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Purpose of Sales Taxesfrom:
Since each state operates independent of the Federal government for the most part, they must find their own ways to generate income in order to provide goods, services, and a governing body for its people. The implementation of sales taxes is one way that states are able to meet their budgets. Of course, those on the receiving end of the deal—the consumers—do not see it as a fair trade, especially since most states also charge a state income tax as well.
Which tax is fairer to the low income? That depends where you live. In states that have exemptions for food, most clothing, and prescriptions, the lower income will benefit because the items that must have will not be subject to sales taxes. On the other hand, in states that charge sales taxes on nearly everything you buy, the exchange is not as equitable, especially if they also charge sales taxes on unprepared food. Where should one draw the line on sales taxes? Should there be a set of exemptions that are common to each state? Many states are losing millions and maybe even billions in revenue where they are surrounded by states that have no sales tax or a lower sales tax with more exemptions. With no sales tax in Delaware, people flock in from Pennsylvania, New Jersey, Maryland, and even New York for tax-free shopping. The revenue they would lose from eliminating the sales taxes would be made up in the gross receipts tax generated from an increase in revenue. You might also add that to the number of jobs retailers generate for the state by need for additional employees.
Are sales taxes as much of an income earner as the states think? Look at the big picture—when people have minimal cash, they will avoid things that cost more than the face value. How many people put their money aside and wait until they go visit friends or relatives in a tax free or lower-tax state to save money. It's always about the money for the consumer, but unfortunately, the states have quite gotten the picture. Like many people in big business, they see only what is happening today and are unable to see how a different approach could turn the chain of events into something more profitable for everyone. They have projections of how much income they want to generate from each type of tax instead of an overall picture that would allow them to reorganize as much as necessary to accommodate the changes in the economy. Sales taxes can be replaced with something more profitable, but until the states are able to see farther into the future, nothing will be done about it.
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