Chapter 123: Consumption Tax Reduction

"It's possible, and we're willing to provide that guarantee. But they don't dare to take out the loans! Carter, your family runs a savings bank, so you might not be aware. Do you know how high the commercial loan interest rates are at the banks in Macon right now?"

Shaking his head with a bitter smile, Robert raised two fingers and exclaimed:

"20! A 20% annual interest rate! And it's only for one year! Even in Atlanta, the minimum is 19%."

"If it weren't for the fact that they can't hold on any longer and are facing bankruptcy, no entrepreneur would dare to take out such an exorbitant commercial loan—no, high-interest loan! This is practically usury!"

Oh.

Upon hearing this, Carter slapped his forehead, instantly realizing the situation. He had predicted this early on when he first arrived: once the federal funds rate increased, loan interest rates would inevitably soar. He had even considered this interest rate differential as a potential profit point!

But over the past few months, he had been making a killing in the stock market and had completely forgotten about the interest rates. After all, for several months, his bank had practically stopped issuing loans altogether; he spent his days just stamping "Rejected" on loan applications without even looking at the details, and he hadn't paid much attention to market loan rates.

Since they weren't issuing loans, there was no need to concern himself with the interest rates!

"Okay, you have a point. That rate is indeed outrageous…"

Now that Robert had reminded him, Carter's mind quickly started turning over new possibilities even as he agreed.

With the market loan interest rates rising, and given his substantial capital reserves, he could potentially undercut competitors with lower interest loans to capture more market share. This meant he didn't need to passively wait for the FDIC to liquidate the assets of poorly performing banks to expand; he could take the initiative and actively grab his competitors' business.

And taking the initiative would inevitably require more staff to be deployed across various locations. But training these people wouldn't come cheap.

Bank employees in this era didn't require particularly high technical skills, but they still needed to know the basics, like verifying checks and identifying counterfeit notes, along with some fundamental statistical skills. Basic statistics weren't a problem—education in the '70s wasn't as lax as in later years, and most high school graduates had sufficient math skills. But recognizing counterfeit notes?

That was not something that could be learned quickly. It required templates, practice, explanations, and learning various ways to identify fake currency and checks. It took at least three to five months to reach even a basic level of proficiency.

After calculating the costs, Carter found that using the bank to absorb these people, or providing some bank positions for them, wasn't cost-effective. With his interest waning, he was about to create a few additional positions at the gas station and restaurant to do Benjamin a favor when Robert suddenly spoke up:

"I understand that in this environment, it's not easy for you either. Our municipal reserve funds are also very tight; we can hardly ensure the distribution of some welfare payments. So, if you're willing to help, I'll exempt you from the municipal consumption tax! As for the state tax, it'll be the same as before; I'll apply for it."

Seeing Carter's troubled expression, Robert clearly misunderstood. Unaware that Carter was now quite wealthy, he felt ashamed. What was Carter worried about at this moment?

Wasn't it the significant increase in wage expenses from hiring so many people, while consumer spending was visibly decreasing? In other words, asking Carter to help solve the employment issue was akin to taking money out of his pocket.

Taking away his profits to help the city stabilize employment felt morally wrong to Benjamin, who still had a conscience.

Carter had already helped the municipal government once. Although Benjamin had exempted Carter from five years of property tax, the thirty part-time employees Carter hired had already fulfilled his promise.

The exempted property tax for half a year didn't even cover the part-time wages Carter had paid out that month. So, in Benjamin's moral balance, he didn't feel that Carter owed the municipal government anything. On the contrary, this young man had already shown much more social responsibility than many Douglas businessmen.

Perhaps feeling indebted to Carter, or perhaps not wanting Carter to be dragged down by these efforts, Benjamin solemnly added after promising the tax exemption:

"Carter, rest assured! This time it's different from the property tax. Last time, I couldn't get the state tax exemption for you, but this time, no matter what, I'll make sure you get it."

"Georgia is already famously poor. We can't expect the state government to bail us out of this crisis. But if they don't at least give us some preferential policies to help us help ourselves, that would be too much!"

"I believe the governor and his team aren't fools or heartless. They wouldn't stand by and watch people lose their jobs, spend all their savings, sell their homes and cars, and end up scrounging through trash cans."

"The last time our application was rejected, it was before the depression hit. That was just our concern, and the state had a reason to turn us down. But today, things are different. The Great Depression is already upon us. They won't refuse us this time! So…"

"Say no more! Thirty positions! I'll go back and figure out how to create thirty jobs!"

What more was there to say?

If he could get the municipal and state consumption taxes waived, the benefits would be enormous!

Carter agreed decisively, realizing that if he had accepted too quickly earlier, these concessions might not have been offered.

How beneficial would the consumption tax reduction be? Carter quickly calculated in his head.

First and foremost, his gas station would be the primary beneficiary!

In any country, the price of refined oil includes consumption tax. In the U.S., this tax is a fixed amount per gallon. In Georgia at this time, the consumption tax included in each gallon of gasoline was roughly 20 cents.

This may not sound like much, with the municipal and state tax exemptions reducing it by about 16 cents per gallon. But that 16-cent price differential was a huge advantage!

Don't forget, the oil crisis was still ongoing!

Gas prices were already high compared to previous years. Even a 10-cent reduction per gallon was significant. Coupled with the location of his gas station…

Truck fuel tanks are large, and saving 10 cents per gallon translates to substantial savings when filling up. If he lowered the retail price of gasoline slightly beyond that 10-cent reduction, his gas station could become a hot spot!

And a hot spot could boost business for the surrounding shops.

The profit margin, even with thirty more employees, was considerable. Carter would have asked for fifty if he wasn't worried about revealing his wealth!

Even if he couldn't make a profit immediately, using the profit margin to cover employee wages…

There was always the future!