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My understanding is that a state sales tax can't be less than about 3.5% because that is the cost of operating the sales tax collection bureaucracy. The article

by faster 9y ago

My understanding is that a state sales tax can't be less than about 3.5% because that is the cost of operating the sales tax collection bureaucracy. The article's suggestion that the federal gov collect a uniform tax and redistribute it makes me wonder what it would cost them to run the program. And what about the 5 states that currently have no sales tax? A federal sales tax would probably have to be close to 10% to be useful, and now everyone in those 5 states has that much less buying power. I don't think the solution proposed in the article is a good idea. It may be the least bad idea though.

Bromskloss 9y ago
> My understanding is that a state sales tax can't be less than about 3.5% because that is the cost of operating the sales tax collection bureaucracy. That sounds staggeringly costly. Are there things within the administration that has to be done and actually are difficult to do with less money, or is it as record-breakingly inefficient as it sounds?
- lozenge 9y ago
  Perhaps they are including the cost to the businesses of marking up items, checking tax rates etc?
  - Bromskloss 9y ago
    Interesting thought. A low tax rate should result in a small markup, though, and I wouldn't think the extra administration laid upon businesses by sales tax would offset a 3.5% sales tax, would you?
- anonymous5133 9y ago
  I work as a sales tax auditor and the original comment is flat out wrong if you think about it. I'm assuming he is talking about the department of revenue or similar agency responsible for enforcement of sales tax. If you think about a state that has a 7% sales tax rate, do you think that state is spending HALF of the sales tax revenue on the operating budget for the department of revenue?
  - faster 9y ago
    I'd love to have some support for a real number. I found a source [1] for the cost to retailers to collect a tax (about 4.23% of tax collected in WA) but while most states make it pretty easy to see how much sales tax was collected they don't make it easy to see what it cost to collect that tax, separate from the other taxes they collect (income tax, corporate tax). If you have any insight into this, or suggestions that are less painful than "read the state budget detail", I'd love to have a cost number that is based on facts. [1] https://dor.wa.gov/content/retailers-cost-collecting-and-remitting-sales-tax-study https://dor.wa.gov/content/retailers-cost-collecting-and-rem...
Spooky23 9y ago
It’s not as hard as you think. Sales tax is mostly automated, with maybe 100 people in a large state running the program, with a few hundred more auditors. Administration costs are not really a factor - tax people are able to statistically estimate their loss ratio and can pretty accurately model the ROI on investments in enforcement. If a state was spending 3.5% of collections on enforcement, there would literally be a guy at the door to inspect your receipt.

by faster 9y ago

Bromskloss 9y ago

> My understanding is that a state sales tax can't be less than about 3.5% because that is the cost of operating the sales tax collection bureaucracy. That sounds staggeringly costly. Are there things within the administration that has to be done and actually are difficult to do with less money, or is it as record-breakingly inefficient as it sounds?

lozenge 9y ago
Perhaps they are including the cost to the businesses of marking up items, checking tax rates etc?
- Bromskloss 9y ago
  Interesting thought. A low tax rate should result in a small markup, though, and I wouldn't think the extra administration laid upon businesses by sales tax would offset a 3.5% sales tax, would you?
anonymous5133 9y ago
I work as a sales tax auditor and the original comment is flat out wrong if you think about it. I'm assuming he is talking about the department of revenue or similar agency responsible for enforcement of sales tax. If you think about a state that has a 7% sales tax rate, do you think that state is spending HALF of the sales tax revenue on the operating budget for the department of revenue?
- faster 9y ago
  I'd love to have some support for a real number. I found a source [1] for the cost to retailers to collect a tax (about 4.23% of tax collected in WA) but while most states make it pretty easy to see how much sales tax was collected they don't make it easy to see what it cost to collect that tax, separate from the other taxes they collect (income tax, corporate tax). If you have any insight into this, or suggestions that are less painful than "read the state budget detail", I'd love to have a cost number that is based on facts. [1] https://dor.wa.gov/content/retailers-cost-collecting-and-remitting-sales-tax-study https://dor.wa.gov/content/retailers-cost-collecting-and-rem...

Spooky23 9y ago

It’s not as hard as you think. Sales tax is mostly automated, with maybe 100 people in a large state running the program, with a few hundred more auditors. Administration costs are not really a factor - tax people are able to statistically estimate their loss ratio and can pretty accurately model the ROI on investments in enforcement. If a state was spending 3.5% of collections on enforcement, there would literally be a guy at the door to inspect your receipt.