State Tax Vs Sales Tax, Which Is Worse? (lawyer, big house)

[bbkaren]

1. The poor need to help themselves, then by choosing to invest effort (see above re: baking their bread rather than buying it, growing produce rather than buying), rather than paying money into sales taxes.

2. The poor need to choose to invest what money they have into necessities rather than lottery tickets.

JMO

[johnrex62]

But lottery tickets are tax free, aren't they?

[johnrex62]

Originally Posted by piedmont

In general, the greater your income, the less the impact of a sales tax (vs. an income tax).

Sales tax takes a much greater chunk of a low income family's budget than of a high income family's budget. Rich or poor, we all buy many basic items and hence pay sales tax on them.

As a rule, this is correct. But the exception are those weathly people with poor impulse control that buy lots of "things" to make themselves happy. I understand that Paris Hilton never wears her clothes more than once (if you can call them worn at all for the brief time she has them on, but that is another topic) and then donates them to charity. She must pay significantly more sales tax than I do, since I wear mine until the threads won't stick together anylonger.

Luxury tax on boats, planes and expensive cars addup to more than most poor families pay for their annual food purchases. Hotel taxes are not often a major portion of poor family budgets, but they are often over 10% of a nights stay and even higher in resort areas when the room rates are greater as well.

The more you earn, the more likely you are to indulge in these higher taxed activities, so the tax burden is shifted somewhat in relation to percentage of income taxed even in a sales tax system. I have no stats on what ratios might actually be at different income levels, but this would vary widely based on how impulsive or self indulgent one might be.

[piedmont]

Originally Posted by johnrex62

The more you earn, the more likely you are to indulge in these higher taxed activities, so the tax burden is shifted somewhat in relation to percentage of income taxed even in a sales tax system. I have no stats on what ratios might actually be at different income levels, but this would vary widely based on how impulsive or self indulgent one might be.

There is quite a difference, IMO, in paying tax every time on what you need (bread, flour, milk, etc.) vs paying tax on what you want (D&G dress, luxury car, etc.).

Sales tax is a regressive tax. Some folks probably like that, as it places a greater burden on those with less income. Certainly we've had plenty of folks in national and state offices over the last decades who have this perspective! /end rant.

I'm not positive at which point the no income tax/higher sales tax combo really starts paying out in economic terms for family, but I think it is well above the average family income in the U.S. Over a 120k/year, this tax situation can start to be an economic advantage (but that will depend); it is not much of an economic advantage for households making 50k/year. We figured out that we might save about $5000 in taxes if we moved to TN from NC (but we will also pay more for basic purchases). But those are only a few costs--and don't take into account the other consequences of living in an income tax (of a certain sort)-free state.

[Deborah53]

Originally Posted by TNkudzu

TN Sales Tax is high but you have to look at the whole tax burden before you can make a judgment.

TN ranks number 48th or 8.5% on State Tax burden and 46th or 28.8% when you include the Federal Tax.

North Caroline ranks number 19th or 11% on State and 24th or 31.2% for all Taxes combined.

Here is a website for current Tax burdens.

The Tax Foundation - State and Local Tax Burdens Compared to Other U.S. States, 1970-2007

TNkudzu, Interesting site, thanks for the link.

[insanesmooch]

Originally Posted by countrypooh4

. We are looking at NC also but they do have a state tax and not sure what the sales tax is there. Any opinions on what's worse?

I think there is no state tax on food, but the counties can add one. My receipt from a store last night lists 2% tax for the food. There is a 6.75% tax for other items.
The other NC counties I have food shopped in also have a 2% to 2.5% tax.

[mbmouse]

A note about state sales tax and a federal income tax return. If you happen to fall in a lower income bracket in TN, on your federal tax return, for the past two years there has been a credit of per person on return for sales tax. SO in essence those who are in the low income range and get money back on there return verses paying, actually get some of the TN sales tax back from the Feds every year.

[OREGONRAIN]

Originally Posted by JMT

In addition, the sales tax on groceries is 8%, not 9%.

I would MUCH rather have a sales tax than an income tax. With an income tax, there's absolutely NOTHING you can do to offset it. You can't give yourself a pay raise. Well, unless you're a politician. And with the graduated income tax, sometimes a pay raise actually bumps you into a higher tax bracket meaning your take-home is LESS than it was before the pay "raise."

But with a sales tax, you control how much taxes you pay. If you don't want to pay the sales tax on a $3 loaf of bread, then buy a $2.80 loaf of bread. If you can't afford the sales tax on a $15,000 car, then buy a $14,000 car. In other words, there's almost ALWAYS the option to buy something cheaper, whether it's food, clothes, electronics, or cars. But once they start taxing your income, you're stuck.

I can understand a state having a sales tax, but I can't imagine the population of any state allowing them to tax their groceries, the food in a restaurant ok, but not the groceries. There is no excuse for that at all, food is very expensive and is a life necessity.

[AlisonL]

We pay a snack tax, any food considered a snack is taxed. Potato chips, popcorn, candy, ect.
Maine is the land of high taxes. We even pay a tax on bottled water. Waiting for the tax on the air we breathe next.

[mbmouse]

Originally Posted by AlisonL

We pay a snack tax, any food considered a snack is taxed. Potato chips, popcorn, candy, ect.
Maine is the land of high taxes. We even pay a tax on bottled water. Waiting for the tax on the air we breathe next.

Everything you buy, including in the grocery store, which also includes bottled water and snacks is subject to the 8% or up to 9.75% sales tax in TN.