Massachusetts has a general sales tax of 5 percent, with exemptions for food and clothing purchases under $175. The sales tax is the second-largest source of tax revenue for the state, and is projected to generate just over $4 billion in the coming fiscal year. Of the 45 states that have a general sales tax, Massachusetts ranks last in terms of the revenue the sales tax raises as a percentage of personal income.
What Would be the Revenue Effect of a Sales Tax Change?
If the state were to increase the sales tax from 5 percent to 6 percent, it would increase state revenue by approximately $800 million a year. However, because the sales tax has not kept up with changes in the economy, the revenue raised by such an increase would likely decline over time as a share of the economy. As more people shop online, where it is difficult to collect the sales tax, and as more economic activity shifts to the service sector, which is not subject to the sales tax, Massachusetts loses revenue that it had been collecting through this tax.
Is the Sales Tax Regressive or Progressive?
As the chart below demonstrates, the general sales tax is very regressive – that is, poor and middle class people pay a much higher percentage of their income towards it than wealthy people do. The chart below shows that those at the 80th percentile of income and above contribute less than half as much to the sales tax, as a percentage of their income, than the lowest income earners in the state. Similarly, those earning between $34,000 and $58,000 contribute twice as much to the sales tax, again as a percentage of their income, as do income earners in the top 5 percent. An increase in the sales tax would therefore hit low and middle-income people harder than high-income people.
First of all, the abuse of a neutral word, "regressive." It is simply a description which is misused in contemporary "progressive" "class-warfare" society. As in saying that arithmetic is associative.
Aside from that, everyone with an IQ over 25 would be forced to admit that EVERYTHING a very rich person buys or pays for costs him less than someone who is not rich AS A PERCENTAGE OF INCOME.
Labeling this obvious fact with a word has meaning or significant effect only when loaded with a political and social-warfare baggage and does not make it profound or significant in any way.
I would be ecstatic with a system where everything, including prices and taxes are based as a percentage of income, if it is applied religiously (if you'll pardon the expression) to everyone, no exceptions, from the homeless to George Soros and Bill Gates.
I'll hold my breath...