Monday, April 28, 2014
Replacing State Income Taxes with Bigger Sales Tax on low pay
not able to work overtime to make more money.
So they have no money, or their pay stays the same.
In a world of "Fair Tax" Kool-aid the poor tends to see the many states
that are lowering personal and corporate income taxes and raising the sales tax
to make up the loss, as I will have to buy less because I still make the same pay.
It can be best shown in my town being the sales tax is 9.15% and most pay is $8
an hour, $7+ after taxes. Or $1 every 9 min pay!
That kind of points to what we have here. I drive by many places on my way home
on the weekends so I can stay home on the weekend! I don't have no money!
It's just more of a natural selection on the people that want low taxes.
You will have to get the taxes another way! And it won't be from the poor,
being the pay stays the same as the cost goes up.
The poor will lower their spending to match their income.
Really pushing the do without to survive never a good thing!
"middle- and low-income families pay a much higher percentage of their income
on food and medicine than do wealthy individuals, meaning a much harder hit
on their pocket books."
But not said is the cost of food gets moved to a lower cost food to match their income.
Many poor like me will eat nothing but ramen for a week at $2.24 or so per box
at Walmart to compensate for medicine cost and save money due to higher sales tax.
~~~~Why Replacing State Income Taxes with Bigger Sales Taxes Doesn’t Make Sense
In an alarming trend, governors in Louisiana, Nebraska, and North Carolina have proposed
eliminating their state’s personal and corporate income taxes and raising the sales tax to
offset the lost revenue. These proposals are similar to so-called “FairTax” proposals that
several states have considered and rejected in recent years.
We outlined the problems with those proposals in a 2010 report.
Proponents claim that eliminating income taxes and expanding the sales tax would make
tax systems simpler, fairer, and more business-friendly, with no net revenue loss.
In reality, they would tilt state taxes against middle- and lower-income households
and likely undercut the state’s ability to maintain public services.
Specifically, they would:
* Raise taxes on the middle class. These proposals would significantly change the
distribution of state taxes: lower- and middle-income families would pay more, while
businesses and high-income households would pay less. That’s because repealing the
income tax would disproportionately benefit high-income families
(since they generally face higher tax rates), while a sales tax hike would hit low and middle
income families the hardest (since they pay a bigger share of their incomes in sales tax than
wealthier families do).
* Require huge sales tax hikes. Income taxes raise 40 percent of states’ tax revenue,
on average an amount equal to total state spending on highways, prisons, state police,
public hospitals, public health, and parks. To fully replace the lost revenue, sales tax rates
would have to be markedly higher than they are now, and often higher than proponents claim.
* Levy those new, higher rates on a much larger number of transactions.
While these proposals vary, many call for examining all exemptions to the sales tax with an
eye to extending the tax to many more goods and services. These could include everything
from food to prescription drugs, child care, and home sales, as well as a range of
business-to-business transactions. Bringing large numbers of goods and services into
the tax base at the new, significantly higher rates would cause a number of technical,
economic, and political problems.
* Create an unsustainable spiral of rising rates and widening exemptions.
A large expansion of the sales tax would spark furious efforts to exempt
many purchases from the tax. But if a state granted such exemptions, it would have to
compensate by raising the sales tax rate even higher. The ultimate result, most likely,
is that the new tax would fail to meet its revenue-neutral promise forcing cuts to
education, transportation, and other essential services to meet state
* Fail to boost state economies. Replacing income taxes with an expanded sales tax
would do little or nothing to improve a state’s business climate or economic performance.
On the contrary, the resulting high sales tax could hurt in-state businesses as residents shift
purchases to neighboring states or the Internet. And if a state had to curtail public services
because the expanded sales tax failed to make up the lost revenue from the eliminated
taxes, these cuts could curtail economic development.
* Make state revenues much less stable. By making a single tax a state’s sole significant
revenue source rather than the mix of sources now utilized these proposals would deprive
a state of a balanced revenue portfolio and jeopardize its ability to collect enough revenue
for future needs.