Abolish the sales tax; it hurts the poor by taking a larger percentage of their income, makes it harder to buy what they need, puts a burden on small businesses to buy sales tax permits, and complicates prices.
Ditching the sales tax will make the system more fair while helping the poor and small businesses. Furthermore, prices will be more transparent, as what you see will always be what you pay.
The sales tax is a type of consumption tax, which means you pay when you buy a good or service. Consumption taxes are a type of regressive tax, which means the poor pay more than the rich.
This is because the percentage you pay is dependent upon the price of the good or service, rather than your income. The rich pay the same dollar amount as the poor, and since the rich have more money: it’s only a drop in the bucket compared to what the less fortunate pay.
Let’s say you want to buy something that costs $10 and the local sales tax is 10%; this means the sales tax is $1. If a billionaire walks in and wants to buy the same thing: they pay $1 too. It might not seem like much, but it adds up over time.
Let’s say you bought $10,000 in goods or services; that means you paid $1,000 in taxes — and so did the billionaire. If you made $50,000 a year: that would be 2% of your annual revenue. For the billionaire, let’s assume he makes one-million dollars a year; he’d only pay 0.1% of his income.
The rich buy more, which means they pay a higher dollar value, but it ends up being a much smaller percentage of their income.
Abolishing the sales tax will be fairer to the poor — and the middle-class — while shifting the burden back onto the wealthy.
Sales Taxes Make It Harder for the Poor to Buy What They Need
Since sales taxes increase the prices of goods and services, they make it harder for the poor to buy what they need. The rich won’t notice their missing one-dollar bill, but I know all too well how far that much money can go — especially over time, as more and more of it is sucked away.
Some states have tried to remedy this by lowering sales tax rates on things like food — or exempting them entirely — but this doesn’t go far enough.
The state can’t come up with a list of everything poor folks buy, and the definitions can get weird; New York, for example, legally considers burritos and hot-dogs to be sandwiches, at least for tax purposes.
Furthermore, the poor shouldn’t be penalized for saving up and buying something the state says they don’t need. That would also hurt the middle-class, by the way, who have the money to waste.
We can keep some excise taxes, however, since their regressive nature actually pays off by discouraging the poor from buying harmful products like alcohol, but everything shouldn’t be included by default, but rather carefully considered on an individual basis.
In order to make it easier for the poor to buy what they need without unnecessarily complicating the tax code: we have to abolish the sales tax.
Sales Tax Permits Hurt Small Businesses
Want to start a business in Arkansas? You have to pay the state $50 for the privilege of forking over up to 11.5% of your revenue. While it’s a flat rate, rather than a regressive one, it’s still unfair to small businesses (imagine paying 11.5% of your income just so Jeff Bezos can be in the same tax bracket as the working-poor).
Technically, the sales tax is on-top of what’s being sold, and only being temporarily held onto by the businesses on behalf of the state, but supply and demand doesn’t care about technicalities.
Abolishing the sales tax will help small businesses and lower start-up costs, thus generating economic growth and creating jobs.
Prices Will Be More Transparent
Unlike in Europe, sales taxes are not included in the list price of items for sale. If something is listed as $1.99: you’ll end up paying $2.20. Some people can do the ten-percent increase in their head, but not me — and I’m sure plenty of others are in the same predicament.
This means you’ll end up buying more, unless you sit there and add everything up, because your brain subconsciously sees $1 and not $2 (although there are other factors to this equation than the sales tax).
The gross receipts tax, which is used in Delaware, solves this issue by taxing the business rather than the consumer. The business will just raise their prices, but you’ll see $2.20 on the price-tag. I don’t recommend this kind of tax, however, since it encourages vertical integration.
What About Lost Revenue?
One argument against sales tax abolition is that it’ll decrease government revenue — which is true, but you can just raise taxes elsewhere to compensate, which will not only keep revenue consistent, but simplify the tax code as well.
Abolish the sales tax; it’ll help the poor, shift the burden back onto the rich, help small businesses, and make prices more transparent. Lost revenue can be made up for by increasing another tax, preferably a fairer one.
Department of Taxation and Finance. “Sandwiches”. New York State, 8 Apr. 2019, https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sandwiches.htm. Accessed 6 Oct. 2021.
Sales Tax Handbook Editors. “Arkansas: Sales Tax Handbook”. Sales Tax Handbook, Sep. 2021, https://www.salestaxhandbook.com/arkansas/rates. Accessed 6 Oct. 2021.
Tax-Rates.org Editors. “The 2021 Delaware State Sales Tax”. Tax-Rates.org — The 2021 Tax Resource, http://www.tax-rates.org/delaware/sales-tax. Accessed 6 Oct. 2021.