Sales Tax

There is something that is almost uniquely Oregon: No sales tax. I say "almost" because there are four other states that have no state sales tax: Alaska, Montana, New Hampshire, and Delaware. But Oregon is by far the largest. (Oregon's population is about 3.4 million. The total combined population of the other four states is just 3.5 million.)

Every couple of years some politicians will advocate a sales tax for Oregon to raise more money for our cash-strapped state. While I respect those politicians for having the courage to advocate for a new tax they believe in, I cannot support them because I do not believe a sales tax is a fair way of taxing people.

A sales tax taxes consumption. Yes, people with more money consume more, and at first glance it may seem that this means the wealthier someone is, the more their affected by a sales tax, but in fact, the opposite is true. The middle-class is the most affected by a sales tax. Here's why.

If you're a typical working American, either poor or middle-class, you're most likely in debt. You're living from paycheck to paycheck, with very minimal savings. Maybe you have a little going into a 401K. Maybe you have a small emergency fund. Maybe you're saving a few scraps for a down payment on a house, or a child's college education, but essentially you're spending almost everything you make. And if you're being taxed on everything you spend, that means you're going to be paying a sales tax on almost every cent that you earn.

Contrast that to the wealthiest people. Let's say instead of being middle-class, earning $50,000, and spending $50,000, you're making $250,000, and spending $100,000 of it. Yes, you're spending twice as much. I'm not blind. I can see that $100,000 is twice what $50,000 is. But you're only spending 40% of what you're making. The middle-class guy making $50,000 is being taxed on nearly 100% of what they make, while the guy making $250,000 is being taxed on only about 40% of what they make. A sales tax will eat up two and a half times more of the family budget for a middle-class person than it will for a wealthy person.

The answer to this has been to exempt certain essentials from the sales tax. In most states with sales taxes, you won't pay tax on certain grocery items, and they don't add any additional sales taxes on essential utilities like gas and electric. That's good news for the poor. A larger percentage of what they spend is in those categories than the middle class. The middle class doesn't benefit as much from this.

Essentially, even if a sales tax took the place of other taxes, a sales tax shifts the burden to the middle-class. But here's where it gets even worse: To gain support for a sales tax, advocates of the sales tax spin it as if we will see a reduction in our income tax and property tax bills because some of the burden will be carried by the sales tax.

Now how does that work if the reason for having a sales tax is to raise more money for the state? If you reduce the income tax and property tax because you now have a sales tax, what was the point? We all know that what will happen is that we won't see a reduction in the other taxes. We'll just see more taxes.

Here's the other thing: Today, we grumble about how much we're paying in taxes every week or two when we look at our paychecks, and again when the property tax bill comes. If we were paying a sales tax, we'd be grumbling every time we buy something, and most of us buy something almost every day.

With more money coming out of our pockets on a daily basis, the result is we're going to spend less. Not only will we actually have less to spend, we'll be constantly reminded that we have less to spend. Instead of spending a couple bucks on a coffee from Starbucks, we'll have spent that money on sales tax. Employment will go down, especially on the front-lines where the poor and middle-classes work. (You need just as many CEO's for a company that has 5,000 employees as you do for one that only has 1,000 employees. The CEO doesn't get cut. The front-line workers are the ones who get cut.)

So it's not just that I like the fact that if I buy something that's $4.99, and I use a $5 bill I still get change. It's not that I don't want to have to dig into my pocket for some change every time I buy something. It's that a sales tax shifts the tax burden to the wrong people. It's a bad idea, and the fact that 45 of 50 states implemented it at one time or another doesn't mean it's a good idea. If your friends all jumped off a cliff, would you jump off, too?

That's how I see things.