The American Dilemma and How We Can Fix It

Posts tagged ‘Sales tax’


I believe it is a fair statement that none of us likes to pay taxes – whatever form they take.  If you’re lucky enough in this economy to have a job, you find that when your paycheck is handed over to you it is significantly lower than the amount that you grossed that pay period.  That’s part of the problem with making money.  In fact there are four problems with money, all of which relate to the imposition of paying taxes.

1) You make it and they tax it (Income Tax, FICA Tax, Medicare Tax, State Income Tax).

2) You spend it and they tax it (Sales & Use Taxes).

3) You save it and they tax it (Income Tax, Dividend Tax {already taxed once to the company in which you hold a few shares of stock}).

4) You die and they tax it (Inheritance Tax).

Now while in the world of Presidential ads the focus is on who is paying income taxes and at what rate, we ignore one very important fact.  That conversation is lost on almost fifty percent of the population who pay nothing in Federal Income Tax.

But there is another form of taxation which affects virtually all of us – whether we are working for a living, retired and spending our savings or are on welfare.  That is the issue of state and local Sales and Use Taxes.

Just for purposes of definition a sales tax is imposed in forty-six states on purchases of goods and in some case services which are purchased within and delivered in that state.  Use tax is a tax that the state looks to collect  for goods, which if they were purchased in the state, would be subject to the sales tax.  But in the case of a use tax, the vendor operates outside the state and delivers its product to a purchaser within the state.

Even though the vendor does not collect a sales tax, a use tax in the equivalent amount is supposed to be paid by the purchaser.  The system of collection depends on the honesty of the purchaser to report his purchases and pay the appropriate tax.  Probably ninety-nine percent of this tax goes uncollected from individual purchasers.

So those of us who have ever purchased anything from Amazon or any other vendor who have not charged our state’s sales tax should examine our conscience before we cast aspersions on those who we feel are not paying their fair share.  Did we comply with the law and report these purchases to our state’s governing tax authorities?

We generally refer to our Federal Income Tax Code as a “progressive” tax system – in that higher income is taxed at a higher rate.  By contrast, the imposition of a sales tax is, by its nature a regressive tax system because it uniformly charges the same rate to all purchasers irrespective of income level or ability to pay.

We know that the proportion of their income that the poor pay in sales tax is significantly higher than the amount the well-to-do pay.  And the worst form of this discriminatory tax is that it is borne by the poor who live in states where food intended to be used at home is taxed.

Thirty-one states and the District of Columbia either have never imposed a sales tax on food purchased for home consumption or have abandoned it.  Interestingly, two states closely associated with President Obama, Hawaii and Illinois both tax food.  This tax on food is the most regressive and discriminatory tax on the books because it most adversely affects the poor which includes a significant portion of the black and Hispanic communities.

With all the talk about “tax equity” on a Federal level, I cannot help but wonder why the President, during his tenure as an Illinois State Senator never addressed this question, never proposed a repeal of this tax, never did anything that would have benefited his constituents.  Is this the caring, understanding President that former President Clinton is now championing – the “man with a plan,” as the ad states?

I happen to like former President Clinton.  How could you not like a man who during his impeachment trial based his defense on the definition of the word “is”?  I mean that shows chutzpah to the nth degree.

I only wish the current resident of the White House had as much moxie.  He didn’t when he represented my Chicago district while in the Illinois Senate.  We never heard so much as a peep from him when he represented the people of the State of Illinois in the U. S. Senate.  And as President – if what we’ve seen over the last four years is a plan, I would suggest that based on all the economic evidence, it is a plan to fail.

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