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The argument (with sales taxes) isn’t usually that they don’t let you soak the rich but that they’re too hard on the poor. Almost by definition, somebody livin
by maxlybbert 5y ago
The argument (with sales taxes) isn’t usually that they don’t let you soak the rich but that they’re too hard on the poor.
Almost by definition, somebody living paycheck-to-paycheck is spending all their income. So their sales tax bill is going to be basically whatever the sales tax rate is applied to their income (e.g., a 7% sales tax rate applied to all of their income). Somebody who saves some of their income isn’t spending that portion, so in a year their sales tax bill will be smaller than the sales tax rate (e.g., if they save 10% of their income, then they’re only paying sales tax on the 90% that they spent). You could say this isn’t hard enough of the rich, or it’s too hard on the poor. Usually “too hard on the poor” is an easier argument to make.
There are solutions, such as exempting food or other necessities (the poor probably spend a bigger portion of their income on food, so exempting food helps them more), or adding a luxury tax on things that the poor don’t buy, etc. Of course, then there’s an effort to define what should count as a necessity or what should count as a luxury. When I was a teenager, California sales tax did not apply to packaged food, but did apply to food bought at a restaurant. But there were exceptions to both of those cases: there was a snack tax that applied to some packaged foods (the list changed each year) so that some packaged foods were still taxed; and packaged food sold at a restaurant was exempt (I worked at Cinnabon, hot cinnamon rolls were taxed, after thirty minutes on the hot plate we let them cool down, refrosted and packaged them and they were no longer taxed; if somebody asked for packaged rolls when we were out, they got hot rolls in the box without paying sales tax).
It’s also true that “income” isn’t always the interesting number. Somebody with a million dollars in the bank and no income doesn’t pay income tax, but they do pay sales tax. Of course, if the money came from wages in a previous year, they paid income tax then. If the money was an inheritance, it might have been taxed but the US keeps changing the details of the estate tax.