Thursday, April 17, 2008

The problem with sales tax

Sales tax collections in Missouri are down 15 percent for March,
compared with the same month last year, according to a general revenue
report the state Office of Administration. Read more at
http://www.bizjournals.com/kansascity/stories/2008/03/31/daily32.html.

Last week our city passed a sales tax increase of a half a percent.
That brings our sales tax up to nearly 8 percent, one of the highest
in Missouri.

The mayor claimed the money was badly needed to repair roads, build a
911 tower, and pay for a new fire truck. The added tax will end in
ten years.

End in ten years? We'll see if that's true. Tax increases rarely end.

The problem with sale tax is that it taxes the poor and the middle
class. You can only buy so much food and so many consumable goods,
even if you are wealthy. (But that's not the point.)

Sales taxes discourage rather than encourage business. They
discourage new businesses from coming into a community. They
discourage shoppers from buying in the community.

It now makes it even more attractive for me to shop in the larger city
a half an hour away.

The apologists for the tax say it's only 50 cents on $100. Well, if
during a time of recession people are buying less, a sales tax
increase doesn't help. With a 15 percent decrease in sales and 5
percent increase, that still means $1 less in taxes on $100 dollars in
sales.

In a recession sales taxes discourage buying and don't help government.

A much better approach would be to encourage small business growth.
One business move-in would bring much more than the projected revenues
from a sales tax increase. Two business start-ups would do the same.
Sales taxes work against business growth and consumer spending.


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