S/O Dave Ramsey question: Is it wrong to ask more because you know they can afford it

[PinkInTheBlue]

I'm guessing most people who would want to do this wouldn't admit to it.

 

Say you are selling something and you hear someone who has much money is interested in it. Nobody knows what you are asking for it. Is it *wrong* to decide to ask more than what you considered because you know they'll pay and the difference in price won't matter?

 

Maybe I've become cynical but I really believe people have become a majority who think taking as much as they can from the wealthy is acceptable. I've been in both financial positions and the emotion the not wealthy often have against the wealthy often flabbergasts me.

 

What do you really think?

[Willow]

I think it best thing to do is to decide on a market price and stick to it. i have even done this with houses.

 

"hello buyer. My house is priced at $******* Please understand we find haggling boring. We have researched the market carefully. We think it is fairly priced. obviously it is your choice not to offer this amount, but we will not be doing the offer/counter offer thing." We then price our house at the very low end of the market as obviously most people price expect to drop.

 

We have found the majority of people really appreciate this! In at least one instance we could have had a bidding war and got more for our house, but we stuck to our principles and sold to the first who offered the asking price.

 

The reason i do this is because I was born and brought up as the dd of second hand dealers. We were offered low ball prices and subjected to aggressive haggling on a daily basis. It is boring and time consuming. it also insults our intelligence. Do people think we had no idea of the value of an item? Yes if stuff did not sell we repriced it, but it didn't often happen as we priced fairly in the first place.

 

I just wish people would price an item fairly, then folks can take it or leave it regardless of their own wealth status. Instead we have given ourselves a ridiculous system where what you pay often depends on the amount you are prepared to bully a seller (oh yes we have been bullied and verbally abused by people 'just out to get a good deal')

[Mejane]

I think it's wrong. I wouldn't do it.

[Princess Peach]

I would not do it. I would put a fair price on the item and go from there.

[Laurie4b]

I would think this situation is first of all, rare--that one would know someone was interested in something before you priced it. Secondly, we are all unconsciously influenced by things whether we want to be or not. What we know from market research is that people are really pretty bad at predicting what would influence them.

[pqr]

Are you asking about an object one is selling or the amount that the government takes? Two sides of the same coin isn't it.

 

If you earn X we will take 23% or your earnings but if you earn Y then we will take 35%. Different prices for different folks, come to think of that isn't that called discrimination?

[Joanne]

Yes, it is.

[PinkInTheBlue]

Are you asking about an object one is selling or the amount that the government takes? Two sides of the same coin isn't it.

 

If you earn X we will take 23% or your earnings but if you earn Y then we will take 35%. Different prices for different folks, come to think of that isn't that called discrimination?

 

I don't know if it is but I'd sure be willing to call it that! :) I don't know where Buffett gets his low percentage of taxes but I sure as heck don't get that. You wouldn't believe how much they take from us in taxes as self-employed people. Ugh!

[pqr]

I don't know if it is but I'd sure be willing to call it that! :) I don't know where Buffett gets his low percentage of taxes but I sure as heck don't get that. You wouldn't believe how much they take from us in taxes as self-employed people. Ugh!

 

and that is just as unfair.

[JumpedIntoTheDeepEndFirst]

No, it would not be right to ask more (or less) for an item based on the buyer's percieved amount of wealth. The only situation this works in is an open auction where the person willing to pay the most wins-but anyone can bid.

[DarcyB]

I can't say that I ever remember that being a factor. I know I've thought to charge less from someone whom I knew to not have much money..but don't *think* I've ever looked at someone and jacked the price up for it.

[Soror]

:iagree:

and that is just as unfair.

[Faithseed]

No, I wouldn't do that to anyone. My price is my price regardless of buyer.

 

Our neighbor decided to put his house on the market. The realotr called us to ask if we may be interested. The price was about 50k above market. We politely declined. Come to find out, neighbor had no intention of selling, he just wanted to see if we would pay that to get the land next to ours. :glare:

 

We've also had it happen that we've offered a price that was more fair for an item, and the seller got mad at us stating that we could afford the higher price :glare:

 

Don't get me started on how I feel about taxes for the self employed. Or taxes in general. :glare:

[mcconnellboys]

I don't know, lots of retail places have been accused of price gouging during emergencies in the past couple of decades. Prices on staples suddenly go up if there's a storm; prices on gasoline magically go up just before a holiday that will involve travel for lots of folks. I tend to think it's more common than we might even realize.

 

But would I do this? No. Once I've set a price, that's the price; whether I've told customers or not. I would not secretly jack up a price because a potential customer was apparently more wealthy than the customer I might have envisioned....

[JennyD]

If you earn X we will take 23% or your earnings but if you earn Y then we will take 35%. Different prices for different folks, come to think of that isn't that called discrimination?

 

Everyone is taxed at the same rates; in the US federal and in most state systems, at least, the percentages are marginal tax rates. So the first $X are taxed at a certain rate -- that is the identical rate for the first $X of Bill Gates' income as it is for the person who makes no more than $X. Then the next $Y is taxed at a higher rate, and so on. So each indivdual's last dollar of the year may well be taxed at a different rate than his or her first dollar, but the rates are the same for everyone. (And of course, this means that the marginal tax rate and the effective tax rate are not the same thing.)

 

As for the question at hand, I don't think there's anything at all wrong with tailoring price to what you think people will be willing to pay. I have my doubts, however, as to whether wealth is a good proxy for willingness to pay a higher price for something. Depends on what it is, I suppose.

[LisaKinVA]

I don't know if it is but I'd sure be willing to call it that! :) I don't know where Buffett gets his low percentage of taxes but I sure as heck don't get that. You wouldn't believe how much they take from us in taxes as self-employed people. Ugh!

 

Yes... I would. I've paid them.

 

But, to change a price because someone could afford more? No. That's wrong, although I do think it happens.

 

I don't like the marginal rates, because they punish you for working hard. There was one point in my dh and my joint working life where we actually had to discuss if it was worth it to us financially for the extra money. We worked through the numbers, and the answer was no. I would have made enough to bump us into the next bracket, but not enough more to make the extra money any "extra" for us (vs. my time/energy/loss of flexibility,etc.). Additionally, as you exceed those incomes, your deductions shrink (education, medical, etc.) the AMT (alternative minimum tax) has also had the effect of increasing the amount you pay vs. what you could deduct (in effect, capping possibly very legitimate deductions), so the actual amount you are taxed at the higher bracket went up because you can no longer take the same deductions...

 

...in essense, if you are going to jointly make over $250,000 as a couple, you need to make closer to $300,000 to really "feel" the difference in your pocketbook.

Edited December 17, 2010 by LisaK in VA

[Mrs Mungo]

Well, I have *definitely* lowered my price on certain items for young enlisted soldiers while I would not have lowered my price for someone in my same strata. Isn't that the same thing?

[DarlaS]

Well, I have *definitely* lowered my price on certain items for young enlisted soldiers while I would not have lowered my price for someone in my same strata. Isn't that the same thing?

 

Not necessarily. You had a price and decided to reduce it to give someone a break/hand-up. Good intentions and kindheartedness at it's best. :thumbup1:

 

Raising a price because someone has money kinda assumes they are too stupid to know what something's worth. Insulting--and not at all well-intentioned. :glare:

[RahRah]

I don't know if it is but I'd sure be willing to call it that! :) I don't know where Buffett gets his low percentage of taxes but I sure as heck don't get that. You wouldn't believe how much they take from us in taxes as self-employed people. Ugh!

 

The majority of his earnings are not income, but capital gains, which are taxed lower than wage, interest or "real" (ie. rental property, etc.) income.

 

Because his capital gains vastly out-weigh his, let's say "wage income", his effective tax rate is lower simply because his "wage" earnings are significantly smal compared to his capital gains - which he doesn't pay a dime on if he doesn't sell....in that case, it's paper wealth and not taxed.

[katemary63]

I don't think there's anything at all wrong with tailoring price to what you think people will be willing to pay. I have my doubts, however, as to whether wealth is a good proxy for willingness to pay a higher price for something. Depends on what it is, I suppose.

 

:iagree: This is just called "marketing." An identical product can be marketed to two different demographics and at two different prices. It happens ALL THE TIME.

 

I personally sell Lionhead rabbits (among other farm animals!). The price depends on my market at the time. If I'm at the county fair in my podunk town, I charge $20. If I am at Lionhead Nationals and I drove across country to get there, I charge much more, maybe even $100 for the SAME rabbit! Because at Lionhead Nationals, they are willing to pay more for what they want. (They may be wealthy or not, I don't always know.) If some one calls me on the phone having found me on the internet looking specifically for a Lionhead rabbit, my price will be somewhere in the middle. And if a 4H kid comes to look at my rabbits, I might just give him one for free. There's nothing wrong with adjusting your price to the market at hand. I AM trying to make money.

 

If I were marketing hand made items it would be the same. There may be some craft sales in the big city that could support a higher price. (And that would clearly be because there would be more people there from a higher income bracket.) At a small town county fair, I'd charge less. Makes sense to me.

[LisaKinVA]

Raising a price because someone has money kinda assumes they are too stupid to know what something's worth. Insulting--and not at all well-intentioned. :glare:

 

OOO, I've got one, what about the car dealerships that WON'T tell you the price of the car, and instead ask, "what do you want your payment do be?" :glare: We actually had that happen at a housing development too. We asked the price of the house, and were asked, "what we wanted our payment to be" Made me wonder if the price/loan rate of the house changed based upon my acceptable payment range.

[angela in ohio]

Often, people with much money have much because they don't pay a lot for things. My dear uncle used to get off his company jet and buy shorts at KMart and lunch at White Castle. :D A liftetime of watching money carefully in his personal life is WHY he was wealthy. I wouldn't assume that someone who is wealthy would pay more. Often good business and financial sense is the reason they are wealthy to begin with.

 

If we are talking about two individuals and one object, I think the amount an object is worth depends on what the buyer and seller are willing to agree upon. Each should use whatever information they have. If they assume that a wealthy person will pay more, they can use that knowledge (though I think they are wrong) in their calculations. If you are talking about a business, though, and they are selling the same thing to two different people for two different prices based on what they think each person can pay, you start gettting into issues.

[angela in ohio]

OOO, I've got one, what about the car dealerships that WON'T tell you the price of the car, and instead ask, "what do you want your payment do be?" :glare: We actually had that happen at a housing development too. We asked the price of the house, and were asked, "what we wanted our payment to be" Made me wonder if the price/loan rate of the house changed based upon my acceptable payment range.

 

We always answer that with, "Do you think we're that stupid?" ;) :D

[JennyD]

OOO, I've got one, what about the car dealerships that WON'T tell you the price of the car, and instead ask, "what do you want your payment do be?" :glare: We actually had that happen at a housing development too. We asked the price of the house, and were asked, "what we wanted our payment to be"

 

Wow, really? How amazingly unprofessional.

 

I find the whole psychology of pricing to be totally fascinating -- there are a couple of books on the subject that I've been meaning to get to for ages. On the one hand, presumably individual price differentiation is the holy grail of the free market -- the perfect matching of supply and demand. But when sellers actually figure out how to do this, we hate it because it feels unfair. (The airlines come to mind here.)

[KrissiK]

Target does that. In a wealthier part of town their prices for the same items are higher. However, I don't care. If I don't like a price they charge for something I go somewhere else. This is my right as a consumer. I don't gripe. I don't tell the govt. to interfere and make Target set the same prices in all their stores. They're a private enterprise. They can do what they want and thank goodness this is a free country and they can do that. But, since I know this, I don't shop at certain Targets.

[Mrs Mungo]

Raising a price because someone has money kinda assumes they are too stupid to know what something's worth. Insulting--and not at all well-intentioned. :glare:

 

I did not get from the OP that she would be asking for above market value for the item.

[ktgrok]

I don't know if it is but I'd sure be willing to call it that! :) I don't know where Buffett gets his low percentage of taxes but I sure as heck don't get that. You wouldn't believe how much they take from us in taxes as self-employed people. Ugh!

 

 

I believe Buffet's point, which I agree with for the most part, is that if you make enough to be in the top bracket then you also make enough to hire a good financial person to make sure you take advantage of all the tax loopholes, deductions, etc. If you are in the top bracket most of the time there are plenty of ways to legally reduce your tax burden. Especially if you are self employed.

[angela in ohio]

Target does that. In a wealthier part of town their prices for the same items are higher. However, I don't care. If I don't like a price they charge for something I go somewhere else. This is my right as a consumer. I don't gripe. I don't tell the govt. to interfere and make Target set the same prices in all their stores. They're a private enterprise. They can do what they want and thank goodness this is a free country and they can do that. But, since I know this, I don't shop at certain Targets.

 

The costs of running a business in a wealthier part of town are higher. The property taxes and cost of real estate are higher, and often they must pay higher wages to compete for employees. That is why the government doesn't interfere, because Target can show honestly that they must charge a higher price in that store to cover the higher cost of doing business there.

[cathmom]

So was this really about taxes, or was it a serious question? I'm confused.

[Mrs Mungo]

So was this really about taxes, or was it a serious question? I'm confused.

 

Do you want to argue about taxes or would you rather pretend it's a serious question? ;)

[Crimson Wife]

I believe Buffet's point, which I agree with for the most part, is that if you make enough to be in the top bracket then you also make enough to hire a good financial person to make sure you take advantage of all the tax loopholes, deductions, etc. If you are in the top bracket most of the time there are plenty of ways to legally reduce your tax burden.

 

This is untrue if the majority of your income is W2 and you're subject to the AMT. My uncle is an accountant and every year we go over ways to try to reduce our tax burden with him. And every year we're pretty much SOL. Now if we were living off of investment income rather than salary there would be all kinds of ways to creatively lower our tax bill. But the system is biased against those who actually work for a living and are successful at it :glare:

[Mejane]

If you earn X we will take 23% or your earnings but if you earn Y then we will take 35%. Different prices for different folks, come to think of that isn't that called discrimination?

 

I immediately thought of this, too, and also think it's wrong.

[In the Rain]

So was this really about taxes, or was it a serious question? I'm confused.

 

That's what I wonder too :confused: Like others, I might drop a price or give something away if I felt so inclined. I'd never charge more just because someone could afford more.

[Mejane]

Well, I have *definitely* lowered my price on certain items for young enlisted soldiers while I would not have lowered my price for someone in my same strata. Isn't that the same thing?

 

Not the same, imo.

[cathmom]

Do you want to argue about taxes or would you rather pretend it's a serious question? ;)

 

I'd rather pretend it's a serious question. As a "low income deadbeat" I'm sick to death of the taxes discussion. I support a flat tax across the board, no loopholes, no exceptions, just to end these kinds of discussions. But since I'm not dictator-in-charge, that's not going to happen. The fact of the matter is, this is the system our duly-elected officials have come up with. Yes, I benefit from it, while others pay into it. If you have a problem with it, take it up with Congress, not me. I didn't write the system. And I bet you wouldn't want to trade places with me even though I don't pay federal income taxes, since I've been hobbling around for the last several months because I couldn't afford the $100 supportive shoes my podiatrist recommended. Boy, this is living!

[Murphy101]

Not necessarily. You had a price and decided to reduce it to give someone a break/hand-up. Good intentions and kindheartedness at it's best. :thumbup1:

 

Raising a price because someone has money kinda assumes they are too stupid to know what something's worth. Insulting--and not at all well-intentioned. :glare:

 

:001_huh: I disagree. Stores do it all the time! Go from the bad side of town to the better side and you often see a price difference on the same items for absolutely no reason other than those stores know that area of town are wealthier and can afford the higher price. The items worth didn't change. The intelligence of the shoppers didn't change. Just the prospective disposable income of the buyers.

 

As for the question at hand, I don't think there's anything at all wrong with tailoring price to what you think people will be willing to pay. I have my doubts, however, as to whether wealth is a good proxy for willingness to pay a higher price for something. Depends on what it

is, I suppose.

 

:iagree:

[Crimson Wife]

I'd rather pretend it's a serious question. As a "low income deadbeat" I'm sick to death of the taxes discussion. I support a flat tax across the board, no loopholes, no exceptions, just to end these kinds of discussions. But since I'm not dictator-in-charge, that's not going to happen. The fact of the matter is, this is the system our duly-elected officials have come up with. Yes, I benefit from it, while others pay into it. If you have a problem with it, take it up with Congress, not me. I didn't write the system. And I bet you wouldn't want to trade places with me even though I don't pay federal income taxes, since I've been hobbling around for the last several months because I couldn't afford the $100 supportive shoes my podiatrist recommended. Boy, this is living!

 

I don't have a problem with a progressive tax system, but I do have a problem with the fact that income is treated differently depending on the source and that fact that the system is biased against families. For example, the 33% tax bracket starts at $171,850 for singles but $209,250 for married couples. And the 35% tax bracket starts at $373,650 for both singles and married couples. The tax bracket for married couples should exactly twice what it is for singles. Or simply do away with married vs. single entirely and allocate 50% of the couple's income to each spouse. So if my family has a total income of $100k, tax each of us the same as a single person making $50k.

[Murphy101]

I think those who make enough to fall in that much higher tax bracket can whine when they are willing to pay true living wages to all employees and thus pay the inflated price of their goods and services.

 

I don't like taxes anymore than the next person.

 

Fact is, it's cheaper to pay the taxes than do the above.

 

And the whole trickle down economics theory is bs. Rich folks don't part with their money any more eagerly than poor folks and to suggest that if they just paid less in taxes they'd feel more generous is being rather naive of how humans and business operate.

 

I'm less likely to complain about how much is taxed than the billions of tax dollars wasted.:glare:

[Murphy101]

I don't have a problem with a progressive tax system, but I do have a problem with the fact that income is treated differently depending on the source.

 

This very specific part I agree with. The money is the same regardless of whether it was a paycheck, an investment, an inheritance, or gambling winnings - report your total income for the year and pay ONE tax. The end.

[Crimson Wife]

I don't have a problem with the rich paying higher taxes. I do have a problem with rich singles paying a lower tax rate than upper-middle-class families. A single person making $170k is a heck of a lot better off than a family making $208k. The family ought to be taxed at the same rate as a single person making $104k IMHO.

[Mrs Mungo]

I think those who make enough to fall in that much higher tax bracket can whine when they are willing to pay true living wages to all employees and thus pay the inflated price of their goods and services.

 

I don't like taxes anymore than the next person.

 

Fact is, it's cheaper to pay the taxes than do the above.

 

And the whole trickle down economics theory is bs. Rich folks don't part with their money any more eagerly than poor folks and to suggest that if they just paid less in taxes they'd feel more generous is being rather naive of how humans and business operate.

 

I'm less likely to complain about how much is taxed than the billions of tax dollars wasted.:glare:

 

:iagree: Interesting article (with links and pretty graphs).

[NoPlaceLikeHome]

Are you asking about an object one is selling or the amount that the government takes? Two sides of the same coin isn't it.

 

If you earn X we will take 23% or your earnings but if you earn Y then we will take 35%. Different prices for different folks, come to think of that isn't that called discrimination?

 

I see a progressive tax code as fairness even if I end up paying more:D

[NoPlaceLikeHome]

I don't have a problem with a progressive tax system, but I do have a problem with the fact that income is treated differently depending on the source and that fact that the system is biased against families. For example, the 33% tax bracket starts at $171,850 for singles but $209,250 for married couples. And the 35% tax bracket starts at $373,650 for both singles and married couples. The tax bracket for married couples should exactly twice what it is for singles. Or simply do away with married vs. single entirely and allocate 50% of the couple's income to each spouse. So if my family has a total income of $100k, tax each of us the same as a single person making $50k.

:iagree: I do support a progressive tax system but at the same time they may want to raise the income level for married couple for the 33% and 35% tax rate to something like 350,000 and 500,000 perhaps. I would also like to see a return to the previous rates under Clinton with the former raised suggested ceilings IMHO. I also think they should have a million dollar a year income tax level as well or something similar to that.

 

Just for the record, I don't have class envy and want to be as rich as possible:D

[NoPlaceLikeHome]

I think those who make enough to fall in that much higher tax bracket can whine when they are willing to pay true living wages to all employees and thus pay the inflated price of their goods and services.

 

I don't like taxes anymore than the next person.

 

Fact is, it's cheaper to pay the taxes than do the above.

 

And the whole trickle down economics theory is bs. Rich folks don't part with their money any more eagerly than poor folks and to suggest that if they just paid less in taxes they'd feel more generous is being rather naive of how humans and business operate.

 

I'm less likely to complain about how much is taxed than the billions of tax dollars wasted.:glare:

 

:iagree::iagree::iagree:

 

I also think that the rich often benefit from welfare so to speak in that our infrastructure often supports big business. For example, our roads take a very heavy toll from big trucks and I am pretty sure that the taxes paid by these businesses do not cover the cost of repairing and maintaining our roads.

[RahRah]

 

And the whole trickle down economics theory is bs. Rich folks don't part with their money any more eagerly than poor folks and to suggest that if they just paid less in taxes they'd feel more generous is being rather naive of how humans and business operate.

 

 

I can only speak for DH & I - but I opened my business specifically because we had enough to do so for working capital without taking loans to do it....in the process, I purchased goods and services which would not have been bought and hired three individuals, whom I pay well....after one year, I can't even think to start taking back my investment, nor can I pay myself - but that's okay, opening a business is an investment for the future.

 

However, if the tax rate vote didn't pass and taxes were going up next year - you can bet I'd close on December 31st this year.....after sitting with our CPA, it would no longer be in our financial interest to continue with the second business, thus I would have simply closed, laid off three people and just deducted my loss over the next five years.....with the rate extended, I have no reason to close since we're not taking a huge hit on our household take-home now....so three people remain employed and I continue to spend and plow profits back into the business.

 

Trickle down does work.....it might not be the mega-rich doing the trickling down, but those of us whom fall into the 250K a year range ARE doing it and make up a good 40-50% of the economy!

[cathmom]

:iagree: Interesting article (with links and pretty graphs).

 

 

Wow. It's not my imagination after all.

[Mrs Mungo]

However, if the tax rate vote didn't pass and taxes were going up next year - you can bet I'd close on December 31st this year.....after sitting with our CPA, it would no longer be in our financial interest to continue with the second business, thus I would have simply closed, laid off three people and just deducted my loss over the next five years.....with the rate extended, I have no reason to close since we're not taking a huge hit on our household take-home now....so three people remain employed and I continue to spend and plow profits back into the business.

 

Trickle down does work.....it might not be the mega-rich doing the trickling down, but those of us whom fall into the 250K a year range ARE doing it and make up a good 40-50% of the economy!

No, couples who earn $250K in *wages* do not make up 40-50% of the economy. Not even close. Small business that earn $250K, maybe. But, the 3% increase in taxes for that brackets would have been for couples earning wages of over $250K, not bringing in small business income at that rate. Small business owners would not have been affected. Maybe I'm misreading your post?

[Peela]

If I am selling something 2nd hand, generally I have an idea of what it is worth and what is my bottom price. If someone turns up I feel wants it and has the money...I theoretically might not go down to my lowest price, and I might ask my top price as a starting point.

I am really not sure what is ethically wrong about asking a higher price for something from someone who can afford it. They don't have to buy it. My experience is that wealthy people can often be the tightest bargainers...more so that the not so wealthy, often. Its just the way it works.

Ever been to a 3rd world country and had to bargain for EVERYTHING? To them, we are all wealthy and they often ask exhorbitant prices, many times what the article is worth, because they are used to ignorant westerners not used to a good bargaining session. If you are savvy, you know what it is worth and you bargain them down and walk off until they come back to a reasonable price. And "wealthy" person can do that. I am not going to tell them they are morally wrong, even in my own head- so what! So I can feel morally right? It's just how it is. Why pass moral judgements?

But I am answering the OP's actual question, and answering from my experience in the 2nd hand market and in Bali and India, which is where my experience is.

[RahRah]

No, couples who earn $250K in *wages* do not make up 40-50% of the economy. Not even close. Small business that earn $250K, maybe. But, the 3% increase in taxes for that brackets would have been for couples earning wages of over $250K, not bringing in small business income at that rate. Small business owners would not have been affected. Maybe I'm misreading your post?

 

All revenue on a small business is flow-through for s-corps, LLC, partnerships and sole proprietorships. I mis-typed - small businesses make up 40-50% of the economy - they don't all take home $250K or more, but a good deal do.

[RahRah]

Small business owners would not have been affected. Maybe I'm misreading your post?

 

We would have been significantly effected due to the flow-through nature of our taxes. It would have been a big enough hit to us that I'd stop working to grow my business and take it as a loss and DH would continue, but wouldn't expand his business as he is now going to - he actually gave a green-light to an expansion he's been holding his breath waiting to do today...if the rate extension didn't go through, he'd have stayed put and not hired anyone else or expanded.