Wednesday, April 04, 2007
Higher income households spend a smaller portion of their income on items subject to the sales tax. This is partly due to their higher savings rates and partly to the mix of consumer goods and services they buy. Hence, tax burdens as a proportion of income tend to decline as one moves up the income scale.Emphasis added. So here's my question: Why do we exempt services? For example, the state of Washington taxes your purchase of time in a tanning bed. I've said on the air that I think people should be taxed for their tattoos because, well, I think tattoos are stupid. But to be serious, why don't we?
Here's the answer, from a discussion about its use in California. It's bad for business, even worse than what the DFL is proposing.
I also think that the burden of the service sales tax might be felt more by the DFL's base of support. Can you imagine Mike Ciresi paying 7.15% of his legal services revenue in tax to the government? He might just hightail it to South Dakota!