Tags: sales | tax | inflation

Sales Tax Inflation at 50-Year High!

Sales Tax Inflation at 50-Year High!

George Mentz By Tuesday, 21 May 2024 12:53 PM EDT Current | Bio | Archive

Sales taxes are levied on retail sales of goods and services. They play a crucial role in funding local, state, and national government services.

With elder care costs up 40% in three years and child care is up a monstrous 76% in 40 months, many families are on the brink of economic disaster and bankruptcy.

For example, if a computer cost goes from $500 dollars to $1000 dollars where the sales tax is 8%, the taxes on the computer go up 100% from $40 dollars to stunning $80 dollars in tax. Presently, this is the worst inflation in 40 years according to CNN.

Sales taxes, being regressive, disproportionately affect vulnerable Americans such as the poor, women, and minorities. Unlike progressive taxes (which increase as income rises), sales taxes impose a fixed percentage on purchases.

Consequently, those with lower incomes spend a larger portion of their earnings on taxable goods, exacerbating the burden and debt for women and minorities particularly in big cities with high sales taxes.

Additionally, women and minorities, who often face economic disparities because of paying tax in large inner-cities, bear a heavier impact due to these non-progressive tax policies. Sadly, the sales tax collections are going up even faster than inflation.

For example, here are some tax rates in big cities USA. Chicago 10.25%, Seattle, Washington: 9.5%, Long Beach, California: 10.25%, Los Angeles, California: 10.25%, & Oakland, California: 10.25%. Thus, the average poor family pays 10% taxes on essentials, and if inflation is up 30% in LA or New York, that means that poor families are taxed 30% higher on goods and services.

When inflation rises, it devastates families with sales taxes in several ways:

  1. Revenue Pressure: Inflation erodes the purchasing power of money. As prices increase, governments may dramatically boost tax receipts without doing anything. To boost city worker wages, inner cities might raise sales tax rates again to generate additional income.
  2. Local Variations: Some major cities impose higher rates than others. Many large cities in the US tax all workers who don’t even live in the city.
  3. Ballot Measures: Hard hitting ballot measures can lead to local sales tax charges and increases. For example, Tacoma saw a voter-approved 0.10 percentage point increase, making it the highest overall rate in a major city1.
  4. Avoidance Efforts: Research in the past indicated that cross-border shopping increased as sales tax rates rise. However, that research fails today with each state now requiring different sales taxes or ad valorem taxes for online shopping.
  5. Relocating to Another State – Many are now moving away from high-tax, large cities in states such as New York and California and leaving high tax states due to the socialist nature of the local tax systems.

Impact on Big Cities

Big cities, with their higher population densities and greater economic activity, are particularly affected by inflation-related changes in sales taxes. While some cities maintain modest local tax rates, others face pressure to adjust taxes and fees due to rising costs and revenue demands.

Remember this: wages have not kept up with inflation. For example, cities are paying their employees only 5% more while costs of sales taxes on goods and services are up 40% or more in many cases, in just in 3 years. In reality, cities are raking in the cash but keeping it quiet.

In summary, inflation can drive sales tax adjustments, impacting major cities differently. Policymakers must strike a balance between revenue needs and economic growth while considering the effects on consumers and businesses3.

Overall, this tax devastation of the working families is compounded by interest rate inflation or interest rate hikes. Families are paying 30-40% more on goods and services over the last three years.

Thus, families are paying 30-40% more taxes on goods and services. Then, the same families must pay 23-25% Interest Rates and APR on their credit cards to finance essential goods and services. This credit card interest is a tax on top of a tax on workers.

In the end, the hasty green policies of raising the costs of oil and gas on workers through destructive energy policies has led to the worst lending rates in 50 years.

Compounding this problem on the economy, the costs of energy and borrowing have brought construction and residential building to a standstill as borrowing money is too cost prohibitive. With 30-Year Fixed Mortgages up over 150% in the last 40 months, Americans have had enough.

Many now believe that that hurried and uninformed energy policies and regulations over the last 3 years are the chief cause of this unneeded artificial disaster in the US economy.

This is because when you limit drilling, and raise regulation, the energy markets react immediately as we saw when gas went from $2.00 dollars a gallon to over $5 dollars which is a 150% increase. This energy cost automatically drives up the prices of food, utilities, fuel, heating, travel, cooling, running computers and appliances. Bad energy policies doubles the logistical cost of moving stuff to be delivered at your home in the USA.

With a proper 30-year plan for energy innovation, all of this probably could have been avoided; however, policymakers moved too hastily with widespread implementation of battery powered cities throughout the USA. As for external forces affecting energy, President Trump has said that he could solve the Ukraine Crisis in 1 day with tough diplomacy and cooperation from international leaders. However, the damage has been done and most families have been set back 5-10 years economically and may never recover.

Overall, sales tax revenues have been proven less elastic and they rise accordingly with inflation even with reduced consumption (Hitchcock et al., 2022). Even in Colorado, the state overcharged consumers by $2 Billion and won’t give it back.

Remember, a flat sales tax rate injures everyone, regardless of income. Unlike progressive taxes, which increase as income rises, a flat rate hurts women, minorities, and working families the most. Flat taxes and fees disproportionately impact lower-income individuals particularly in big cities with higher inflation costs and sales taxes.

Whether it is a tax on your phone, internet, utilities, care or other, the cities and states have raised taxes on everyone through artificial inflation created by inflation, immigration, energy prices, government expenses, and pay raises for the government elite. In conclusion, inflation is a tax on the poor, and sales taxes and flat fees are a double-tax on working families across America.

Commissioner George Mentz JD MBA CILS CWM® is the first in the USA to rank as a Top 50 Influencer & Thought Leader in: Management, PM, HR, FinTech, Wealth Management, and B2B according to Onalytica.com and Thinkers360.com. George Mentz JD MBA CILS is a CWM Chartered Wealth Manager ®, global speaker - educator, tax-economist, international lawyer and CEO of the GAFM Global Academy of Finance & Management ®. The GAFM is a EU accredited graduate body that trains and certifies professionals in 150+ nations under standards of the: US Dept of Education, ACBSP, ISO 21001, ISO 991, ISO 29993, QAHE, ECLBS, and ISO 29990 standards. Mentz is also an award winning author and award winning graduate law professor of wealth management of one of the top 30 ranked law schools in the USA.

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With elder care costs up 40% in three years and child care is up a monstrous 76% in 40 months, many families are on the brink of economic disaster.
sales, tax, inflation
Tuesday, 21 May 2024 12:53 PM
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