Pages

Saturday, May 28, 2022

Inflation's Distorting Effects on Taxation of Interest

We've been in the era of 2% inflation so long that many of the distortions it causes have faded from memory. While reading up on iBonds, I remembered one of them: taxes are assessed against total returns, not real returns.

High-inflation example: 

  • Inflation is 8%
  • Your aggregate marginal tax rate is 32%
  • You earn 10% interest (2 points above inflation)

So your after-tax yield is 6.8%--somewhat below inflation, so you are not even quite preserving your capital.

Low-inflation example:

  • Inflation is 2%
  • Same aggregate marginal tax rate of 32%
  • You earn 4% (2 points above inflation)

Your after-tax yield 2.76%--somewhat above inflation.

Sunday, May 22, 2022

Ordering Wine online Vivino

TL;DR

  • I placed 2 orders to Vivino, for 8 bottles per order, each a mix of 2 different wines.
  • There were under-$20 wines reviewed in the New York Times, and hard/impossible to find in St. Paul, MN.
  • The retail price was competitive with the price listed in the article. Shipping was free. One order evaded sales tax.
  • The delivery arrived promptly and was fully satisfactory.
  • My cursory investigation suggests that buying directly from the distributor, to cut out Vivino's "middleman" profits, is not an option.

My (Limited) Experience

I've used Vivino (the wine rating/discovery app) lightly for a few years. I am a wine-lover but a dabbler.  I am not building a cellar and have a modest budget ($15-20 a bottle), so I really haven't gotten that much value out of the app, in terms of curation and discovery (and like many others, I consider the ratings nearly worthless, being crowd-sourced and utterly un-calibrated).

I finally got around to using Vivino to actually order wine, and I think that might wind up being my most valuable Vivino use case. I will frequently read some article in the general press--sometimes New York Times, sometimes the local paper--reviewing and recommending wines in my price range. I'm often curious to try what is recommended. The problem is finding it. The NYT stuff is almost impossible to find locally. And even the local stuff may only be available in a wine shop across town. That's way too much friction.

So recently I ran though a NYT article with recommendations. Of the 10 I looked for, I successfully found 4 on Vivino. Not bad. The prices were competitive, if not especially a bargain--never less, sometimes 5-10% more, than mentioned in the article.

Where Vivino shines is reasonable shipping cost. It appears that for < 9 bottles, they charge $15 flat rate. That actually isn't bad, for say 6 bottles. But it seems like there is a tipping point, I believe at the odd number of 9, where shipping becomes free. That makes Vivino a very convenient, price-competitive way to try and obtain wines that are not locally available.

And here's the thing--while Vivino doesn't support pure mix-and-match to get free shipping, it also doesn't have to be 9 bottles of the same wine. The way it seems to work is that Vivino has relationships with a number distributors. I don't know what that number is, exactly, but the same few kept coming up in my query vs the NYT list.

I don't have enough data to know if each distributor has their own requirements, but the two that fulfilled my order both seemed to set 9 as a breakpoint. As far as I could tell, any 9 bottles from that shipper could be combined to get the good price. I split my orders 4-5.

Both my shipments arrived promptly enough--4-5 business days--and were accurate. Very well-packed.

Comments About Vivino on Reddit

On Reddit, I have seen comments that put Vivino in the same category as DoorDash, and claim that they take a 15-20% cut. Given the competitive prices, I don't see how there is room for that much margin. But as a consumer, I am sympathetic to the idea that the aggregator should not eat the lion's share of the profits; I make sure to subscribe to anything I can directly, not through the Apple store.

So what I found interesting was that Vivino was absolutely transparent about who the distributor was. I looked up one of them on the web (Corkery Wine & Spirits). The price on their website was the same as Vivino, but then I noticed that they warned they only ship to 3 states (MN not one of them). I found this very curious, so I called them. I explained my situation, and they confirmed they only ship to those 3 states under their own name, but through Vivino they can ship elsewhere. I didn't try asking for a fuller explanation.

(The distributor for one of my two orders didn't charge tax for my state, giving Vivino an additional cost edge. I do not feel that this kind of online tax avoidance evasion is ethical or fair, so I don't consider this a pro for Vivino, but others may feel differently.)

Vivino vs Wine.com

Some Redditors speak more favorably of Wine.com, since they maintain inventory, rather than acting purely as a middleman. From the perspective of supporting your local wine ship, I don't see how this makes a difference. From the purpose of economic efficiency, I believe--for a highly fragmented market such as fine wine--maintaining inventory is unlikely to deliver net economic efficiency, and is instead a source of overhead and inventory limitations. The longstanding dream of online wine sales, after all, is to be able to buy any wine you hear of, for a price comparable to the normal brick-and-mortar retail price that prevails in its traditional physical distribution footprint.

In my limited experience with Wine.com, I found their inventory hit-and-miss, with a roughly similar hit-rate to Vivino (keep in mind, sample size with both is very small) . But I found their prices consistently on the high side--15-20% more than the typical retail price.

And that is before shipping. I haven't used Wine.com in a few years, so I did some quick investigation. It looks like their shipping price for 6 bottles is about $4.50 per--nearly double Vivino's $2.50. At 12 bottles, the per-bottle price decreases to about $3.25. It seems to very slowly decrease with volume from there. But clearly they are going for the Amazon Prime approach, by offering a $60 annual fee to get free shipping. Which is not a bad deal.