Thursday, April 02, 2009

Consumption Taxes


Some people argue in favor of a sales tax instead of an income tax. This would mean that only those who indulge in certain consumption will pay the taxes.

However, certain things are not simply indulgences. Some are necessities, like food.

A person making $20 per hour and a person making $8 buy the same product, who pay the higher sales tax?

If you look at the short end, you would say neither because the tax would be the same. Outside that box, however, you would understand that the greater burden is on the person who earns less as a percentage of total income and expenses are calculated at the end of the month.

The perception of cost would also be much greater when tied directly to a good or service, instead of gradually drawing taxes out each week. The Cigarette tax is now high enough to cause people to quit smoking in droves. It's a good thing I quit smoking in 2004.

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