Tuesday, October 9, 2012

Sales Tax Hikes During the Recession

Sales taxes have been hiked by several states and localities as their revenues declined with the economy. I estimate that the weighted-average state sales tax rate increased 0.5 percentage points from 2007 to 2010.

When you consider the narrowness of the sales tax base relative to the payroll tax, the state sales tax hikes are equivalent to a 0.2 percentage point payroll tax hike in terms of their national labor market impacts.

4 comments:

Milton Recht said...

There is also the question of tax incidence (aka tax burden). Who is really paying these sales tax increases? It is probably the seller, manufacturer and those in the distribution chain who wind up paying all or part of the sales tax, which means lower profits for them unless they reduce costs such as payrolls, etc. Sales taxes probably reduce private employment and wages.

Ed R said...

Not sure what point Casey is making with this post??

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