Abolish the Sales Tax


Back to school season is heating up (because it's mid-August, get it?) and with it, in a lot of states, come sales tax holidays for school supplies and clothes. So now is the perfect time to implore — really get on my hands and knees and beg — the 45 states with a sales tax make these holidays permanent and abolish the sales tax for good.

Why? Because a sales tax is a regressive tax that takes more from low-income individuals than those with high incomes, and all regressive taxes need to go.

The regressive nature of the sales tax isn't in its mechanism, necessarily; an 8% tax on a $3 loaf of bread is less than an 8% tax on a $3000 television — that seems fair, no? But problems arise when an individual making $25,000 per year and an individual making $250,000 per year both buy a $3 loaf of bread. The 8% tax on $3 is a larger share of $25,000 than $250,000. The lower income individual is essentially paying more of his income to the sales tax. Yes, the same goes for the $3 loaf of bread at face value, but that is part of the unrelenting nature of capitalism that is unlikely to go away any time soon. A sales tax simply adds insult to injury.

Of course, ridding ourselves of the cursed sales isn't as easy as one might hope. Individual states bring in a lot of revenue from sales taxes, and lose a lot of revenue when they give consumers tax holidays. All told, North Carolina lost $13.6 million in tax revenue during its sales tax holidays last year. Getting rid of it altogether would certainly leave states in the red. So while a reprieve from sales taxes might be a boon for consumers and retailers, states that are already struggling to balance budgets lose one of the few opportunities they have to bring in some cash. Unfortunately, this source of revenue for states roots itself in policy that disproportionally affects low- and middle-income earners.

There is, thankfully, no federal sales tax. But a recent push for an internet sales tax might as well be a national tax. A rare shining moment of bipartisanship saw the Senate pass legislation that requires large online retailers (those making over $1 million) to collect sales tax in states from which they ship product. Called the Marketplace Fairness Act, the bill was intended to level the playing field for small brick-and-mortar businesses competing with online giants. While that is certainly a noble endeavor, it ignores the real issue at hand: any sales tax is inherently unfair.

So how would states make up the revenue they would lose from an abolished sales tax? Why not upping revenue from a progressive tax, like capital gains, of which only 42 states currently have in place? Capital gains taxes impact only those with the income available to have the sorts of investments that make capital gains possible, thus making sure those forced to pay it can indeed afford to. Or, as a compromise, perhaps introduce a form of luxury tax: a state sales tax on goods with a price of at least $1,000, ensuring that if a regressive sales tax has to be in place, it at least only impacts those with $1,000 to spend.

As the cliché goes, taxes are put in place so that individuals pay their fair share. But state sales taxes do the opposite; the 24-cent tax on bread is a significantly smaller share of income for those making $250,000 than those making one-tenth of that, and thus fundamentally unfair. Tax policy, be it at the state or federal level, needs to ensure those with the ability to pay more do — sales taxes do not. So they've got to go.