Sales Tax: It hits the poor harder 2013.02.20

Written by David Green.

There’s lots of talk in Lansing about changes in state taxes, most notably in the matter of maintenance for roads and bridges.

Gov. Rick Snyder made a proposal last year to increase the fuel tax, but that hasn’t been a popular choice. In the governor’s view, those who use the roads the most—those who buy the most gasoline—should contribute the most to maintain the roads.

Drivers are already upset with the high cost of fuel and they don’t want the price at the pump to go up even more.

Our state senator Bruce Caswell told city council members last week that about 95 percent of the people he’s spoken with favor a sales tax increase rather than a fuel tax increase. They would rather pay more for most everything they buy instead of more for gasoline.

We don’t doubt that the senator has heard overwhelming support for the sales tax increase, but we do wonder if the issue was explained clearly in his informal survey, particularly to lower income voters.

It’s very common for people to vote against their best interests. Sometimes it’s a matter of politics; other times it’s a particular “hot-button issue” that grabs their vote. Many lower income people support politicians who work hard to shift the tax burden away from the well-to-do over to the less fortunate.

A sales tax is known as a regressive tax because it’s more of a burden on low income people. An increase in the sales tax means everyone pays more for all the essential items, from clothing and cleaning supplies to vehicles and phone service. The sales tax paid by lower income people for essential items represents a much higher proportion of their wealth than for someone with a higher income.

When it’s time for Michigan residents to decide whether or not the sales tax should go up, we expect the vote will be in the affirmative. On the surface, it sounds better than higher gas prices, but underneath it won’t be the best for everyone.

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