Understanding taxes

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Marty4650 Forum Pro • Posts: 15,134
Understanding taxes

Many people (including the current Supreme Court) felt it was "unfair" that there was no practical way to collect sales taxes from transactions made in another state.

They had two big problems with this.

  1. It deprived some states of much needed revenue
  2. It gave an unfair advantage to online retailers over brick and mortar stores

So the recent Court ruling has fixed this. Now everyone will be required to pay sales taxes no matter where the transaction took place. You will be taxed based on where you live, and not by where the transaction took place.

But his decision has just raised the cost of goods for most people. And it provides local governments with more money that will simply be spent by politicians to buy more votes rather than for lowering all the other taxes they imposed to compensate for this lost revenue in the past.

Let me explain the last point.

There are four states that have absolutely no sales tax. Oregon, Montana, New Hampshire and Delaware.

But those four states are NOT the ones with the lowest tax burden, because they have imposed "other taxes" to offset that loss.

This means that Oregon, which has no sales tax has the 10th highest overall tax rate out of all 50 states, because they impose so many other taxes on their residents. And Delaware, which also has no sales tax has the 16th highest overall tax rate. Even Montana, with no sales tax at all, still manages to impose a tax burden on it's citizens that is higher than those imposed by 12 other states.

So what happens now that sales taxes are now collected in all 50 states? Will these "sales tax free states" repeal some of their other taxes, or will they simply get a windfall? Or will the politicians simply spend more money buying votes with taxpayer money?

Or perhaps there will be a movement towards a uniform higher sales tax for all states... to "level the playing field" and be fairer? Something akin to the European VAT?

One thing for certain, the big loser in all this is the consumer who will pay more for their goods and services. There will be less advantage to shopping around.

Taxes should be levied to pay for government, and not to punish or reward some class or category. But we never seem to have enough money to pay for everything we want, so we raise taxes than borrow more money to allow our government to spend more money.

Even nations like Sweden with a 60% income tax, plus a 25% VAT applied to the other 40% when you spend it, usually spends more money than these taxes provide. So you really can't tax your way out of debt, if your spending habits never change. Every household knows this, even if governments don't.

My guess is that no taxes will be cut due to the states having this new source of revenue. In fact, they might be tempted to impose higher sales taxes and even add them to states that never had a sales tax before. So they don't miss out on the windfall.

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