Kansas City and barbeque. New Orleans and jambalaya. New York and bagels. There are few cities more inextricably linked to a specific food—or product of any kind, for that matter—than Seattle is to coffee. Home of Starbucks, Seattle’s Best, and other coffee companies known around the world, the region represents one of the highest per capita coffee consumption areas there is. So it was with great interest that I watched the recent flap over the proposed tax on espresso. The tax would not have applied to drip coffee, just the more expensive latte, espresso, and similar drinks.
The ten-cent levy would have been in addition to the sales tax already collected on the drinks. Coffee houses, who already pay business taxes, decried the complex bookkeeping hassles they would have to deal with given the structure of the tax. Administration would have been involved for city government, too. But childcare providers would have gained millions each year.
More than 100 years ago, Thorstein Veblen suggested that as a society’s resources grow beyond mere subsistence, the purchase of goods and services not strictly necessary for survival can take on new meanings. In his argument, he dealt more with the types of things some people buy just to show they can afford them—conspicuous consumption. Studies indicate higher-income households are more likely to consume espresso and other expensive coffee drinks. Clearly, Veblen’s idea that certain patterns of purchasing and behavior have significance beyond the obvious applies here. In Seattle, the ritual of coffee drinking is certainly not about providing the body with needed fuel. Attempting to tax espresso raised the ire of many, needless to say.
For some, the chief complaint wasn’t the addition of 10 cents to the cost of every cup. In fact, the increment isn’t all that big given the cost of latte or espresso. However, the idea of the government collecting taxes on a specific product for an unrelated purpose rubbed many wrong. There have been “sin” taxes on alcohol and cigarettes for decades, but these are at least loosely linked to the ultimate use of the tax receipts. Taxes on cigarettes, for example, are often used to improve healthcare; gasoline levies typically go to better transportation systems. Moreover, there was fear that this tax would open the door for other, product-specific taxes in Seattle and elsewhere.
On the positive side, the tax would have been largely recession proof, and few are arguing against the merits of additional funding for childcare. However, even among the strongest childcare advocates, there are those who suggest that the issue of funding is far too important to leave to a mechanism such as the proposed tax.
As I’m writing this, it appears that the tax failed to pass. I must say that I think that’s a good thing. Although funding for childcare is a noble goal, a tax on a specific product represents an undesirable way to achieve it. Such actions reflect poorly on the attractiveness of the area as a place to do business and distort consumer spending in capricious ways. Moreover, the incremental gains were insufficient to justify the administrative nightmares—both at the coffee houses and the city—that would likely have ensued.