This will be brief & I'm going to bed soon, so I won't respond much until tomorrow. Within this debate about the new online sales tax collection legislation, a very important issue keeps getting sidestepped with the following argument: demographically speaking because the poor don't have credit cards, bank accounts or computers, enforcing state sales taxes on online purchases isn't regressive. I'll leave aside for a second the assumptions made in that argument that may or may not be idiotic, and just focus on the sales tax issue. Sales taxes are, by definition regressive. It is a flat tax imposed on purchases without respect to the income level of those who make the purchase. True, there are exemptions for most food items & in many states there are exemptions for clothing. Follow me below the fold.
Say I make $50,000 a year and I want to buy a computer that costs $1,000. Another individual wants to buy the same computer, but makes $100,000 a year. We're both buying it in a locale that charges 8% sales tax, or $80. As a percentage of income, that sales tax is .16% of my income. For the individual making $100,000 a year, that is .08% of their income. As a percentage of income, that transaction costs me twice the amount of tax as the individual making $100K. For someone making a million dollars a year, it is 20 times the amount.
Given that people who make $50,000 probably spend all of their income [and yes, not just on exempt items], can we all agree, on just this basic level, that sales taxes in and of themselves are a terribly unfair method of taxation & rather than finding ways to extend their jurisdiction, we should find ways to eliminate them entirely?