Sliced, with taxes on top

The irrationality of tax codes and the equally irrational behavior they often generate have been a constant source of amusement for many of us over the years. With that in mind, I couldn’t help but chuckle over a recent culinary development in New York.

Patrons at bagel shops in the Empire State have been befuddled by higher costs of sliced bagels than bagels that are dumped in a bag and taken home, to the office or wherever. It seems an obscure law that was on the books for some time was not being enforced. Desperate to raise money, the state Department of Taxation and Finance has decided it wants its bite of the bagel (sorry).

It is not unusual for states to tax prepared foods, even as they do not tax their component ingredients. New Yorkers were not only unamused by the abrupt change but by the notion that slicing a bagel somehow dropped it, hole and all, into the prepared food category. Fuhgeddaboudit!

While New Yorkers grouse about Bagel-gate, Americans as a whole have another head-scratching tax story to absorb. PPACA has a clause “excluding Federal and State taxes and licensing or regulatory fees” from the definition of medical loss. That seems pretty clear, doesn’t it?