Sales Tax as a Moral Issue

National Public Radio reported on the trend among Republican governors to cut income taxes, often by proposing a broader sales tax.  Even in once-progressive Minnesota, Democratic governor Mark Dayton is proposing a scheme to increase sales tax by increasing the goods and services subjected to the tax.

In an era when the wealthiest enjoy a lower real tax rate than the poorest, it seems immoral to increase the tax burden on the poorest.  Furthermore, we have a depressed economy and that hurts the poor and the middle class the most.  Meanwhile, the very wealthiest, those already paying the lowest tax rates, have realized strong economic gains.

tax-policies1Forget the phony arguments about supporting job creators and business owners — an argument you’ll hear in NPR’s story — isn’t this really a moral question when we choose to increase taxes on those least able to pay them while those who have the resources to pay them get by with lower real rates?  There’s something almost criminal about that.

Let’s look at an example.

Let’s use after-tax disposable income and say that Family A has $50,000 after taxes and Family B has $500,000.  In this hypothetical example the sales tax rate is 5%.  Suppose family A spends only $40,000 of their income on taxed items at 5%.  That’s a tax of $2000.   Family B spends $200,000.  That’s a tax of $10,000.  So Family B is doing more to support our government, right?

Well, yes…in dollars.  But Family B has $300,000 in savings, a valuable asset that Family A does not have.  We could talk about the material benefit of having five times as much goods and services to enjoy, too, but cranks will complain that this is a subjective criticism akin to resentment.

The real issue is in the rate of tax.  We can look at the rate of tax as a factor of overall disposable income to make a comparison.  Family A pays an effective rate of 4%.  Family B, however, pays an effective rate of 2%, half as much.  Now I think we CAN look at the discrepancy of material benefit in items and services bought and savings gained.  Family B is much better off in the end while Family A pays a disproportionately higher amount in taxes.

In the age of inequality — with all the harm that that it creates — why would we foster further inequality?  On what sensible argument can you justify further depressing the wealth and power of those who are already behind?

Keep in mind, too, that the very poorest among us cannot escape sales taxes.  The mean-spirited argument that some people pay no taxes at all is demonstrably false.  Those “tax free” people actually pay.

Finally, as taxes expand to cover essentials like food and services like legal representation, the poorest are hit again.  We should protect the basic necessities of life, like food, clothing, and shelter.  And in a society where the quality of legal representation matters in issues of justice, freedom itself can depend on the ability to pay for legal services.  Taxing these services only tips the balance away from serving the poor and working classes.

In the age of inequality, sales taxes are not just a bad idea, they are an unjust solution that point to moral problems in our society.


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