Markets also produce their own forms of taxation. Credit cards, ATM fees, prescription drug purchasers and many others have hidden fees for third parties that operate just like taxes in creating deadweight losses. Government taxes are spent for public benefit offsetting deadweight losses, but private profit from hidden private taxes doesn't.
- Credit Cards (1 link)
- Credit cards assess a hidden tax called the Interchange Fee. It is the money withheld from the merchant by banks and credit card companies to pay for the privilege of using a credit card in the transaction. This tax also frequently falls on cash customers, because credit card contracts with merchants generally provide that merchants cannot reveal the tax with a surcharge for using a credit card. Merchants can offer cash discounts, but most do not, charging the same prices, and so cash customers subsidize credit card fees. This is VERY big business, due to oligopoly in the industry.
- Pharmacy Benefit Managers (2 links)
- Middlemen who manage prescription drug benefits for health plans. They are unregulated and oligopolistic, taking a very large cut of revenue from pharmacies and customers. Because their methods are not transparent, drug companies, insurance companies and pharmacies don't even know how much they are paying these middle men.
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