The State’s Own Accountants Said the Savings Would Cost More Than They Save
The State’s Own Accountants Said Swipe Fee Savings Would Cost More Than They Save
When a state proposes to stop the card networks from charging interchange on the sales-tax portion of a purchase, the pitch is always the same: merchants are overpaying, and this gives some of it back. It sounds obviously good. Who would argue against paying fewer fees?
But somewhere in almost every one of these bills is a document nobody quotes in the press release: the fiscal note. That is the dry, official cost estimate a state’s own analysts attach to a bill so legislators know what it actually does to the books. And on the swipe fee savings these laws promise, the fiscal notes tell a story that runs directly against the headline — sometimes written by the very agencies the law is supposed to help.
This is not an argument that swipe fees are fair, or that merchants aren’t overcharged. They are. It is a narrower, more uncomfortable point: the specific fix these laws offer returns far less than it appears to, and the people who have actually done the arithmetic — including government accountants with no stake in defending Visa — keep arriving at that conclusion.
A State Agency Estimated the Fix Would Cost It More Than It Would Save
The clearest example comes out of Texas. When the legislature there weighed a bill to carve sales tax out of the interchange base, the state’s own fiscal analysis had to estimate what it would take for a government entity — itself a merchant that accepts cards — to actually comply. Someone has to reprogram every point-of-sale system to split the tax portion out of each transaction, certify it, and maintain it.
The Texas Parks and Wildlife Department, which sells licenses and permits by card, concluded in an official fiscal note that the programming and system costs of itemizing the tax portion of each sale would outweigh the swipe fee savings the change was meant to produce. Read that again: a government agency, doing the math on its own transactions, found that implementing the swipe fee savings would cost it more than the savings were worth.
A fiscal note is the non-partisan cost estimate a legislature’s own analysts attach to a bill. It has no interest in the payments-industry fight — its only job is to tell lawmakers what the bill does to public revenue and costs. That neutrality is exactly what makes it worth quoting: it isn’t a processor’s talking point.
Even the Industry That Opposes These Laws Put a Number on It
You might expect the payments industry to wave away the savings as trivial, and it does — but the interesting part is how specific its estimate is. The Electronic Transactions Association, the trade group representing processors and networks, has argued that after the court injunction narrowed the one enacted law (in Illinois), roughly ninety percent of card transactions there fall outside the law’s reach entirely. Its estimate of the annual swipe fee savings to an individual merchant lands at only a few dollars — on the order of six dollars a year — while it pegs the up-front compliance cost to each merchant in the hundreds.
It is worth being clear about the source: that figure comes from the side that opposes these laws, so treat it as the low end. But even discounting for that, an opponent quantifying the savings at a few dollars a year is a remarkable thing. When the people fighting a law and the government accountants scoring it independently land in the same place — that the savings are small and the compliance real — the burden shifts to the bill’s supporters to show otherwise.
In Aggregate, the Money Is Real — Which Is Why This Isn’t Simple
Here is the honest complication, because a piece that only cited the skeptics would be as one-sided as the press releases. Across an entire state, the sums are not trivial. One analysis on the merchant side estimated that businesses in Rhode Island alone paid roughly twenty-seven and a half million dollars in interchange on sales tax in a single year. A Texas legislative committee heard that a small merchant with about a million dollars in annual card sales pays roughly thirty thousand dollars a year in swipe fees, of which nearly twenty-five hundred dollars goes solely to process the tax portion.
Both numbers are real, and both are sourced. So the tension is genuine: the savings are large in aggregate and small per merchant, meaningful to a state’s total economy and marginal to any single business’s monthly statement. That gap — big in the sum, small in the individual case — is the whole reason these laws are so easy to campaign on and so hard to actually deliver.
A saving spread across millions of transactions and thousands of merchants looks huge as a statewide total and lands as a few dollars a month on your own account. Legislation is written and sold on the statewide total. Your business lives in the per-merchant number — and that is the number the fiscal notes keep flagging as smaller than the cost to capture it.
The Lever You Control Is Bigger Than the One They’re Fighting Over
If the swipe fee savings from a tax carve-out are a few dollars a year, and even those are years away and tangled in court, the practical question for a business owner is simple: where is the money that I can actually move? And the answer is almost never the interchange — the pass-through cost that is roughly the same for everyone — but the markup stacked on top of it by your processor, which no legislature controls and which varies enormously from one provider to the next.
Interchange is the floor. It is the portion these laws try, and mostly fail, to shave a sliver off. The markup is the part above the floor, and on a typical flat-rate or tiered account it is frequently larger than any tax-carve-out saving would ever be — and it is negotiable today, without waiting for a bill to survive a governor and a federal judge.
The tax carve-out fights over a few dollars a year and may never take effect. The markup on your own statement is on the table right now, is often many times larger, and moves the moment you switch to transparent pricing. That is the swipe fee savings worth chasing — the one you can capture this month.
Frequently Asked Questions
Far less than the headlines suggest. Multiple official fiscal notes and even the opposing industry’s own estimates put the per-merchant swipe fee savings at only a few dollars a year, while the compliance cost runs into the hundreds. In aggregate the sums are large, but almost none of it lands on any single business’s statement.
Yes. In Texas, the Parks and Wildlife Department — itself a merchant that accepts cards — concluded in an official fiscal note that reprogramming its systems to itemize the tax portion of each sale would cost more than the savings the change would produce.
Focus on the markup, not the interchange. Interchange is a pass-through cost that’s roughly the same everywhere; the markup your processor adds on top of it varies widely and is negotiable now. A statement review shows you exactly how much of your rate is real cost and how much is markup you can cut today.
Skip the Legislature. The Savings Are on Your Statement.
No swipe-fee bill is going to meaningfully lower your rate this year — but the markup your processor stacked on top of interchange is on your statement right now, and that part you can cut today. Send Brookside one recent statement and we’ll calculate your true effective rate and show you exactly which fees are real cost and which are markup. For background on card-fee protections, see the CFPB’s consumer credit-card resources.
Get Your Actual Effective RateNo obligation • No pressure • Response within one business day
See what a statement review looks like →