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Sales Tax

Transparent Statement:
Sales taxes are regressive and an inconsistent way to generate revenue.

Relying primarily on sales tax to fund state government is incredibly stupid. When the economy pauses, consumer spending plummets, taking state revenue with it.

This leads to huge swings in sales tax revenue for the State. When the Great Recession began in 2008, it took more than 5 years for sales tax revenue to recover back to 2007 levels. You just cannot consistently fund a state government that way. I suppose there are dumber ways to fund state government, like relying on donations, but not many.

Sales taxes are also regressive by their very nature. Let's say you earn $100,000 per year and I earn $50,000. We both need to buy a car, and let's say we both buy a car that costs $20,000. At 10% sales tax, that is $2,000 in tax. (No, sales tax is not actually 10%. But after including county and city taxes, it is often close. More importantly, it makes the math easier.)

So it seems fair that we both pay $2,000 in sales tax. After all, we bought the same car. The difference though is that $2,000 is 4% of my $50k income, but only 2% of your $100k income. That sucks for me.

You can argue that I should buy a cheaper car, or perhaps you choose to purchase a $40,000 car. Then you pay twice the tax ($4,000) but the same 4% as me.

The problem with this argument is that lower-income people must still buy a lot of the same stuff as upper-income people, like food, clothing, furniture, appliances, even toilet paper. So poor people spend a larger percentage of their income not just on these items, but on the taxes too.

I suppose it seems fair since no one is actually forcing poor people to buy things like food and clothing. But at the federal level, our tax system has always been more progressive, meaning that upper-income people pay a higher percentage of their income. Different income tax rates mean the rich pay a higher percentage of their income for the same government services.

In summary, the sales tax system is regressive and inconsistent. Regardless of whether you believe our state needs new revenue, both the state and low-income people would be much better off with a more reliable source of revenue.

I am not suggesting we get rid of the salex tax entirely. I am merely advocating for diversifying our revenue by adding an income tax and capital gains tax, and lowering the sales tax in the process.

Steve Rubenstein for Governor | Privacy Policy