Do sales taxes disproportionately affect the poor?
After the passing of Proposition 100 in Arizona, many liberal-minded constituents are concerned that sales taxes are akin to “poor taxes” because persons in lower socioeconomic brackets are locked into purchasing goods and services from the market rather than putting their money into investments or savings. Thoughts?
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26 Answers
Yes, that is true because we all need to buy things and the poor spend a higher proportion of their income on goods. An exception to that is if only luxury goods or services are taxed such as fur coats or cosmetic surgery.
Of course. This wouldn’t be America if they didn’t.
A lot of places don’t tax groceries, or tax them at a lower rate, to lessen the burden on the poor.
A general sales tax is the most regressive form of taxation. So, why do most states impose a sales tax? Sales tax is extremely simple to implement and collect, and it’s a very effective way to raise revenue.
It’s wrong to tax food. Most states do not.
The only other burdensome tax is one’s first car.
After that, sales tax is not regressive; it’s a choice. Outside of food (and first car and first house), Sales Tax, is the most progressive way to tax people. They don’t have to buy a plasma TV. They don’t have to buy an expensive watch. They don’t have to buy a yacht. But if they do…. then those things should be taxed. And the sillier things (like $10,000 Rolexes) should be taxed at 100%.
I realize I’m deviating from the technical term “progressive”, because mathematically, sales tax is always considered a “regressive” tax because the poor have a bigger negative impact in paying it. But in reality, it is not. Income taxes (and by that, I mean all federal withholdings) hurt the working poor, far more than sales taxes do.
@Kraigmo What about clothing? We can’t run around naked and without shoes. How about over-the-counter medications? Should a bottle of aspirin, purchased by someone who’s in pain, be subject to sales tax? As for food, my state imposes a sales tax on groceries; too bad that people can’t survive without eating.
If you want to identify the most regressive tax, it’s Social Security OASDI. The first dollar of earned income is subject to OASDI tax, but eligible income is capped at $106,800. In other words, someone in a minimum wage job ($7.25×2,080 hours) pays 6.2% Social Security on his entire $15,080 wages, while some who earns $2 million isn’t taxed on $1,893,200.
No. The poor generally do not buy as much, so they pay less in sales tax.
@josie The poor are limited to buying the bare necessities for living, if even that much, so of course they buy less. They buy oatmeal instead of BMW’s; they buy shoes instead of diamonds.
The discussion isn’t about who pays the lower absolute amount of sales tax; it’s about who pays the greatest sales tax as a percentage of income. That would be the people with little to no disposable income.
That’s true in a sense, because a poor person pays the same tax as a rich person to buy the same item. But, on the other hand, essential goods and services (like food, drugs, rent, laundromats, etc) have no sales tax. Also, rich people shop at Abercrombie and Fitch and drive new Beemers, while poor people shop at The Dollar Store and buy clunkers at Honest Bob’s Quality Used Cars, and so pay less for discretionary goods through frugal shopping.
Forget trying to make an argument that some people should not pay taxes. If anybody benefits from the tax code, they should pay into it. You can’t argue successfully against that with me.
Yes, of course. But sales tax percentages can’t be based on income like income tax can be. This is the argument that necessities such as food and utility bills should not be taxed (as they were not in days past). Now the government taxes food with the same percentage as any other consumer good. And utilities are taxed and surcharged at an incredible rate, particularly telecommunications. I’m willing to join the revolution when a braver soul starts it.
@josie I’m a socialist. I support universal access to health care and free public education (from pre-school through college). I’m disgusted that people are impoverished and hungry in this land of excess and obesity. The crumbling infrastructure and lack of mass transit are disgraceful. Americans are the only people in the developed world who can’t retire with adequate pensions; except for union members and federal or state government workers, pensions have disappeared from the workplace.
I’m bright enough to know that nothing comes for free. I willingly pay taxes— income, sales, real estate, personal property—and would gladly pay more. I also believe that everyone—even the poorest among us—should pay even a minimal amount of tax; a taxpayer is a vested citizen and part of the system.
But, I strongly believe that taxes must be progressive. The working poor, who live from paycheck to paycheck, barely manage to survive. Yes, they should pay some taxes, but they should also receive more from society than they give. The people with great wealth and/or high incomes have surplus resources and can pay without deprivation.
I’m from Washington, DC. I live my life surrounded by people with 7-figure incomes, and by people living below the poverty line. The Great Society is long gone.
While this question is different from the one I posted here , I think that some of the ensuing discussion there is relevant here so I feel obliged to post a link.
@Silhouette Are you complaining about a 2% tax on food. In my city the sales tax is 9% on food and everything else.
@perspicacious They tax groceries where you are? That’s abut e only thing they don’t tax here in King County; everything else gets taxed at 9.5% (more for booze or tobacco).
@jerv Yes, everything, including groceies and prepared food, in my city is 9% sales tax. Hotels and car rentals are more. The shopping area closest to me is actually in another city and the sales tax there is 10%. It’s time for an uprising.
@Primobabe, clothing can be found at Family Value Store (and places like that) for 99 cents up to $7.00 That means the sales tax, max, would be 10 cents to 70 cents. That’s why I say sales tax is progressive. You choose. And yes, you must wear clothes, but clothes are available cheaply. And you are totally right about the federal withholdings, especially related to Social Security, and how wrong it is, and how wrong it is they cap rich people from paying some of it above a certain level.
@Kraigmo True, but how often do you see pants going for $7,000? Also bear in mind that they actually pay less for some things. For instance, how much more does it cost to pay off a car with a loan at 2.9% APR as opposed to paying cash? Now try that at 12.9% APR, which a poorer person is likely to get if they go for the same car.
Or let us go the cheaper car for the poor person route. As somebody who averaged a car a year because I couldn’t afford to spend three times as much on a car that would last at least five years, I can tell you that it’s really a false savings unless you get lucky. And let us not forget that a large chunk of bank profits were made from fees imposed on people who could least afford to pay them; a predatory practice that was recently ended.
You are correct to a point but not as correct as you think.
@Primobabe If you believe that Socialism should be mandated and legally enforced by the government, then you are not a Socialist-You are a totalitarian Statist. The original Socialists, like Henri de Saint-Simon would have been horrified at the prospect of State enforced socialism. Socialism is a secular religion, to be practiced by those who choose to do so with others who make the same choice. Government imposed Socialism ALWAYS leads to the same tragic consequence-the enslavement of entire nations. And history has proved this too many times to count. Ok for being a Socialist. Shame for being a Statist
@josie At what point do I advocate, in any way or manner, “mandated and legally enforced” socialism?!?! And, what could I have possibly written that would give you the right to compare me to Stalin, a man who killed countless more people than Hitler did? Are you simply an internet baiter who tries to get under one’s skin?
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