No, I’m not anti-tax, just anti-sales tax. They are inherently regressive and beset the planet’s retailers with gig after gig of paperwork. But should we starve government? Emphatically no, just so the money is well spent. At all levels—local, state and federal—I want the super-rich to pay a larger share of income taxes than they do now. Care for some numbers arguing for an end to sales taxes and the expansion and better targeting of income taxes? Here they are.
1. Here in the United States, the odds are already stacked against the nonrich. Take a look at the Gini index used by the Central Intelligence Agency to measure “the degree of inequality in the distribution of family income in a country.” We Yanks are in Mexico’s class or getting there. Our index reading was 40.8 in 1997, 45 in 2007—the wrong direction. By contrast, Mexico’s was 53.1 in 1998, 47.9 in 2006. We’ve become more Banana Republic-like, Mexico less. The number for Germany was 30 in 1994 and 27 in 2006. For France? 32.7 in both 1995 and 2008. I’m not saying, “Soak the rich into bankruptcy”; and, in fact, I recognize the value of capital in the expansion of old industries and the creation of new ones. But clearly, the rich and super rich in the U.S. have room to pay more taxes and still live very good lives. I don’t care if the National Taxpayers Union notes that the top one percent of Americans paid 40 percent of federal personal income taxes in Tax Year 2007. As individuals, the rich collected a lot more income on which to pay.
2. State and local taxes are already regressive. The average state and local tax rate on the best-off one percent of families is 6.4 percent before accounting for the tax savings from federal itemized deductions,” according to the Institute on Taxation and Economic Policy. “After the federal offset, the effective tax rate on the best off one percent is a mere 5.2 percent. The Institute goes on: “The average tax rate on families in the middle 20 percent of the income spectrum is 9.7 percent before the federal offset and 9.4 percent after—almost twice the effective rate that the richest people pay.” Washington State, where Bezos lives and has located Amazon’s headquarters, is among the “Terrible Ten” states with the most regressive tax systems. It doesn’t even have an income tax, just a small business-and-occupation tax on gross receipts.
3. Total state and local sales tax revenue in the United States was $412 billion in 2006, and state sales and gross receipts revenues were $357 billion the next year—which sounds huge; but then consider the Gross Domestic Product, $14.2 trillion in 2008. Would it really be that horrible to make a careful transition over time to replacement of state and local sales taxes with revenue from progressive income taxes?
Granted, the super rich love to say they’ll flee the U.S. if taxes get too high. Let ‘em. I’m sure we can grow some gifted tycoons to replace them. The key could be a mix of improvements in childhood nutrition (for mental development) and education (complete with more resources to encourage children to excel in computer science) and other areas. If anything, I’d like to see more money going to deserving activities within the public sector. I just want taxation—whether in the U.S. or other countries—to be fairer. Taxing a lower-middle class family—buying e-books from Amazon for their kids—is not the way to do it. And how dare any state tax groceries, even a nickel!
Oh, and in case you’re curious, if you repeal sales taxes, local stores will be on an equal footing with Amazon. In other words, politicians wanting to tax Amazon in the interest of parity with local stores have it backwards. Don’t expand sales taxes. Get rid of them.
Despite my loathing of sales taxes, I do not want this to happen overnight—yes, I am sensitive to the needs of public schools and other parts of the public sector—but let’s at least make it a long term goal.
Come to think of it, lack of sales taxes could mean something else: permanent economic stimulus, through more money going to people who’ll spend it on a number of items ranging from Fords to Kindles. If there are inflation worries, well, perhaps income taxes could be increased. But that’s hardly the biggest risk right now. Here’s to more disposable income for e-books and everything else! This is an e-book blog, not a tax blog, but you can’t separate e-books from the rest of the life.
All right, you anti-income tax libertarians—have at it! Speak up, and try as much as possible to discuss the above issues in an e-book-and-Amazon context, and in a civil way that attacks the arguments, not the other TeleRead community members making them. But before you do, consider the source of this passage written in the year 2000:
“Repeal all sales taxes. They’re unfair, they hurt consumers and they’ll hurt our economy if they’re expanded to include cyberspace. Don’t believe these politicians who say that you won’t have fire and police departments without sales taxes. Only 16% of local government revenues come from sales taxes.
“At the state level, several governments impose no sales taxes at all and 45 states receive most of their revenue from other sources.”
Well-put. And if anything, those words apply in this recession, where sales taxes crimp consumer spending.
So who wrote the passage? A socialist in Sweden? Perhaps a Serbo-Croatian anarchist? Hardly. None other than James K. Glassman—for Reason Magazine (“Free Minds and fee markets”). I don’t know his exact and complete views on progressive income taxes these days. But I know where he stood nine years earlier on the sales variety. Against!