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Sales Tax is The Best Way For States to Get The Revenues They Need

Tue Apr 12, 2016 14:53:26PM | Categories: State Income Tax Rates & Sales Tax
View from inside the Mall of AmericaBy: James Patterson

While the federal tax rates are the same for all fifty states, the various states are left to determine what their state income tax rate should be and those numbers are all over the map. Seven states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) have no state income tax at all and several other states are thinking about joining their lead and abolishing their income tax. Those states understand something that all of the other states don't--there are better ways to get revenue outside of a state income tax.

The easiest way for states to get revenue is through a sales tax on goods and services. The states that do have a sales tax tend to have a tiered system that taxes certain goods at a higher rate than others. The necessities in life are usually taxed at a lower rate than luxury items. I think that this system is the fairest because you are taxed on what you buy, not what you earn.

Every state adopting a sales tax will also prevent people who live on "boundary cities" of taking advantage of the discrepancies between two states. An example of a boundary city is Vancouver, Washington. It is across the river from Portland, Oregon, a state that doesn't have a sales tax, but does have a high income tax rate. Residents in Vancouver tend to shop for all of their goods in Portland and avoid a sales tax, but also avoid paying an income tax because they live in a state that doesn't have one. If every state adopted a sales tax then this problem would be solved over night.

State income taxes might also prevent people from moving to another state in search of a better life. If someone lives in a state that doesn't have an income tax then it would probably be very difficult for them to move to a state that does, even if it means giving up a promotion.

This is why I think all state income taxes should be abolished and replaced with a higher sales tax. You will be taxed on the goods you buy, but not on the amount of money you make.

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