The cover charge shift maneuver for retail-level excise taxes on consumables

A retail-level tax on a commodity presents lot of problems, like this one, suggested by the authors of Marijuana Legalization: What Everyone Needs to Know:  A marijuana ‘”bar” could set low per-joint prices and derive most of its revenue from a cover or entertainment charge.

A response to that maneuver shows up in today’s WSJ:  “In 1944, a new wartime ‘cabaret tax’ went into effect, imposing a ruinous 30% (later merely a destructive 20% [Note:  The WSJ never met a tax it didn’t hate]) excise on all receipts at any venue that served food or drink and allowed dancing.”

That tax was aimed at posh or swanky luxury entertainment, but it suggests a line of attack against the problem of shifting costs from a commodity to cover charges.


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