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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?

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Comment Preferences

  •  Tip Jar (6+ / 0-)

    “It takes no compromise to give people their rights...it takes no money to respect the individual. It takes no political deal to give people freedom. It takes no survey to remove repression.” ― Harvey Milk

    by lucid on Tue Apr 30, 2013 at 11:30:09 PM PDT

  •  So you believe in unfair taxation? (4+ / 0-)
    Recommended by:
    ciganka, DRo, sewaneepat, FG

    You believe it is okay to tax one business while not taxing another just because of an outdated court decision on sales tax long before the online business model. The problem of getting all the states with sales tax to eliminate that source of revenue to make the sales tax system fair so on line business can continue to dodge sales taxes can not be done. impossible.
      which is why we are at the sales tax legislation being proposed today.
     legislators believe B&M is worth having in their communities from the sole proprietor wedding shop and the Vacumn repair and sales shop to the regional grocer because they generate a sense of community, property taxes, Income taxes because it is more labor intensive and other multiplier effects that stimulate local economies. These B&M stores are saying they can not compete without an adjustment on fair taxation.
     

    •  Here's the squiggle: B&M sales taxes are assessed (2+ / 0-)
      Recommended by:
      DRo, ManhattanMan

      based on the address of the seller, not the buyer.

      Public Finance courses are replete with tales of cities and towns vying to be the location of new commercial development - not for the property tax (which they frequently forgive in wooing the retailer) but for the sales tax revenue. See, e.g., Santa Ana v. Costa Mesa over the mall on their border, or countless auto mall and Walmart locations.

      Sales taxes are appealing because, while regressive, they are unfair in shifting revenue among communities. There is nothing so sweet in the community of communities as getting non-residents to pay for the services provided to residents.

      Too late for the simple life, too early for android love slaves - Savio

      by Clem Yeobright on Wed May 01, 2013 at 03:24:54 AM PDT

      [ Parent ]

      •  Only on small purchases (0+ / 0-)

        Where it would be ridiculous to track and process tiny amounts.  But go buy a car in another state.  You are exempted from tax in the seller locale and forced to pay your own state tax when you register.  

        Cars are big enough to make this worth it and not something your average citizen is frequently purchasing.  

        Красота спасет мир --F. Dostoevsky

        by Wisper on Wed May 01, 2013 at 04:01:33 AM PDT

        [ Parent ]

  •  I know very little about this topic. (1+ / 0-)
    Recommended by:
    oortdust

    It has been years since I lived in the US, but I do remember people in communities voting to raise sales tax to finance community projects.  As I recall, usually it was a local bill for 1 penny and that penny was divided up in several ways.  

    See, in my eyes, I never saw this as a burden.  Then again, I never had it mapped out from these different perspectives.  However, I assume that there are still local sales taxes tied to communities, which would be a real grass roots type of taxation, so this is probably an important conversation to have.

    Thanks, I hope that I get to follow a healthy debate here.

    It gets on my nerves, and you know how I am about my nerves...

    by ciganka on Wed May 01, 2013 at 02:38:57 AM PDT

  •  I would oppose sales tax (2+ / 0-)
    Recommended by:
    ciganka, oortdust

    As a wholistic replacement for income tax, which is often proffered by national sales tax advocates.

    But in and of themselves I am not inclined to believe small transactional taxes are oppressive.  

    Красота спасет мир --F. Dostoevsky

    by Wisper on Wed May 01, 2013 at 04:06:14 AM PDT

  •  This will put the kibosh on 'handling', won't it? (0+ / 0-)

    Shipping charges will no doubt be exempted from tax, but 'handling'?

    Are B&M vendors allowed to subtract their payroll costs before assessing sales tax?

    'Handling' will have to be separated out from 'S&H' and taxed as part of the sale price, won't it?

    Too late for the simple life, too early for android love slaves - Savio

    by Clem Yeobright on Wed May 01, 2013 at 04:30:26 AM PDT

    •  I don't know if it is a state by state issue, (1+ / 0-)
      Recommended by:
      Clem Yeobright

      but in TN, sales tax is collected on both the shipping and handling part of S&H. Of course, you get to deduct the shipping part from the income side to determine the income tax of the business but not from the amount on which sales tax is collected.

      The sales tax is on the amount the business charges to the customer so no, you don't subtract any costs in assessing the sales tax. A national VAT would be different in that (as I understand it), you would subtract all the costs up to the point your business got the product, but would collect the tax on whatever costs you added to the product, including payroll costs. At least that is my understanding of it.

      You can't scare me, I'm sticking to the Union - Woody Guthrie

      by sewaneepat on Wed May 01, 2013 at 05:34:16 AM PDT

      [ Parent ]

  •  asdf (1+ / 0-)
    Recommended by:
    ManhattanMan
    Sales taxes are, by definition regressive.
    What about a targeted tax on certain goods?  Say, yachts or caviar.  Still regressive solely by dint of being a sales tax?

    re: the argument that sales taxes are regressive: I don't think anyone disputes that.

    •  Sometimes a sales tax is... (1+ / 0-)
      Recommended by:
      ciganka

      ...not regressive.

      Think in terms of assets instead of income. For example:

      - Rich Man has $1,000,000 in the bank.
      - Poor Man has $5,000 in the bank.

      We enact a 5% sales tax. Rich Man loses $50,000 in purchasing power. Poor man only loses $250.

      Granted, this is only a one-time effect.

      The key to keeping sales taxes fair is not not tax food.

  •  complex for small biz to calculate (1+ / 0-)
    Recommended by:
    ciganka

    Part of the bill, requires each state to "provide free software" so businesses can have accurate and up-to-date tax tables.  There is quite a bit of complexity.  Some states actually have more than one rate per zip-code (since zip codes can cross county/township lines).  Trying to pinpoint the proper rate for an address is not always simple.  

    Additionally, some states charge tax on shipping, handling, and service, while others might charge tax on one or none of the aboe.  This is a large burden on small online businesses.

    I have had the "pleasure" of trying to integrate tax software into midsize business' sales/accounting systems.  It's expensive and troublesome.  This will raise the bar for small businesses trying to compete with bigger competition.  The Fortune 500 companies will have little problem with sales tax integration.  Small businesses will struggle to get this correct.

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