taxes if he agreed to keep quiet about them tampering with the game.

Ah. I didn't really follow it closely enough to know, I was just guessing. In that case, he's probably just a jerk.