Crazy plan X - discuss

[essentialsaltes]

California tax revenues 2009-2010 (see figure 8):

personal taxes $47B
corporate taxes $8B
sales taxes $26B

Pertinent facts:
Sales tax in my hood is a ridiculous 10.25%.
Sales taxes are regressive.
I chortle with glee when I order something on Amazon and pay no sales tax. Even if I had to pay for shipping (which I never do!) it can still be cheaper than paying sales tax. Of course, I always send a big check to Sacramento to cover all my online purchases every year!

Proposal:
Eliminate sales tax and increase income and corporate taxes.

Positive(?) Effects:
more progressive tax
encourages consumption of California goods and services
eliminates online tax loophole
pleasant shock at cash registers everywhere

Negative(?) Effects:
rich people whining
horrifying shock on paychecks everywhere
some people are unable to calculate tips

Comments

[essentialsaltes.livejournal.com]

Your scenario assumes that all of the previous sales tax revenue is now generated by corporate tax placed on the manufacturer. I was imagining (not for any particularly good reason) apportioning it in the same proportion as current income/corporate tax revenues. Since personal taxes are about 6 times corporate taxes, then only a seventh of that million gets added to the corporation, the rest being paid for by increases in personal income tax.
It's still true that increasing the tax rate will have some sort of disincentivizing (ugh) effect on efficiency, but it won't I think be as strong.
(Also the widget company would presumably be saving 10% on its office supplies and California-sourced widget materials - or at least some % after any price increases.)