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As I recall from my days of teaching Econ at the University level, sales tax are considered regressive because poorer people pay more as a % of their income than high income folks. The reason for that is high income folks do not spend all of their income, while poor people typically do. The facts are somewhat muddy, since the list of taxable items varies from state to state. But it is generally accepted that sales taxes are in fact regressive.
This has nothing to do with disparate impact. It's just math.
What you describe is all about disparate impact. As you correctly stated, it will impact a poor person more than a rich person due to the poor person spending a greater proportion of their income.
Progressivity/regressivity of a tax is a function of the tax rate and the base upon which that tax rate is applied. For some taxes, like income tax, the base is income. But for sales tax, the base is the amount of the taxable sale. For sales tax to be regressive, a $10 purchase would have to have a higher sales tax rate than a $100 purchase (for example).
I have seen this idea in one article after another, but it still makes no sense to me given the definition of a progressive tax. I would think a true regressive tax would, in the case of income, have higher tax rates for lower income brackets. I guess what is meant is that a flat tax is "regressive" only in reference to the effects of a progressive tax, i.e. it is less good than the preferred scenario of ascending tax rates. Still a property tax at 2% of assessed value is a flat tax, where it to be regressive lower value properties would be taxed at higher rates. My take is once again certain folks are intentionally misinterpreting mathematics as a means of promoting various policies which is funny because I actually support progressive income taxes.
And sure... you can support a variable income tax scale without calling it "progressive". Of course, "progressive" doesn't simply mean it in the sense that the tax increases with income, anymore than "regressive" simply means taxes increase downward. The word is about the "spirit" of the policy. Is it modern and enlightened? Or is it steeped in ignorance and dark ages thinking? According to.....
And although "progressive" tax systems are a primary plank of the Marxist worldview, progressive taxes are NOT necessarily Marxist in an of themselves. Any sovereign state can decide how to levy taxes for itself as a matter of public policy, without being collectivist in nature.
Authoritarians, especially those on the Left, always put great stock in the use of language as a framework for political "optics", . "Regressive" is a negative word, and so of course, Marxists apply it to anything in society they don't like. Like they use "reactionary". And, not just for economics. Conversely, they apply "progressive" to anything they espouse or support, because it has positive overtones to "dress up" or camouflage whatever draconian measure or policy they're trying to slip under the doorway.
You could look at sales tax and all the other taxes that are a flat fee on EVERYBODY, and view that as philosophically "regressive" too - but the government sure won't, because they don't want you to remember that fact. Nor would they ever refer to withholding taxes from payroll as a regressive measure (regressive, albeit probably very much preferable to NOT withholding it from paychecks).
Hence, taxes that don't comport with the "progressive" worldview of the statists - that don't enable them to transfer wealth, or build power, or buy followers, or that otherwise flow from some notion other than retaliation, resentment or social justice are ALWAYS going to be termed "regressive". It doesn't matter that flat taxes would increase government revenue. No no no. What's more important is divide and conquer politics. Buying loyalty is a much more valuable strategy. In fact, the lost revenue is just the COST of buying votes to the Left.
And they know once they get in power, they'll have ALL the power of ALL the money. Once they don't need to be voted for anymore.
Last edited by Led Zeppelin; 01-12-2019 at 10:19 AM..
The impact of a sales tax is disproportionate, and in a negative way, on poor people. But it’s not a regressive tax.
Again, a regressive tax is simply the opposite of a progressive tax. Nothing more, nothing less.
Now, one of the things that I find interestingly missing in these discussions, is the fact that every expense, from taxes to gasoline to milk to shoes and everything else that people spend money affects poor people more than rich people. But guess what? It affects every rich person more than it affects someone who is richer. It’s simply the nature of money.
Is anybody really going to reasonably argue that there should be some sort of income adjusted pricing for everything? Of course not, it’s a ridiculous notion. But the same people who would never put forth such a silly argument will fall all over themselves to argue in favor of income adjusted pricing when it comes to taxes.
SMH.
Thanks for your profound and oft repeated definition. But, a rose by any other name...I don't care if you call it regressive, flat, or progressive - all ANYONE really cares about is the actual impact. Being autistically literal may make you "correct" but it really doesn't further the conversation at all.
Thanks for your profound and oft repeated definition. But, a rose by any other name...I don't care if you call it regressive, flat, or progressive - all ANYONE really cares about is the actual impact. Being autistically literal may make you "correct" but it really doesn't further the conversation at all.
In a discussion about taxes, accuracy and precision are important. Conflating regressive taxes with the disproportionate impact of taxes serves no useful purpose. What possible reason could you, or anyone else, have for using the terms incorrectly, in spite of knowing what the actual meanings are?
Why is gross income used as the basis? How about, in the test about whether a tax is regressive or now, discretionary income is used for the basis? That limits the difference between disparate impact and regressive taxation, does it not, and I would argue that it is much more valid than income, which is gamed and shrouded in a delineation between investment income and income earned from wages.
What you describe is all about disparate impact. As you correctly stated, it will impact a poor person more than a rich person due to the poor person spending a greater proportion of their income.
Progressivity/regressivity of a tax is a function of the tax rate and the base upon which that tax rate is applied. For some taxes, like income tax, the base is income. But for sales tax, the base is the amount of the taxable sale. For sales tax to be regressive, a $10 purchase would have to have a higher sales tax rate than a $100 purchase (for example).
{shrug} Virtually all economists think a sales tax is regressive. If you wish to change the definition to suit your argument, take it up with the economic academic community. Until then, you are simply wrong.
{shrug} Virtually all economists think a sales tax is regressive. If you wish to change the definition to suit your argument, take it up with the economic academic community. Until then, you are simply wrong.
Not true. I've spent 30 years in the academic community surrounded by economists, and have had this exact conservation with a great many of them. While there are plenty who at first blush will say that sales tax is regressive, when asked to distinguish between regressivity versus disparate impact, I've never had one continue to stick with that claim.
Try it. Round up the economists that you know and have this conservation with them. I bet you'll be surprised at the results.
Oh, and according to Merriam/Webster, I'm not the one changing definitions:
I have seen this idea in one article after another, but it still makes no sense to me given the definition of a progressive tax. I would think a true regressive tax would, in the case of income, have higher tax rates for lower income brackets. I guess what is meant is that a flat tax is "regressive" only in reference to the effects of a progressive tax, i.e. it is less good than the preferred scenario of ascending tax rates. Still a property tax at 2% of assessed value is a flat tax, where it to be regressive lower value properties would be taxed at higher rates. My take is once again certain folks are intentionally misinterpreting mathematics as a means of promoting various policies which is funny because I actually support progressive income taxes.
Most reasonable flat tax schemes have a deduction of a certain amount (like how our current tax has a 7k deduction). If you had say the first 25k be tax free I can't see any argument for a flat tax being "regressive".
If income is going to be the basis of providing the taxes necessary to fund the government, then everyone should pay the same percentage of income as tax with no credit, exemptions or deductions, regardless of type of income, marital status, age, or any other factors. Anything other than that is, on its face, unfair to someone. To call that sort of flat tax regressive is absurd.
The thing is the government "makes" all the money we have if you have 20% of all the money they made in one year wouldn't it make sense to charge you more as you actually hold more.
Cebuan, because there's some relationship between the value of car a person can afford and their income, the example you provide is a flat tax rate on cars that is somewhat a flat tax.
To the extent the relationship between a car's price and what's affordable is often not proportional, it is to that extent more regressive only for persons that cannot readily afford the comparatively necessary car they purchase.
A flat sales tax rate upon cars is certainly NOT a progressive taxes; the tax rate upon the same priced car or the dollar amount of that tax are not proportionally increased dependent upon the purchasers' incomes.
I never said the rate was proportional to income. I was not talking about incomes. I was taking about the progressiveness of the ratio of the tax burden to the ability to pay it. Which is exactly the goal of a progressive income tax, but calculated in a different way.
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