5 ms·

It's also incredibly regressive, targeting poor people with a higher percentage of their net income than rich people.

_delirium 14y ago
That's one reason, in practice, for the popularity I think. When a state proposes raising income tax on the one hand, or sales tax on the other hand, raising sales tax is often easier to accomplish, because the lobbies against it are weaker. (There might also be a psychological aspect in that it's more of a nickel-and-diming: people may not realize what it adds up to in terms of a yearly total, while they do see that for income taxes.)
- 1123581321 14y ago
  It is actually because it is nearly guaranteed to be collectible when it is attached to inelastic goods which are needed by everybody. On the other hand, raising things like estate tax and income tax increases the amount of legal tax dodging through trusts, municipal bonds and the like so it's unpredictable and difficult to collect. This dates back to a reversal of Andrew Mellon's prudent and lucrative tax policies by FDR and Morgenthau, who turned to gasoline and alcohol taxes to cover shortfalls caused by their extremely high progressive income tax rates, and since then high earners have gotten in the habit of tax avoidance regardless of current political and fiscal strategies, permanently entrenching the regressive taxes as necessary.
  - _delirium 14y ago
    I'm not sure I buy that as a "because". I think it's more likely sales taxes are passed preferentially because income taxes are more often defeated in legislatures due to political opposition, not because of technocratic arguments about collectibility. It would be interesting to have some numbers on collectibility, though. Both income taxes and sales taxes can be dodged (black-market purchases and out-of-state online purchases are two common ways of dodging sales taxes). There are a number of examples of states raising either one, and it'd be interesting if someone has extracted data on the results.
- jonknee 14y ago
  It's also easier because it's a state issue (national politics always get more coverage) and usually tied to something people can actually see or understand (we're raising the sales tax .25% for 15 years to fund mass transit).
ig1 14y ago
Poor people are disproportionately likely to shop in-store rather than online because they're vastly more likely to be unbanked (i.e. no credit card) and be low-education. I'd hazard an educated guess that the percentage of income spent by the poor online is tiny. Both because the above factors and also because the majority of spending for those group is going on rent, groceries, vice (cigarettes and alcohol) and transport which aren't commonly bought online in any case.
- adanto6840 14y ago
  Is there any data out there on this perhaps? I definitely tend to agree with your theory but I'd also love to look at some data or existing research. Would appreciate any links that anyone might be able to provide for further reading or data related to this topic...
  - ig1 14y ago
    Which part would you like data on ? - the unbanked payments issue is pretty well known in the payments/retail industry. See this press piece by Walmart: http://news.walmart.com/news-archive/2012/04/26/walmart-announces-pay-with-cash-for-online-purchases http://news.walmart.com/news-archive/2012/04/26/walmart-anno... There's also several startups in this space like Fuze Network and PayNearMe.
- potatolicious 14y ago
  > "because they're vastly more likely to be unbanked" This is not true in the US, where your debit/bank card is also a VISA/MasterCard fully usable online. Even people with zero credit can easily spend money online. If you have a bank account in the US, there are effectively no barriers to spending the money in it, online.
  - ig1 14y ago
    If you're unbanked you don't have a bank account, hence no debit/credit card. Between 18-24% of the US population fall into that category.
ams6110 14y ago
This could be remedied with a tax credit on the state income tax return, i.e. you get an automatic tax credit for sales taxes paid in whatever amount is decided to be "fair".
- lilsunnybee 14y ago
  Except that the people that are hit hardest by this likely aren't paying income taxes, because their income is so low.

That's one reason, in practice, for the popularity I think. When a state proposes raising income tax on the one hand, or sales tax on the other hand, raising sales tax is often easier to accomplish, because the lobbies against it are weaker. (There might also be a psychological aspect in that it's more of a nickel-and-diming: people may not realize what it adds up to in terms of a yearly total, while they do see that for income taxes.)

1123581321 14y ago
It is actually because it is nearly guaranteed to be collectible when it is attached to inelastic goods which are needed by everybody. On the other hand, raising things like estate tax and income tax increases the amount of legal tax dodging through trusts, municipal bonds and the like so it's unpredictable and difficult to collect. This dates back to a reversal of Andrew Mellon's prudent and lucrative tax policies by FDR and Morgenthau, who turned to gasoline and alcohol taxes to cover shortfalls caused by their extremely high progressive income tax rates, and since then high earners have gotten in the habit of tax avoidance regardless of current political and fiscal strategies, permanently entrenching the regressive taxes as necessary.
- _delirium 14y ago
  I'm not sure I buy that as a "because". I think it's more likely sales taxes are passed preferentially because income taxes are more often defeated in legislatures due to political opposition, not because of technocratic arguments about collectibility. It would be interesting to have some numbers on collectibility, though. Both income taxes and sales taxes can be dodged (black-market purchases and out-of-state online purchases are two common ways of dodging sales taxes). There are a number of examples of states raising either one, and it'd be interesting if someone has extracted data on the results.
jonknee 14y ago
It's also easier because it's a state issue (national politics always get more coverage) and usually tied to something people can actually see or understand (we're raising the sales tax .25% for 15 years to fund mass transit).

ig1 14y ago

Poor people are disproportionately likely to shop in-store rather than online because they're vastly more likely to be unbanked (i.e. no credit card) and be low-education. I'd hazard an educated guess that the percentage of income spent by the poor online is tiny. Both because the above factors and also because the majority of spending for those group is going on rent, groceries, vice (cigarettes and alcohol) and transport which aren't commonly bought online in any case.

adanto6840 14y ago
Is there any data out there on this perhaps? I definitely tend to agree with your theory but I'd also love to look at some data or existing research. Would appreciate any links that anyone might be able to provide for further reading or data related to this topic...
- ig1 14y ago
  Which part would you like data on ? - the unbanked payments issue is pretty well known in the payments/retail industry. See this press piece by Walmart: http://news.walmart.com/news-archive/2012/04/26/walmart-announces-pay-with-cash-for-online-purchases http://news.walmart.com/news-archive/2012/04/26/walmart-anno... There's also several startups in this space like Fuze Network and PayNearMe.
potatolicious 14y ago
> "because they're vastly more likely to be unbanked" This is not true in the US, where your debit/bank card is also a VISA/MasterCard fully usable online. Even people with zero credit can easily spend money online. If you have a bank account in the US, there are effectively no barriers to spending the money in it, online.
- ig1 14y ago
  If you're unbanked you don't have a bank account, hence no debit/credit card. Between 18-24% of the US population fall into that category.

ams6110 14y ago

This could be remedied with a tax credit on the state income tax return, i.e. you get an automatic tax credit for sales taxes paid in whatever amount is decided to be "fair".

lilsunnybee 14y ago
Except that the people that are hit hardest by this likely aren't paying income taxes, because their income is so low.