All Taxes Are Not Created Equal

All Taxes Are Not Created Equal

We all know two things we can never escape are death and taxes. What is important to remember when following the news about Congress, or your state legislature, is that not all taxes are created equal. Recently, some politicians, including particularly those on the hard right, have been pushing to replace the income tax with sales taxes or “consumption taxes.” Generally, right-wingers claim to be against taxes so creating new sales taxes or consumption taxes creates a little bit of a rhetorical problem for them. That’s the reason you will generally hear such taxes, which are really new taxes, being described as some kind of tax “reform” instead of what they really are, which is new taxes on regular folks.

The main thing to remember is that sales taxes and consumption taxes shift the tax burden down the income scale so that they fall most heavily on those who are middle class or just trying to become middle class. The reason for this is that people in those ranges generally have to spend most or all of what they are able to earn to live. Wealthier folks are able to put their surplus money into investments, send it overseas, or conduct purchasing in states and jurisdictions that don’t have sales taxes or consumption taxes that they wish to avoid.

Compare that to the income tax. The income tax is a progressive tax in which the more money that one makes the more tax one pays. Wealthy interests oppose income taxes for this precise reason. Of course, the income tax is still only a percentage of those higher incomes. For example, West Virginia’s highest income tax rate is 6 percent, so for a very wealthy person making a million dollars, they are paying $60,000 of that in state income tax. If they had to pay $80,000, they would still be $920,000 to the good! So it’s okay. 

The shift from income taxes to sales and consumption taxes is really just another way to make the slice of the American pie that goes to upper income folks bigger by taking a little bit more off the plates of the middle class and poor. Whether it is called “reform,” or “comprehensive” or what have you, that’s what it means. 

Over the last 40 years, America has enjoyed massive gains in productivity and output. That’s what we call “gross domestic product.” But while those gains were formerly shared up and down the income ladder, analysis has shown since about 1980 almost all of the increases in productivity and GEP have gone to the top 10 percent in wealth. Shifting our state governments, or even the United States as a whole, from an income tax system to a consumption tax system would make this growing inequality even worse. Of course, if you are in that 10 percent (or even the top one percent), maybe that’s exactly what you want. But that result isn’t so good for the rest of the United States, which needs to strengthen its middle class instead of hollowing it out with a big tax hike. 


We all know two things we can never escape are death and taxes. What is important to remember when following the news about Congress, or your state legislature, is that not all taxes are created equal. Recently, some politicians, including particularly those on the hard right, have been pushing to replace the income tax with sales taxes or �consumption taxes.� Generally, right-wingers claim to be against taxes so creating new sales taxes or consumption taxes creates a little bit of a rhetorical problem for them. That�s the reason you will generally hear such taxes, which are really new taxes, being described as some kind of tax �reform� instead of what they really are, which is new taxes on regular folks.