What that means is a poor person loses way more of their own income to a sales tax then a rich person loses.
Example:
Poor person has 20k a year, spends 300 (before taxes) a month in groceries, thats 3600 a year.
Say the sales tax is 10%. Ok, that is 360/20000.
1.8% of a poor person’s income goes to just tax on groceries a year.
Ok, now someone who makes 80k spends the same amount on groceries.
360/80000 = 0.45% of their income goes toward grocery sales taxes.
Thus the tax burden of a sales tax hits poorer people harder than richer people.
A progressive tax, like most income taxes… well the taxed amount increases as your income increases, so this is basically reversed: a richer person is taxed more in absolute terms than a poor person.
…
A high sales tax does not stimulate rich people to buy more.
All it does is mean poor people buy much less, and rich people buy slightly less, thus shifting the demographic of people buying things.
Whoever told told you that a high sales tax… stimulates rich spending… is economically illiterate, as in, they’d flunk an AP Micro course or a first year of a 4 year degree… that is absolute nonsense.
All it does is filter out the poors, who now have a dramtically tighter budget than the rich, and make it seem like only rich people are coming into your store… because poor people stopped coming in.
Could a Sales Tax be Progressive?
Theoretically, you could have a progressive sales tax… but that would realistically require all POS sales sytems to also pull your income when you swipe a debit or credit card.
Its not totally impossible to do this, but it would be quite complicated to implement, you’d have privacy issues, data security issues, smaller business owners would have to foot a disproportionate cost as compared to large businesses to upgrade their systems… how do you handle cash transactions, id verification, etc.
To my knowledge, no such system has ever been implemented in the US… or possibly anywhere, at a large scale.
Bonus! Property Taxes:
Property taxes vary much more locally and regionally, with many more possible complicating factors.
Basically, some government system or process estimates the value of your home as if you tried to sell it on the market, that year.
Then taxes are applied to that estimated value.
But… lots of governments do the value estimation part in ways that are both absurdly complicated and often quite out of step with actual the actual market, and there are often complex rules determining what triggers a new valuation or when it occurs.
Usually property taxes themselves, once your property value is assesed, are a flat rate based on the assesed value.
So… that too is a regressive tax, that effectively punishes less wealthy property owners more than wealthier property owners…
But there are so manh caveats and complications to any given city or county or state’s local property tax laws that it can vary quite significantly.
A sales tax is 100% a regressive tax.
What that means is a poor person loses way more of their own income to a sales tax then a rich person loses.
Example:
Poor person has 20k a year, spends 300 (before taxes) a month in groceries, thats 3600 a year.
Say the sales tax is 10%. Ok, that is 360/20000.
1.8% of a poor person’s income goes to just tax on groceries a year.
Ok, now someone who makes 80k spends the same amount on groceries.
360/80000 = 0.45% of their income goes toward grocery sales taxes.
Thus the tax burden of a sales tax hits poorer people harder than richer people.
A progressive tax, like most income taxes… well the taxed amount increases as your income increases, so this is basically reversed: a richer person is taxed more in absolute terms than a poor person.
…
A high sales tax does not stimulate rich people to buy more.
All it does is mean poor people buy much less, and rich people buy slightly less, thus shifting the demographic of people buying things.
Whoever told told you that a high sales tax… stimulates rich spending… is economically illiterate, as in, they’d flunk an AP Micro course or a first year of a 4 year degree… that is absolute nonsense.
All it does is filter out the poors, who now have a dramtically tighter budget than the rich, and make it seem like only rich people are coming into your store… because poor people stopped coming in.
Could a Sales Tax be Progressive?
Theoretically, you could have a progressive sales tax… but that would realistically require all POS sales sytems to also pull your income when you swipe a debit or credit card.
Its not totally impossible to do this, but it would be quite complicated to implement, you’d have privacy issues, data security issues, smaller business owners would have to foot a disproportionate cost as compared to large businesses to upgrade their systems… how do you handle cash transactions, id verification, etc.
To my knowledge, no such system has ever been implemented in the US… or possibly anywhere, at a large scale.
Bonus! Property Taxes:
Property taxes vary much more locally and regionally, with many more possible complicating factors.
Basically, some government system or process estimates the value of your home as if you tried to sell it on the market, that year.
Then taxes are applied to that estimated value.
But… lots of governments do the value estimation part in ways that are both absurdly complicated and often quite out of step with actual the actual market, and there are often complex rules determining what triggers a new valuation or when it occurs.
Usually property taxes themselves, once your property value is assesed, are a flat rate based on the assesed value.
So… that too is a regressive tax, that effectively punishes less wealthy property owners more than wealthier property owners…
But there are so manh caveats and complications to any given city or county or state’s local property tax laws that it can vary quite significantly.
…
thank you for coming to my ted talk lol
Thanks, zero regrets for attending this ted talk (´･ᴗ･ ` )
Oh you replied quickly, I may have still been cleaning up the formatting.
Either way: =D