A Sales Tax is Not Always a Regressive Tax on Lower Income Americans
The current sales tax rate in the States of New Jersey is 7%. This tax does not apply to groceries, clothing, and prescription medication. So people with lower incomes do not have to pay a tax when they purchase items that they need to survive. While New Jersey does not tax these items, some States do.
One example is the State of Kansas, as stated in an article published on the “TaxJar Sales Tax Blog.” According to the article “2016 State Sales Tax Rates,” Kansas overall has a lower sales tax than NJ. In Kansas the 6.5% sales tax rate applies to groceries. Let’s say a person in Kansas purchases a can of soup for $1, the total will be $1.07; while in New Jersey if that same can of soup costs $1, the total will be $1 because it is not taxed in New Jersey. While seven cents may not seem like a lot, for someone with a low income it can add up over time.
Now let’s say a person in Kansas buys $100 worth of groceries, like vegetables, packaged meat, and canned items. That person will pay $6.50 more in Kansas because there is a tax on food. That $6.50 could have been used to buy a bus ticket, pay for a bill, or put in a saving account. People who earn less income pay a higher of their percentage of their income on a sales tax when groceries, clothing, and prescription medication is taxed.
People with lower incomes in New Jersey do not have to pay extra for essential necessities. If someone makes $600 a month, but they have to budget that money then they will count every penny . The article, “Regressive Tax” discusses how a tax is regressive if a tax disproportionately takes up more of one person’s income than another. An example would be a tax on groceries takes up more or a poor peons’s income than a rich person’s income. Let’s say $300 goes to housing, $100 goes to insurance, $100 to clothing and medication, and $100 goes to groceries. That person may not have any money left to pay a tax. Someone making $600 a week would have no problem paying that extra $6.50 tax on their groceries.
So to conclude, a sales tax itself may not be regressive. If it has certain exemptions, then it is not regressive because it does not place an extra tax burden on people with low incomes. If it does not exempt essential items, then it is regressive because it is a tax that everyone has to pay and people with lower incomes will pay a higher percentage of their income than those with higher incomes. While everyone pays the same tax rate on items, those making less money pay a higher percentage of their income on taxes, making it unfair for the lower income Americans.
“Sales Tax By State: Are Grocery Items Taxable?” TaxJar Sales Tax Blog. N.p., 30 Aug. 2016. Web. 06 Nov. 2016.
“Regressive Tax.” Investopedia. N.p., 15 May 2015. Web. 23 Nov. 2016.