Wednesday, February 21, 2007

Why Sales Taxes Are Regressive

Republicans love floating the sales tax idea. The problem is the tax is more regressive. The poor in Florida are going to get pinched hard with this tax every time they shop for groceries.

Cities, counties and other governments are expected to collect a little more than $30 billion in combined property taxes this year. A penny increase in the state sales tax would generate about $3.8 billion a year.

Florida is behind in meeting the class-size demands. Under Jeb Bush, Kidcare was cut. Many poor families depend on the service as the only means to provide their children with medical attention.

The current sales tax is 6 percent. Florida expects to currently make $30 billion in property tax revenue. That is subject to change with pending legislation. According to the article, the sales tax raises $3.8 billion a penny. If the sales tax goes up to 13.5 percent that would be an extra revunue roughly to $24.7 billion. That doesn't make up for the lost in property taxes.

Sales taxes are rather unstable. Florida went into a deficit after 9/11. A severe hurricane season would hurt tourism. These are the same conservatives who argue that tax cuts create surpluses. The Institute On Taxation and Economic Policy lists Florida's tax system as the second most regressive in the country.

Florida’s Tax Code: Soak the Poor and Middle Class, Spare the Wealthy

When all Florida taxes are totaled up, the study found that:
# The state and local tax rate on the best off one percent of Florida families—with average incomes of $946,000—is 3.0% before accounting for the tax savings from federal itemized deductions. After the federal offset, the effective tax rate is a mere 2.7%.

# The average tax rate on families in the middle of the income distribution—those earning between $24,000 and $38,000—is 9.9%. After a trivial federal offset, the rate is 9.8%, three times the effective rate on the richest Floridians.

# But the tax rate on the poorest Florida families—those earning less than $15,000—is the highest of all. At a whopping 14.4% it is more than five times the effective rate on the wealthiest Florida families.

The study found that Florida’s taxes are particularly regressive because the state lacks abroad based income tax and instead relies primarily on an extremely high sales tax to fund public services.

I love how Peer Review cheers this dumb idea on without going through the numbers. My favorite post is Jim Johnson saying tax cuts should be used to back sports franchisesbecause of this economic impact.

John Gruden, Vinny Lecavalier, Mike Alstott - they all have to fill up their gas tanks, have their suits dry cleaned, shop and eat, etc.

That is the lame beyond words. If Johnson believes that Tampa's economy relies on Mike Alstott getting his suit cleaned than he is an economic illiterate.
Conservatives support tax hikes to build sports arenas and sales taxes that will pitch the majority of Floridians. Fiscal conservative my ass. Florida is in the current property tax nightname from state tax cuts that force counties to increase property taxes. That is where the debate should start.


At February 21, 2007 2:20 AM , Blogger bytehead said...

I'm a little confused.

13.5 - 6 = 7.5

$3.8B x 7.5 = $28.5B (yes, I realize the mistake with million/billion, no biggie)

I know how you can get 6.5 difference, as here in Clay County we pay 7%, to pay for Jacksonville's grand plans (that never seem to happen or are delayed due to cost. Sigh), and then there's the school board that wants to tack on another 1% on top of that.

Hell, let's say that they go from 6% to 14%, which means my total tax will be at least 15%, and likely to be 16%. Yeah, I can see voters voting for that extra 1% here. Not.

And from my old home state of Ohio, in Cincinnati the sales tax is already 7% (it's at least 6.5%!), plus the property tax, plus the income tax. And Ohio doesn't have a homestead exemption of any amount. Of course, Cincinnati is also paying for their new stadiums with the extra kick in the pants of that extra 1%

At February 21, 2007 6:25 AM , Blogger Jim Johnson said...

My favorite post is Jim Johnson saying tax cuts should be used to back sports franchises because of this economic impact.

I never advocated cutting taxes -- my post advocates allowing professional sports facilities who collect sales taxes to keep a portion of those taxes for construction and/or renovation. Remember, these taxes would not be collected if not the sports facilities did not exist. These taxes are paid by the patrons, not the sports teams.

That is why a tax rebate is not a tax cut. I am not saying the Lightning or Buccaneers should not pay their share of taxes - they should. But letting them keep a portion of their taxes to cover the cost of facilities is a good thing.

By the way, this kind of thing happens to more than just sports teams. The Qualified Targeted Industries, Qualified Defense Contractor, the Enterprise Zone and the movie/tv production incentive programs all give some kind of tax rebate or tax exemption or tax cut to private companies for opening or expanding in Florida. Local governments often provide property tax deferments or exemptions to companies who create higher paying jobs.

Supply side economics works. You may not believe it, but it does.

At February 21, 2007 6:27 AM , Blogger Jim Johnson said...

Oh, but I agree that any plan to replace property taxes with sales taxes is SUCH A BAD IDEA and I don't think those advocating the plan have any clue to the ramifications.

At February 21, 2007 2:22 PM , Blogger Truth or Death said...

Mike, do you just buy into everything the Sentinel puts out, or just most of it?

I didn't go through the numbers at PEER because that is pointless until we begin to formulate plans on the scope of the tax. What goods will be taxable? Would any type of property taxes stay in place? Once we have a proposal that fills in these holes, then it is time for the numerical analysis.

And I've not supported any blind increase in the sales tax. What I'm cheering on is the discussion that is taking place. Maybe it leads to the conclusion that a sales tax isn't feasible, who knows. But the fact that we are discussing new ideas and solutions is fantastic.

There is certainly some merit to the idea and I hope the discussion continues.

Mr. G

At February 22, 2007 12:22 AM , Blogger Vox Populi said...

I didn't read every word here but numerous studies (uncited by me at this time) have revealed that the cost to infrastructure far outweighs the benefit of the franchise.
I think it's ridiculous to even consider taxing sales instead of property. This is purely a move that considers the influx of people who have built these mausoleum mcmansions and now don't want to pay the piper. Ergo put the monkey on the poor guy's back. Isn't the lottery ENOUGH of a tax on the poor?

Pay your property taxes and next time don't build such big boxes on such falsely over-inflated properties and when the false market crashes don't look to the whole state to take on your responsibility.

I do NOT like Rubio in the least.

He is bought and paid for.

And that's all she wrote. He and Putnam up there square dancing paradise into the shadows....


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