Taxing Breakfast

Bagel Bamboozle

At Bruegger's Bagels in Albany, New York, getting your bagel sliced will cost an extra eight cents. That isn't because the owner is a cheap jerk. It's because the use of knives in a bagel shop magically summons the tax man. New York's sales tax doesn't cover whole bagels, but if you want yours sliced with a schmear, the state wants its own cut. Even more puzzling, a nontaxed whole bagel eaten at home becomes taxable if eaten in the store.

Stories like this are likely to become more common as cash-strapped governments looking for ways to raise revenue decide to enforce some of the more arcane tax laws on the books. Many states already draw artificial lines between necessary foodstuffs and luxury items for the purpose of taxation. In Colorado, Washington, and a few other states, for instance, a Hershey bar is taxable candy, but a Kit Kat bar counts as tax-exempt food, thanks to the presence of flour.