It’s Fix the Tax Code Friday!
This week, my post about a national sales tax on online sales was all in jest for April Fool’s Day. But it caught some folks off guard because it really could happen. Proponents say that a national sales tax would increase revenue by taxing consumption rather than income. Critics say that a sales tax is far too regressive and would disproportionately affect the poor.
I want to know what you think.
Today’s Fix the Tax Code Friday question is:
Should the US consider a national sales tax as an alternate method of raising revenue?
Greetings from the UK! Yep, hubby and I packed up and headed across the pond to Jolly ol’ England for a few days of rest and relaxation (as well as a hint of business).
I won’t regale you with the saga of what’s really happening here (lots of sick travelers, present company included, ridiculously fickle appliances – nothing for nothing but centuries of civilization here in the UK and the plumbing is still a mystery – and what the BBC is calling “the worst storm of the winter”). In fact, I’ll bet you’re thinking that I haven’t had much time for tax at all. C’mon, there’s always time for tax.
Specifically, one of the things that I’ve been reminded of since I’ve been back (having spent a year in the northeast during college, as well as some jaunts for vacation), is the simplicity of the VAT (value added tax) really. Notwithstanding the issues, including the high rate of tax, the VAT makes shopping really simple – whether you’re in London (where I started out), Sussex (where I am now) or Cardiff (where I planned to be initially). The VAT is the VAT. It doesn’t differ from one county to the next as it does here. And even more brilliant? It’s included in the price.
Here’s what I mean. If I want to buy a Diet Coke in London and the sign says 75p, it’s actually 75p. Tax is included. If I want to buy a Diet Coke in Rye and the sign says 75p, it’s also 75p. Easy peasy.
But in the US, if the sign says 75¢, it matters where I am how much that soda will actually cost me since the tax is additional. Each state has different rules regarding what is taxed and what is not – depending on where you live, sales tax might apply to food, clothes or cigarettes. And there’s not one state that charges sales tax which has such bright line rules that it’s easy to figure what qualifies as taxable (remember this post about Milky Way bars?) and some states tax you depending on what you plan to do with the item (remember the post about eating pumpkins versus decorating them).
So, my Diet Coke could cost 75¢ – or it could cost as much as 82¢ (assuming the highest US tax rate). On lower ticket items, it’s confusing. On higher ticket items, it’s significant enough to send folks hunting for states with lower (or zero) sales tax. In my own state of Pennsylvania, we are often lured to Delaware for zero sales tax – and while Pennsylvania has a “use” tax that requires you to pay sales tax to the Commonwealth on items purchased in other states, let’s be honest – who does it?
I wonder if we’re not making things more complicated that they need to be with an additional sales tax which varies from state to state. Whispers abound about the possibility of a national sales tax – I don’t know, would that fly? Even if not, would it make sense for any state to have an “included” sales tax?
I don’t know the answers. I just know that it’s awfully nice to be able to count my money out in my hand as I stand in line this week and know exactly how much I’m paying for what I’m buying.
Well, only if you live in the UK.
Our friends across the pond at Oxford University claim that charging VAT (Value Added Tax, sort of like a sales tax) of 17.5% on foods deemed to be unhealthy would reduce the number of heart attacks and strokes. The theory is that increased costs will slash consumer demand.
Hmm. Have they ever heard of cigarettes? In the US, we keep raising the costs of those for largely the same reason and it has not had the desired impact. In fact, according to the ACS, although 70% of smokers want to quit and 35% attempt to quit each year, fewer than 5% succeed. That’s tax or no tax.
Well, actually they have. Like the US, the UK also imposes “sin taxes” on alcohol and cigarettes. I have no information as to whether the tax in the UK has affected the number of smokers and drinkers.
Remarkably, there is a similar tax in place in the UK for certain kinds of foods. While most food is exempt from taxation, there is a tax on certain products such as potato crisps (we call ‘em chips), ice cream, candy and chocolate biscuits (cookies to my colleagues in the US).
The plan, which the Journal of Epidemiology and Community Health estimates would save more than 3,000 lives per year, would be to tax foods that are high in fat such as pastries, cakes, cheese and butter. Such a tax would raise average weekly household bills by 4.6 %. It’s not likely to be implemented any time soon as outgoing PM Tony Blair and the British Heart Association have each expressed opposition to the tax.
The tax is nothing new – though wildly unpopular. In the US, such ideas have been tossed around for years to try and control both the increase in childhood obesity and the sky-rocketing cost of our health care. In 2005, Detroit Mayor Kwame Kilpatrick had proposed a 2% fast food tax. And the idea of the “fat tax” really originated in the US with Yale Professor Kelly Brownell proposed a “sin tax” on fatty foods in the 1980s.
Of course, one of the obstacles to such a tax (in addition to the glaring “big brother” nature of the tax) is determining exactly which foods to tax. Even the apparently simplistic fast food tax is troubling. It’s becoming more and more difficult to figure out what “fast food” is. Does the Chicken Salad at McDonald’s count as fast food because McDonald’s makes it? Does my favorite Saga Bleu burger from the Ugly Moose count since it’s a burger?
In the UK, they’ve targeted certain foods high in fat as taxable. The problem with this, in my opinion, is that it might encourage companies to replace natural foods high in fat – like butter and cheese – with synthetic additives that might be even worse for your health (remember the Olean fiasco?). I happen to enjoy a good goat cheese – I wouldn’t be as wild about goat-like cheese.
What do you think? Should we tax foods high in fat? Do the potential benefits outweigh the consequences?
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