December 19, 2003

NYC sales taxes

Here's an alarmist Reuters story that hit the wire today:

NY Loses $500 Million Yearly in Tax to Fake Goods Sold
By Grant McCool
NEW YORK (Reuters) - Financially strapped New York loses $500 million a year in tax revenues from fake brand-name goods sold on city streets, officials said on Thursday...
Mayor Michael Bloomberg said at a news briefing that the city "loses half a billion annually in lost tax revenue in trafficking of counterfeit trademark goods."

Mr McCool (great name, by the way) expresses no skepticism about the $500 million number. But think about it for a minute: New York sales tax is 8.625%, which means that $500 million in tax corresponds to $5.8 billion in sales. Let's say that there are 1,000 street vendors in New York City selling counterfeit goods – surely an exaggerated estimate. Then they would have to be taking in almost $6 million a year each for these figures to make any sense.

I have a feeling that the $500 million figure is as fake as a Louis Vuitton bag on Canal Street. Say the fake sells for $30, but the real thing sells for $1,000. Then the sales tax on the real bag would be $86 – significantly more than the entire price of the fake. I bet that Bloomberg is adding up all those nonexistent $86 tax receipts, rather than the $2.59 which the vendor should charge in sales tax on his fake bag and doesn't. As though the Canal Street shoppers, unable to find a fake in Soho, would just walk into the Vuitton store and buy the real thing instead. If Bloomberg believes that, maybe he can just ask Santa to make up his $2 billion deficit for him.

Posted by Felix at 03:30 AM GMT

Didn't you know, Felix? Those bags are real...

Posted by: Stefan Geens on December 19, 2003 07:30 AM

Why, exactly, do you care about this?

Posted by: Matthew on December 19, 2003 03:45 PM

It's part of my ongoing campaign against journalistic innumeracy.

Posted by: Felix on December 19, 2003 04:59 PM

Those bags are not real, no bag sold on Canal Street is real.

Posted by: Jon on January 21, 2004 06:26 PM

The other day I was complaining that not enough people who read the site comment on it. Jon's comment above is pretty much exactly the kind of comment I was looking for.

Posted by: Charles on January 21, 2004 10:30 PM

Jon is a real smart guy. I appreciate Felix's comments. People on the street are just trying to make a living, and the people who buy the stuff know what they are buying so whats the big deal? The designs arent even the same, they are just similar. Anyways where do you people think the designers get their ideas? They steal them from someone else. Who knows, maybe the real ones are the fakes and the fakes the reals. Anyways, fuck bloomberg and fuck the city's taxes. The city is trying the most lowdown way of scheming money. As if the people they are taking from make enuff for them to take. City should go after the big organizations with higher taxes, they are the ones who can afford them. Bloomberg is a retard. What the hell is he trying to accomplish? Make all the people in the city broke so they can move away? Than who's gonna work in the businesses? He probably doesnt want to scare the big businesses with big taxes and im sure that avoiding taxing businesses more has nothing to do with his own private business but taxing the people and fining the people on the bottom of the food chain will only destroy the cornerstone of the city. Bloomberg needs to change his strategy and the federal govt needs to get off their asses, pull out of Iraq (stop sending our people to die) and help us out! What the hell is happening here? We got a psychotic Texan as president who is only on a revenge rampage running the whole fucking country and here in our own city a retard who got bored of running the crappy Bloomberg company and needed some excitement fucking with our lives. Someone please tell me what we can do about all this crap!

Posted by: Canalboy on May 5, 2004 06:08 AM

They're not saying these pple are *making* $6 million a year. Haven't you heard of opportunity costs??? They're only saying that the city is *losing* $500 million a year - It's $500 mil that they aren't making. It's like this...fake bags bring in $0 in sales taxes. The real thing costs $1000 and up, which means $86.25+ in taxes per bag. So if those fake bags didn't exist, they'd be making $86.25+ per bag. But since they do exist, that's $86.25+ that the city is losing for each fake bag that's sold. You sell a lot of these bags, and the losses add up. I think it's a bit persumptuous to accuse someone of being innumerate w/out a full understanding of the economics behind the math.

Posted by: sereneangel9 on November 3, 2004 05:31 AM

I reread your thing...and I see you get that. But see, that's the way the system works. That's the way economics works.

and really, if pple don't like that, they should move off to Cuba or something. No capitalism there...woohoo!

Posted by: sereneangel9 on November 3, 2004 05:37 AM

In response to sereneangel9 comments, I'm glad you reread Flix's argument. So, do you really believe that if the, say, 25,000 counterfeit bags sold last year did not exist, 25,000 real designer bags would have been bought instead? That's so absurd. If the city is basing their loss on this premise they are completely out of touch!

Posted by: dopeynope on November 12, 2004 07:01 PM

That's a pretty fucking short sighted series of opinions here, I must say.

Counterfeit designer goods hurt everyone. How? 1. Child labor/sweatshops
2. Supporting terrorism. There are significant and credible links to counterfeit dollars being funneled to Al Queda and other organizatons like them
3. Loss of tax revenue which means worse schools and more thugs
4. Internet theft and fraud
5. Deception (not everyone knows what they are buying--do you know how many of these fake pieces of shit end up on Ebay, being sold to unsuspecting midwestern housewives as "genuine"??)

Posted by: Nunya Dam on March 29, 2005 06:31 PM

the people who buy a $15 dollar bag on canal street will most likely NEVER pay $1000 for a real one. sereneange19's comments are a pitiful misinterpretation of the situation. The city's loss is on the transactions that DO occur, since they are not taxed, not on a projection of what it could have made if people had bought the same amount of real bags. Someone who could afford to pay $1000 for a handbag will do so. That market segment is not being tempted by canal street knockoffs.

Posted by: sam on March 29, 2005 07:46 PM

Bloomberg is an asshole and so is the New York City Controller. How can anyone possibly do any type of percentages based on handbags that will never sell in stores, because of the simple fact.. HELLO.. they're NOT real. So it doesn't matter what they would cost if they were real.. because once again they're not. This is so ridiculous. It's like saying the city looses money from drugs, because drug dealers don't pay taxes on them. If they're so worried about taxes then maybe they should make these things legal and people wont be able to push them on the street.

Posted by: AMAZING on March 29, 2005 08:33 PM

Regarding, "the $2.59 which the vendor should charge in sales tax on his fake bag and doesn't," how do we know that this tax isn't actually being paid. Most small businesses do collect and remit sales tax. Just because the goods are counterfeit is no reason to expect that the sales tax revenues on those (cheaper) sales aren't flowing into city coffers at the same rate as any other cash sale. So by having goods at the right price available to consumers, the city might be *making* more money on the counterfeit goods than on the real ones. We don't know for sure, but certainly the *possibility* exists that counterfeiting could be beneficial to city coffers.

Posted by: Rob on November 3, 2005 10:55 PM

In response to Rob....conterfeiters would charge tax because they are paying taxes right???

Posted by: smartass on January 17, 2006 03:35 AM

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Posted by: Pavel on December 29, 2006 03:19 AM

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Posted by: Pavel on December 29, 2006 03:19 AM

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Posted by: Pavel on December 29, 2006 05:28 PM