this post was submitted on 12 Apr 2025
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[โ€“] [email protected] 8 points 2 days ago* (last edited 2 days ago) (1 children)

It's to do with the proportion of one's income that goes into purchases and the proportion of one's income that goes into savings (which generally ends up as investments):

  • Poor, working class and lower middle class people's income after paying rent or mortgage goes 100% into purchases, so a sales tax hits 100% of their income (after rent/mortgage). These people generally have no savings or just about enough to face a small unexpected event such as a fridge or washing machine breaking.
  • For the rest of the middle class, the proportion of their income that goes into purchases gets lower and lower the higher their income gets and, of course, what's left goes into savings, the last part not being taxed via sales tax (plus when it does end up getting spent, it often ends up in things like Property which is not taxed by sales tax).
  • The rich will easily save 90% or more of their income, plus they can make sure their purchases happen where the sales tax won't hit them (say, they'll buy their yachts in places with no sales tax), so only a small proportion of their income is hit by a sales tax.

Absolutely, the more income people have the more they spend, but spending doesn't grow at the same rate as income and beyond a certain point people just naturally end up earning so much that they don't spend it all or even most of it.

In percentage terms, the poor and working class are the worst hit by sales taxes because, after paying rent and mortgage 100% of their income ends spent purchasing essential goods hence hit by sales tax, whilst the rich are the least hit by sales tax because their income is so vast that they spend only a tiny amount of it on things covered by sales tax.

Whilst in absolute, dollar terms it's not the poor that pay the most in sales tax per person, they're hit the hardest because sales taxes hits all of their income (after rent/mortgage) hence hurts them more, plus that income was already not sufficient to live well enough the first place and sales tax just makes it worse.

[โ€“] [email protected] 3 points 2 days ago

Thanks, this makes it clear for me. I think the tax burden shouldn't be spread thinking about who pays the most in the absolute sense but according to how much the tax burden weighs them down. Not being able to save money for a rainy day is definitely a sign the tax burden is too high. I imagine there is plenty of research of what is fair and what is not, also on what is wise policy and what is foolish. But it's so easy to spin these theories to make them seem like something they're not. Paying less taxes is so attractive, people might vote for something that actually hurts them because they're (intentionally) confused about how a certain tax affects them.