—The problem with article is it ignores that fact that in exchange for 9% sales tax you get flat rate of 9%. That would offset a 20% tax on a car.—
I think he understands that. I think what he is saying is that once an individual (and that means, imagine YOU are buying a car) is faced with that sort of bump in the price based on sales tax, the individual will at least seriously attempt to find a way to avoid it. That is why he used the phrase “black market”. He is saying that giving people that kind of control over taxes (by shifting the collective 20% into sales tax), people will do what they can to avoid it. Legally and illegally.
The easy legal way is to just buy less: get a cheaper car. Buy used, etc. But there will be incentive to resort to “questionable” or downright illegal methods as well. And the more money that is involved, the more corrupt people become. One could, for example, get the seller to report the sale for a lower amount than it really was. Or the buyer could use some sort of barter to make up for some of the price. There are lots of ways to reduce the government’s knowledge of what really happened.
The key is that a 20% sales tax drastically increases the amount of money people save by avoiding sales tax. And this means the black and gray markets will significantly increase. Heck, look what happened when NY increased the cigarrette tax significantly. Tax revenue went DOWN because people left the state to buy large volumes of cartons of ciggies for themselves and their friends.
The author has a very good point.
The key is that a 20% sales tax...
Can we talk about the reaction to a 16% total sales tax instead?