We have recently had two major tax cuts packages go through congress. Both were pushed by the republicans. Democrats, for the most part, seemed to agree with the idea of some tax cuts. For the most part, it seemed to me democrats were against the idea of tax cuts on income tax especially for the higher brackets. Why did they never propose lowering sales taxes? If they were really concerned about the lower income families, wouldn’t a reduction is sales tax have the largest effect. Wouldn’t cutting a regressive tax be better than cutting a progressive tax in the eyes of someone wanting to help the lower income status people?
Is there a federal sales tax in the U.S.?
No there isn’t, and this is pretty much the crux of the issue in the OP. Democrats at a federal level are pretty much powerless to affect state sales taxes. Democrats at a local level are pretty much powerless to affect Federal Income Tax. It might make more sense to look at this at a state level and see if Democratic legislators who oppose income tax cuts “for the wealthy” have tried to cut sales taxes. I’m not aware of this happening anywhere, but it’s a big country and I don’t know what goes on in every state.
Alaska is one of only two states with neither state income tax nor state sales tax. But the current deficit is forcing a decision on some sort of revenue enhancement, and Republican Governor Murlowski has backed the sales tax and opposes an income tax.
Tha t would be Murkowski
Fear Itself: Sounds similar our county, where the Republican county exec was dead-set against raising property taxes to erase the county deficit, as the Dems (and some of the Reps in the county council) were inclined to do. He instead proposed to raise the sales tax which is already about the highest in the state. [I don’t know about other places, but here in New York, counties can add on sales tax to the state sales tax.]
The amusing thing was hearing a news clip where he was trying to justify this by talking about how little the sales tax increase was. (“We’re talking about only another 25 cents on each $50 purchase” or something like that.) This was really a ludicrous argument since one is talking about raising the same amount of money whether it is done with a sales tax increase or a property tax increase. The total amount it is going to affect citizens on average is the same (modulo the small affect of a sales tax hitting visitors while the property tax only hits residents…but Rochester ain’t a huge tourist destination, besides which, there is a big shopping mall just over the border in the next county that folks can flock too). The difference, of course, is that the sales tax hits harder on low income folks while the property tax is more progressive…especially since housing prices are higher in the suburbs and lower in the inner city.
That was not my impression, but I could be mistaken. Cite, please.
You know, if we replaced the national income tax with a sales tax, the Dems could cut it to their heart’s content, primarily helping the lower class.
IMHO, the general idea of taxes and their consequences are pretty well known and somewhat common-sensical.
Taxes on consumptiom (sales tax, luxary tax, value add tax, etc) are regressive in that they hurt the poorest first and hardest.
Taxes on earnings (income tax, captitol gains tax, estate taxes, etc) are progressive in that they hurt those that accumulate wealth.
The most important political aspect of taxes though is how they are perceived. Face it when you get your yearly income tax “bill” its really something of a crap shoot. Did I get a refund (that’s money baby!!!) or do I hafta send a check (money grabbing b-tards!!!). Fact is the government/ politicians want/need your money. The trick is to make you think that you aren’t paying it. Or at least, making sure the people who should pay do. Funny how its never you though, right?
That to me makes sales tax the most dangerous of all the taxes. Sure, its regressive and hurst the porr most. Sure, any tax on any activity is a natural deterrant. But hey, its only 6 cents on a bag of chips. Its only a buck fifty a restaurant tab (but only take out for some reason), its just a smidge here, and smidge there. Eventually you just get used to it and pay it with out thinking. And that’s exactyly what they want.
And that’s why Democrats are the biggest proponents of this style of taxation. Democrats fear an intelligent and informed populace. Anything that they can do to hide how they are taking your money is fine by them. To them we are all sheep who should pay a sales tax to the government then vote them into office when they offer us “free” stuff that we paid for one bag a chips at a time.
God forbid, in a Democrat’s world, would any citizen, when asked to pony up a bit more, ask the question: “And I’m paying you this because…?”
That doesn’t mean anything will come of it, though. Sheheen and now Benson have said they support one tax or the other as a way to pay for the" Education Crisis", but it’s been in discussions now for more than six years without anything ever happening. All it does is upset voters during election years.
I didn’t realize Alaska was the only other state with neither tax.
What planet are you from, JC? By and large, Democrats are against regressive taxes such as the sales tax, and in favor of progressive taxes, like the income tax. If you can provide meaningful support for your assertion, I’d like to see it; but it flies in the face of common wisdom.
Well, that is sort of like saying to your wife/girlfriend that if she lets you sleep with the entire Victoria’s Secret modeling staff this year, then it would then be easy for her to reduce the amount you cheated on her the next year.
Sure, if we make the tax structure much more regressive first then we could later make it a little less regressive later but I fail to see what that accomplishes.
Sales taxes don’t have to be regressive. Simply don’t tax necessities, only luxuries. Necessities being defined as grocery food, non brand name clothing, and housing.
You’d never get away with ‘non-brand-name-clothing’. That’s impossible to define.
But food, housing, ???
Hmm…would gasoline fall under 'necessities? Gotta use it to get to work, right? Or many many of us do at any rate.
I was agreeing with this right up to the part about Democrats. Sales taxes make it really hard to understand how big your tax burden really is. But, as FI pointed out, Democrats generally oppose sales tax and prefer a progressive income tax.
A further irony in this whole situation is that the states which vote Republican benefit from the federal income tax as they receive more government spending back than they pay in taxes. The Democrat-leaning states not only end up subsidizing the rest of the country, but we have to hear all the whining about how taxes are too high.
I’m statrting to feel that we should cut federal taxes and services and let the states keep their own money. It would be hysterical to see the chaos that would cause in places like Mississippi.
First of all, here’s a cite to back up Dan’s assertion that Republican states wallow in the pork barrel more than Democratic ones.
In his first State of the Union Address, Bush proposed a tax cut of 1.6 billions dollars. In there response speech, the Democrats offered a counterproposal of 900 millions dollars in income tax reductions. In the second round of tax cuts, where the largest share was in the reduction of the tax on dividends, the Democrats were entirely opposed. At that point, is was already clear that our wonderful surplus had somehow vanished and that we would beginning running massive deficits the following year.
Obviously, our definitions of necessities would differ, and government being the way it is, the rules would probably be incredibly complex. But a sales tax need not be regressive. It is conceivable that you could make it so that almost all of what the poorest Americans buy would be tax free.
If you wanted, you could even make the sales tax itself progressive. A restaurant dinner could be taxed at 10%, while a yacht could be taxed at 35%. A DVD player could be 15%, a 60" TV 30%.
adaher, I agree that with some work it is probably possible to design a sales tax that is progressive. In fact, there is a liberal economist at Cornell who has devised a scheme for a progressive “consumption tax”. (By the way, another way to make the sales taxes we have more progressive would be to make it a goods and services tax like the GST in Canada, rather than just a tax on goods since the rich spend a lower percentage of income on goods and a higher percentage on services than the rest of us.)
Alas, sales taxes as they are implemented now are highly regressive. (The studies have been done so there is no doubt about this.) And, I believe that if you look at most of the proposals for replacing the federal income tax with either a sales tax or a flat tax, they generally lead to a more regressive structure than we have now. [In some cases, there may be large enough exemptions to keep the poor out of paying much…But, they almost always shift more burden from the rich to the middle class, and especially lighten the load on the very rich.]
There are three kinds of taxes that are commonly used in the US: income tax, sales tax, and property tax. I believe that income tax is the best of these. Let’s look at a family in three stages:
Young Families: At this point income is relatively low, they may not yet own a house or have a “starter house”, but they are spending like crazy buying cars, furniture, baby stuff, etc.
Peak earning years: The income is relatively high, they own an expensive house, but they are not spending anything like they did in earlier years relative to their income.
Retired: Their income is lower than it was at its peak, they probably own a house that has increased drametcally in value over the years, and their spending is low.
A sales tax would be really bad for a young family, neutral for peak earners, and good for retired people.
A propery tax would be good for young families, neutral for peak wearners, but bad for retired people.
The income tax seems to be the fairest as it is good for young families and retired people, and falls the hardest during times of peak earnings when the ability to pay is greatest.
Note that this is not a “class warfare” argument. Assuming that I have to pay X dollars in taxes over my lifetime, I prefer to pay more of it in middle age than when I am starting out or retired.
The income tax is the best if progressiveness is your top priority. However, the nessecary reporting and enforcement for the income tax creates a rather unpleasant situation not appropriate for a country that professes to love liberty. It is a major infringement on the right to privacy and the IRS can take your property without due process, or at least a laughable version of it.
For me, the indignity of having to share all my financial information with the government is much worse than the actual monetary cost of the tax itself.