WWYD: Pay Cash to Get a Discount
‘œThe United States has a system of taxation by confession.’ ‘“ Hugo Black
The ethicists at Money Magazine put together a 15-question survey to see how readers stack up when quizzed about money and ethics. After you answer each question, you’re prompted to a screen with the results of that question and some commentary from the ethicists on what should be the ‘œcorrect’ answer.
Click over and take the quiz.
The first question caught my eye and I’ve been saving it for my turn at our What Would You Do? series. Here’s the question as posed by Jeanne Fleming and Leonard Schwarz:
‘œYou’re remodeling a bathroom and the tile guy offers a 20% discount if you pay in cash. It is clear to you that he will not report cash payments.’
Would you most likely:
- Pay the full amount by check
- Take the discount and pay in cash
- Refuse to do business with someone who cheats on his taxes
The majority of people (65%) would take the discount and pay in cash.
The ethicists responded by saying, ‘œHappily, we live in a country where citizens are not obligated to report to the state the misdeeds they suspect others of committing. Still, knowingly profiting from someone else’s cheating on their taxes is wrong – as wrong, for example, as getting a discount for letting the workmen install stolen tiles. In either case, the tile guy is stealing, and being a party to it is abetting a thief.’
Well, clearly it’s ‘œwrong’ but as the results indicate, most people would do it’¦ including me. Jeanine and I have done a lot of work on our homes in the last several years and I’m sure this has happened along the way. I find it also happens when negotiating with a new lawn service or cleaning lady. If you pay in cash, it’ll be less money.
So all this begs the question: what would you do? Most will probably take the discount, so it would be especially interesting to hear how we rationalize it and consider it okay. Feel free to fire away in the comments section below.
There are so many laws in place that each of us commits many crimes each day. Once you get used to a life of crime, it’s not so bad – and this is one I feel positively virtuous about. Civil disobedience! Yeah, that’s the ticket …
It’s supply and demand. The more you have of something, the less you value any given portion of it. Today we have a great oversupply of law.
I would move on to another contractor.
Clearly, this person wants to work under the table & hide finances from the government for some reason. It could be “just the taxes” they have to pay as a small business owner- but then how do the taxes get paid? By more honest citizens- giving this creep a free ride.
It could also be for more nefarious reasons, such as hiding income from child support owed. Think of the child…
I just couldn’t find myself feeling okay about working with someone like this. I’d have to say thank you but no thank you… and then knowing that the person *probably* gets most of his business under the table– I’d have to move on to a new contractor.
The tax issue probably wouldn’t have been clear to me. Especially if this guy is a subcontractor. In fact, I would expect to pay cash (or by check).
And if I did suspect him of trying to earn his money under the table, I wouldn’t automatically assume the worst of him.
It would all be tied in to the general feeling of creepiness I get from him, though. Regardless of method of payment, I’d give him the boot if I didn’t feel comfortable with him.
I would never assume that discounting for cash payment is someone trying to cheat on their taxes, not without more evidence than the discount itself. As a business contractor, timely payment and cash flow are always my foremost concern. It’s well worth forgoing that hassle, stress, and time-waster in exchange for a discount that gets immediate $ in hand and no chance of bounced check. Your cleaning lady, gardener, babysitter, etc. may be very honest people who simply would rather have the money today. (This also fits with a lot of the short-term thinking that our culture encourages.) Just like many of us don’t like to buy on credit, there are many who prefer not to sell on credit.
It’s indicated in the article that the man is not reporting the income as
” It is clear to you that he will not report cash payments.”
This is not someone who just wants or needs the money now. This is someone cheating on taxes and perhaps on his own debtors (liens can’t be taken if there’s no reported income) and children- as I said above. How can he be expected to be honest and do a good job with this underlying morality? And why would I want to be an accomplice to his misdeeds- and teach my kids to skirt law and responsibility? Not worth it.
Ellen, I really like your answer, though I only agree with the part about having too many laws, so many that we are (mostly) all criminals.
I’m one of the ones who said they would take the discount. My rationalization is that it’s none of my business what he does with his money. This is a pretty crappy rationalization, though, because it does matter if he is stealing from taxpayers.
I’ve always had trouble with issues involving the ethics of others, though. I take very little control. I’ve refused to lend people money for addictions, and I would for unethical uses too. But in most situations I just let people decide for themselves what to do on the philosophy that they are grown ups and that there isn’t much that I can do.
On the other hand, I certainly have no problems with boycotting products or companies for ethical reasons. And not giving this contractor my business is certainly something I can do. I guess tax evasion doesn’t sound horrifying enough to me.
In the past, I have paid cash for a discount, but I never thought they were planning to evade taxes. But then I am so clueless that it would never “be clear” to me that someone wasn’t planning to report the income unless they came right out and said so. My last mechanic liked to get parts at junkyards, and they want cash, so he liked cash. Maybe the junkyard wasn’t reporting their full income.
Usually I get to come out on the ethical side of questions like this, so this is interesting.
DivaJean, I really like your points. And they show me some of the horrors like not paying appropriate child support. But I often meet people and hear about people whose underlying morality is good except in one area. People who are really great in every way except for being racist come to mind. Still, it certainly makes sense to check out other contractors or at least check out the all-cash one more thoroughly.
Thanks for this question, Nina.
The cost of doing business is high. Credit Card companies charge a few percentage points in transaction fees. Discover Card is the highest, which is why it’s not universally accepted.
I expect a discount for cash purchases. Some gasoline stations discount as much as 10 cents/ gal for cash. Actually a 20% disco on a cash job seems like a lo-ball. I’d have countered w a 33% bid.
Why not let the little guy get a tax break by not reporting.
It’s the American Way, innit?
It might depend on my situation. I don’t know. I could tell myself that it’d be good for him to actually have some money in hand–some small companies almost go under while waiting to be paid. Even if I knew that wasn’t his intention.
I owned a painting company for many years and never offered cash discounts. It never crosssed my mind. However, people sometimes offered to pay small amounts for extra work and I usually didn’t declare that work. My main motivation was that for an extra $50, it would no longer be worth my time if I had to create the paper trail of writing out the quote, collecting cheque payment, writing it up in my books etc. It would double to work of a 3 hour job.
So if someone asked me for a similar cash payment, I’d understand and have no issues with it. It’s like not paying sales tax at a yard sale, technically illegal but reasonable in terms of paperwork for a minimal gain. I feel the same way about bartering services with someone – a favour here and there are not part of the grander economic system. The tax loss to the system is marginal.
If someone asked me for an entire job in cash, or for thousands of dollars, I wouldn’t hire them. If they don’t declare, I’m not getting a receipt. If I have no receipt, where’s my guarantee? And this person has pretty much posted notice that they’ll do whatever they can get away with. I once had a guy ask me to pay him $3000 in cash to cut holes in my roof and install skylights. I’m just not that stupid.