Today I testified before the Minnesota House Tax Committee on the merits abolishing the state’s personal and corporate income tax in favor of a broad based sales tax. Predictably, Democrats objected, claiming that sales taxes are regressive and would eliminate the system’s progressivity. They are only half right. Sales taxes are not progressive. But neither are they regressive. Progressive taxes hit higher income people harder while regressive taxes hit lower income people harder. Sales taxes, on the other hand, are proportional. That’s a good thing. Sales taxes do not fall more heavily on one segment of the economic spectrum over another. They fall on all sectors in proportion to their economic status. Higher income people pay more tax because they spend more money. Lower income people pay less tax because they spend less money. Proportional taxes are by definition fair since everyone pays for government in direct relation to their economic status. Rich people are not unfairly punished for being rich and poor people cannot be overburdened because of built in limitations on their spending. Isn’t that fair?
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