Social Question

JLeslie's avatar

Americans: would you make fewer purchases if your sales tax tripled?

Asked by JLeslie (47251 points ) September 25th, 2012

I was having a discussion with a friend about taxation, and he was arguing for a federal flat sales tax of 23% and no federal income tax. I think that would mean most peope would have a 28–30% tax on most purchases, since local sales tax is often 5–7%. where I live sales tax is currently 9.25%.

I am not looking for a discussion about sales tax vs income tax, but rather just a gut feeling in terms of spending habits if we had a very high sales tax and no federal income tax. Buying a $30k car would be $39k. Buying. $100 dollar dress would be $130. Would it matter you have more money in your pocket because you are not paying federal income tax?

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40 Answers

jca's avatar

I would definitely buy less if there was a huge increase in sales tax.

tedd's avatar

I am personally against a purely sales tax model, because I don’t think it would fund all of the government agencies and programs that I think make our country strong.

As far as a “would I spend less if it were initiated anyways” outlook… Probably initially. I would see the added price sticker shop and spend less. Eventually though it would dawn on me the increased money I had in my base income, and I imagine my purchasing would probably end up around the same it is now.

Coloma's avatar

I’m a spender, if I have the money and really want something it wouldn’t stop me.

wundayatta's avatar

That’s a policy designed to encourage savings. It’s nice, when you need people to save more. Right now, that would be disastrous. We need people to spend more. They are saving quite enough at the moment, thank you very much. We need to reduce the cost of purchasing items, and take our taxes on the income side.

DigitalBlue's avatar

I don’t really know that I can buy much less than I currently do, but knowing my personality – I would probably never set foot in a store ever again. :)

Seek's avatar

At that point, I would have no choice but to buy a yurt and start living off my own back garden. There is no way I could afford a 25% sales tax. No way.

tom_g's avatar

No. Most of my purchases are necessities, so those wouldn’t change. And the few non-necessities I buy are so few that it wouldn’t have a large effect. The only thing it could do would be to slightly diminish the amount of money available for eating out, which I don’t do that often and should do even less.

But a flat rate sales tax is horseshit anyway. It would disproportionately affect people with less money.

Jaxk's avatar

Generally my purchases are more defined by how much money I have in my pocket. A sales tax would certainly make the tax more obvious since it would hit you in the face every time you bought something. Most people are geared to look at thier Net Pay rather than Gross Pay when they get thier paycheck so the income tax is less obvious. At least in the beginning I think we would all suffer some ‘sticker shock’. Of course if the tax were folded into the sticker price, it would once again be hidden.

wonderingwhy's avatar

Staying away from the pros & cons and focusing on my spending… I doubt it would change much in my habits, though buying big ticket stuff with loans, like property, would be noticeably more unpleasant. I’d suspect I’d shop more overseas, unless they’re going to nick that too.

Seek's avatar

I just thought of something.

30% sales tax is going to MURDER small business.

Take my hubby’s work: hardwood floor refinishing.

$30 a case for finish immediately becomes ~$40 a case. $100 tool rental becomes $130 tool rental. Buffer pads become about $20 a piece. At that rate, a 3 coat job becomes well over $300 in supplies alone. Add in gas money to get to the job (also up 20%) and license and insurance cost, and he’s paying for the privilege of fixing someone’s floors!

muppetish's avatar

Absolutely. Even Amazon’s switch to taxation is going to cut my spending back significantly.

SpatzieLover's avatar

As it is, Chicago has a HIGH sales tax rate. We go to visit at least once per year. It definitely affects how much we spend when we’re there. If this was across the board, then I’d only buy major purchases during a tax free time/Tax relief period (Wisconsin sets this as just before school starts).

SuperMouse's avatar

As it is we buy mostly necessities and with that kind of sales tax, the few non-necessary things we do get would be gone instantly. We would also have no choice but to cut down even the necessities. Actually, we would probably have to move into @Seek_Kolinahr‘s yurt. I am not a huge fan of recessive taxes and this one would be an absolute nightmare for me and many folks in similar situations.

YARNLADY's avatar

It sounds like you are saying that instead of income tax, people would pay sales tax. If that were so, I would have a lot more money to spend, and I would probably buy more.

JLeslie's avatar

@YARNLADY Yes, you would have more money.

woodcutter's avatar

It would encourage me to save more. If it does the same for others I would imagine it would change the economy. The people who pay no Fed income tax to start with would be hammered more. Exactly what they don’t need…those 47 percenters.

glacial's avatar

You would probably end up with a situation similar to that in Canada, where we have a relatively high sales tax (depending on the province, usually a total of around 15%) , but lower income families/individuals get a sales tax credit following their income tax return. Paid out in several installments over the year, it encourages people to go out and spend that money all over again – so no, I don’t think it prevents people from making purchases.

Of course, it’s based on income, so you wouldn’t “get tax back” if you bought a big ticket item like a car. It assumes that you are shopping within your means… which I think is a good thing.

JLeslie's avatar

@glacial If I remember correctly your prices marked on an item already include the sales tax right? In America we actually get a tax credit on our federal income tax also if we made a big purchase like a car.

Seek's avatar

^ Which is kind of backwards, if you ask me.
“Oh! You could afford to buy a new house! Yay! Here’s a lot of money!”

“Oh, you’re barely making ends meet! Better buy renter’s insurance in case your landlord decides to steal your record collection while you’re not home!”

Ah, America.

fremen_warrior's avatar

@Seek_Kolinahr that’s not America, that’s ‘muricah – something that hopefully dies off quickly so that the US can regain at least some sense of sanity it once had. Good luck to you people…

JLeslie's avatar

@Seek_Kolinahr I have to say I have never thought of renters insurance as covering my stuff against a landlord.

I also don’t get the first point of buying a house here is a lot of money. Can you explain that? Do you mean the tax deductions for a mortgage?

Seek's avatar

Yes, and yes.

JLeslie's avatar

@Seek_Kolinahr So you prefer to get rid of the mortgage deduction?

Do you know a lot of people who have had a landlord steal their stuff? That just seems so far out to me. Renters insurance is to insure your things period. From theft, from a hurricane, from whatever.

Seek's avatar

@JLeslie

Didn’t say that. I do believe it’s a good tax break for middle class families, but it’s also no help to the poor. And yes, I do know of people who have had things disappear from their homes and suspected their landlords (as the landlord has the key, of course, and there’s no sign of break-in) and can’t do anything about it as they couldn’t afford renter’s insurance (too busy paying out the nose for car insurance so they can get to work – since who can afford to live in the places that do have public transportation? Twice the rent!).

JLeslie's avatar

@Seek_Kolinahr That sucks. Most states landlords cannot even go inside the property without some sort of notice while tenants are living there. But, a theif wouldn’t care anyway. I just can’t imagine it, stealing from a renter? Most Landlords barely visit their properties. Usually someone else is managing it. But, I believe you, it probably does happen at times, but I would think extremely rare. Renters insurance is very cheap by the way, but I realize for the very poor any additional amount is a lot. It might also have a deductable? I don’t remember.

majorrich's avatar

I believe a huge rise in sales tax could create a great underground market of barter and bootleggery the likes of which made the Kennedy family’s wealth.

woodcutter's avatar

It’s that state income tax that tears you a new one,unless you live in those few states without that.

glacial's avatar

@JLeslie No, the sticker price is generally the price before tax. That’s what makes it so easy to calculate a 15% tip on a cheque (that slim silver lining).

JLeslie's avatar

@glacial Oh, haha. In the states a lot of people double or triple the tax to figure tip, that’s funny.

woodcutter's avatar

I thought it was 20% for tips. Assuming they served you well.

JLeslie's avatar

@woodcutter I tip 18–20% usually.

woodcutter's avatar

I tip at least 25 % because the math seems easier and I’m dirt poor relative to most. Those jobs suck and I think they should get it. I couldn’t do that work. It chaps me when I walk past a table that well to do people were dining left a shit tip when they left. Cheap people suck too.

JLeslie's avatar

@woodcutter I just double the dollars and round up or down for the cents. So for example if the subtotal is $43.56, I would have $8.60 in my head and then round up or down, $8 or $9, depending on if they were average or great. My husband likes the credit card bills to be double zero cents, so he would give $8.44 most likely.

woodcutter's avatar

I just go half of half. Forget the cents unless its real close to a dollar more. For me its just fast and easy and fairly generous as well but mainly doing math with too many symbols gives me a headache. especially after chinese

JLeslie's avatar

@woodcutter Well, I am a math person, but still I much rather add than subtract.

glacial's avatar

15% is actually pretty easy to calculate… 10% is one tenth (so just move the decimal one place) and 5% is half of that.

So on a bill for $43.56, 10% is $4.35 and 5% is half that (about $2). Add the two and you end up with approximately $6.50.

The exact calculation for 15% of $43.56 is $6.53. Pretty darned close.

20–25%... I would probably never eat out if I regularly tipped that generously.

JLeslie's avatar

@glacial Two many steps, I can’t be bothered. LOL. I tip higher anyway. In the US 15% is like the minimum tip for good service, almost considered a low tip I would say.

glacial's avatar

LOL. It is the same number of steps you are using – you are doing:

Double the price
Divide answer by 10
Add answer to total

I am doing:

Divide the price by 10
Divide answer by 2
Add both to total

It’s not that taxing. Get it? Taxing? Huh? Huh? :D

JLeslie's avatar

I don’t have to do that many steps, because it is just obvious to me so it doesn’t feel like a step. I don’t even think about moving the decimal. Plus, as I said, I prefer to add than subtract, and figuring 5% is subtraction basically.

My steps are double the dollars and round. Two steps in my mind.

Yours is 10% (which reasonably we can argue is not a step) then cut in half (probably using rounding) then add together using rounding.

So, ok we can argue a similar amount of steps, but I just prefer my way. I don’t think it is the better way or anything. But, I will say that most non math people don’t even know my way exists. So, I like to put it out there as an option. My way is better for 20%, yours is good for 15%. If you were going to tip 20% wouldn’t you just multiply by 2 (double the number) like me?

glacial's avatar

Of course. I think what’s happening here is that you’re not realizing that I just posted a longer, more detailed post than necessary in order to make a truly dreadful pun. I apologize.

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