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Thursday, April 4, 2013

Regressive Vs. Progressive Taxes: Do Southern Tax Policies Kill Poor People?

Katherine Newman, dean of the School of Arts and Sciences at Johns Hopkins University, says the tax system in the South is killing poor people — literally.

Newman is also the co-author of “Taxing the Poor: Doing Damage to the Truly Disadvantaged.”

She says that sales taxes are leading to higher death rates, more crime and a lower rate of high school graduation. Mainly in the South and increasingly in the West. She writes:

While the federal government has largely stuck by the principle of progressive taxation, the states have gone their own ways: tax policy is particularly regressive in the South and West, and more progressive in the Northeast and Midwest. When it comes to state and local taxation, we are not one nation under God. In 2008, the difference between a working mother in Mississippi and one in Vermont — each with two dependent children, poverty-level wages and identical spending patterns — was $2,300.

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  • http://twitter.com/JohnnyFroggg J Frog

    Please explain to me why Europe is so enamored with the VAT …..which is basically a sales tax?  Probably because consumption taxes are the most economically sound ways to fund government.   Structured correctly (i.e. a universal sales tax pre-bate), they don’t have to be regressive.  Consumption taxes are also a very fair way to fund government.  Those that consume the most will pay the most.

  • Raoul Ornelas

    Regressive Vs. Progressive Taxes: Do Southern Taxes Kill Poor People?This ain’t a just a Southern problem this is a problem all across America and one does not have to be poor. If one is hanging on trying to be a middle classer these days, sales taxes are a killer. And if one is a tax payer, its a double death at years end during IRS season, especially if one is single, retired or both . Like gun control Tax reform is needed now! The poor and the middle class are fed up with “caring for the wealthy” via a rigged tax system that benefits the wealthy whom don’t want to pay a fair federal tax and need a rigged tax code to add to their wealth yet are more than able to afford a sales tax or to pay for their own healthcare!?! 

  • Alex R

    Sales taxes can be at least a supplemental funding source based on discretionary spending, exempting things like food. Depending on how they’re structured, such taxes can encourage savings over spending, at least for lower to middle income folks. I’d much rather have a modest sales tax here than a property tax that can stay the same or even rise when your property value has fallen.

    Taxes should be based on the realization and exchange of value. Local government here is frequently short on cash and looking for new funds (like taxing & feeing marginally middle class homeowners) because there is no sales tax.

  • http://profile.yahoo.com/AZDSNALIDTYKQKRQBQKNUH4DQQ Greg

    I agree with the problems the guest points to with regressive sales taxes, but I wonder a bit about how it breaks down so much to primarily a Southern problem. 

    I live in Nashville, TN. The sales tax rate in Tennessee is a whopping 7%. Metro Nashville/Davidson county adds another 2.25%, making my sales tax in Nashville on just about everything 9.25%. It’s stunning – BUT, we have no income tax at all. New York state has a sales tax of 4%, and New York City adds another 4.5% – so unless my math is out, poor people in NYC pay 8.5% sales tax, or less than 1% difference from Nashville. Whereas New York also has a state income tax from 4% – 6.85%. And of course property taxes that are also probably much higher. I assume that similar findings can be found in other more enlightened states. 

    So, while I have multiple problems with relying on sales taxes alone for state revenue (for equity and other reasons), I don’t really understand how the overall tax picture for the poor is that much worse. I do know that a dear friend who recently moved to the Baltimore, MD area (in the country, roughly between Baltimore and Philadelphia) is quite clear that it costs much, much more to live there tax-wise than in Nashville.

    Are high regressive taxes alone worse than almost-high regressive taxes AND high progressive taxes? 

    I don’t know, it seems like the subtitle of the piece “Do Southern Tax Policies Kill Poor People?”  is not only overly exaggerated journalism and somewhat telling of an anti-conservative South bias, but I’m not sure it isn’t also a conclusion based on too narrow a focus. 

  • Annoyed in Ak

    In Alaska, the Republicans are in total control of the legislature and the governor’s office. They are presently working to reduce taxes on the oil companies in a misguided effort to increase oil production. This will end up causing our present surpluses to disappear in a few years and before we know it, we’ll be instituting a nice regressive sales tax.

    We used to have a sales tax in our local area and it had a cap on the tax paid for any one purchase. So, of course, the rich paid a smaller percentage of tax than the poor.

  • http://www.facebook.com/profile.php?id=735106237 Kelly Womack

    Having lived in South Carolina most of my life , in an area where sales tax is 9.5 %  on retail, and 12% on restaurant food, I really identify with this piece!  We now live in Florida,  where there is no income tax, but school are horrible, there are no public services, horrible medical and many other problems.

  • Copacetic

    Point One:  Sales Taxes are more regressive (i.e., borne disproportionately by the lower income taxpayers) because percentage wise, more of their market basket is comprised of taxable items.  So in effect all of their income is subject to the tax while for the wealthy, that is not the case.  The wealthy spend more of their income on non-taxable items such as stocks, bonds, houses, yachts, lawyers, etc.  So a smaller percentage of the wealthy taxpayer’s income in fact is taxable.   Point Two:  Income taxes also typically are also paid by corporations and business entities.  Getting rid of corporate income taxes further shifts the tax burden to lower income consumer taxpayers.  Corporations are typically owned by stock holders who are more wealthy, so their share of the tax burden as a whole are shifted to poorer taxpayers.  The argument that corporate taxes are just passed on to the consumers of the corporate products is not actually true. The percentage of the corporate tax that is passed on through product pricing depends upon the the relative elasticity of demand for the corporation’s products. In a totally inelastic demand product (think insulin for diabetics) all of the tax is passed on.  In a totally elastic demand (think automobiles or cotton swabs) none of the tax increase is passed on — it is fully absorbed by the corporation.

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