Repeal the Sales Tax
Michael J. Ring
Next month, voters in Arkansas will decide a ballot question promising to alter radically the taxing and spending structure in that state. If the proposal is successful, Arkansas will become the first state in the nation to abolish property taxes and replace them with an increased sales tax. The proposal has labor leaders, business executives, and both Democrats and Republicans running in fear.
There's strong reason to fear this proposal: Arkansas takes in nearly one billion dollars annually in property tax receipts, while the sales tax increase is projected to net only $642 million. The schools of Arkansas will be hardest hit: They receive $745 million from the property tax pool but would only get $300 million of the sales tax revenue. Arkansas' schools, whose performances already rank among the worst in the nation, simply cannot afford to have this loss of funding. As Arkansans already pay low property tax rates relative to their personal incomes, this type of tax relief is not warranted.
The Arkansas proposal stands to benefit mostly the wealthy - those with expensive, valuable property holdings. The proportion of relief to the average taxpayer will be much smaller. In fact, those with lower incomes will see their purchasing power decrease, as they will be hit proportionally harder by the rise in the sales tax rate. If Arkansas or any other state wishes to provide tax relief that is fair and equitable for the working classes, it is the sales tax the state should consider abolishing.
The rate and extent of sales tax laws vary from state to state. Here in Massachusetts, food and clothing purchases are generally not taxed, but the costs of taxable items are assessed an additional five percent for state revenue. Some states have higher rates and fewer exemptions from the provisions of the tax. Others, such as New Hampshire, wisely implement no sales tax at all.
If you are familiar with the Massachusetts-New Hampshire border area, then you know that the effects of the sales tax discrepancy between the two states are immediately apparent. In the Granite State, large regional malls exist just over the border along most major expressways. On this side of the border, aging cities bordering New Hampshire struggle with crumbling downtown business districts. While the suburbanization of America was a very strong factor in this development, so was New Hampshire's tax-free status.
The abolition of the sales tax would allow working people to enjoy more luxuries and afford more goods. It could make an automobile, new furniture or a new computer, among many other things, affordable for many people. In states or municipalities where items of necessity may be taxed, the sales tax directly infringes upon the ability of struggling workers to eke out a decent living. The elimination of the sales tax is one small step society can take to improve the quality of life of working people.
In addition to providing consumers with more purchasing power, the abolition of the sales tax would help businesses as well. Consumers would put all of their purchasing income toward supporting business establishments, rather than seeing a fraction grabbed by the state. The stimulation of spending would increase profit in the coffers of the retail industry as well.
The abolition of the sales tax would not only increase profit among business, but it would also offer the potential to increase employment. Greater demand for retail services would increase job opportunities in that sector. In turn, companies producing retail products would also see some increase in demand for their product, and they, too, could potentially need more employees. The abolition of the sales tax would raise all ships, helping business and labor, worker and proprietor.
Tax relief is always a welcome benefit, but justice demands that repeals be targeted to the working class, which bears a disproportionate share of the tax burden in this country. The property tax abolition proposed in Arkansas would accomplish the opposite of this goal. The elimination of the sales tax, however, would provide a greater proportion of relief to the poor and middle classes while aiding businesses as well. Thus, it is the sales tax which should be repealed.