Taxing Bagels and Blogs

New York and Philadelphia have been provoking the ire of their residents lately by levying taxes on two formerly sacrosanct local products.

In the Big Apple’s case, it’s the bagel. New York’s increasingly dysfunctional state government recently imposed the taxes in an effort to close Albany’s $9.2 billion budget gap. That’s a lot of bagels.

But in a weird Dunkin’ Donuts-like bagel twist, the city that never sleeps isn’t going to be paying taxes on just any kind of bagel. The 8.875 percent tax on prepared food does not apply to unsliced bagels that are bought whole and not consumed on the premises.

However, simply add a “schmear” of cream cheese, or just cut a thick bagel in half so it can be consumed without dislocating the customer's jaws, and it’s considered “prepared,” thus subject to taxes.

Even if the product is bought whole, but the customer wants to munch it in the store over a copy of their crossword puzzle, the bagel vendor is supposed to slap the extra tax on it. So far, the tax appears to have been unevenly spread by bagel vendors since it’s a relatively new addition to the pot pourri of taxes available to New York residents, but before long it’s expected the bagelries will get used to imposing the extra charge. If not, the state revenue department has already begun charging some bagel vendors substantial sums of money for not imposing the tax on their customers.

New York City Mayor Michael Bloomberg recently blamed upstate politicians for imposing the tax on downstate Big Apple dwellers during an appearance on the “Daily Show with Jon Stewart,” and that may be one reason why Albany’s legislators finally managed to agree on at least one way to help close the budget gap.

Philadelphia, in contrast, has only itself to blame for the new so-called “blog tax.” The tax is actually a $300 fee for a “business privilege license,” and as in the case of the bagel tax, its application too seems a bit arbitrary (see Philly Levies a ‘Blog Tax’). The license fee is also levied on other small businesses, but as most bloggers don’t consider themselves to be small business owners, the news that they were expected to pay for a license to write their blogs came as a rude surprise.

The demarcation line appears to be whether or not the blog accepts advertising, which still strikes many bloggers as unfair since blogs oftentimes are hosted on services that put ads next to the blog entries but pay the bloggers little if any money from advertisers. However, even if a blogger earns a pittance from their blog, they are still subject to the $300 license fee, along with taxes on any net profits, wages and again “business privileges.”

Free speech concerns aside, it does seem like the idea of taxing blogs is taking a giant leap ahead of the concept of taxing e-commerce sales on sites like eBay and Amazon, which still escape taxes on the majority of their transactions.

Not surprisingly, many bloggers in Philadelphia are upset about the new taxes. But of course it could be worse. There could be a special tax on cheesesteaks.