I actually came across this article about a week ago, I just hadn’t gotten around to posting it. According to the New York Times, several governors have recently become taken with the idea of shifting the tax code so that a greater proportion of state revenues come from taxes on consumption rather than income.
There are two reasons why Republicans governors would be interested in such a thing at this time. The first is that many have their eye on the next presidential election, and as conservatives, “reducing” taxes would look good on their record. The other is that they believe that this policy would encourage savings and investment and thus would boost the economy. The article mentions that most economists agree with this viewpoint.
Democrats point out that greater reliance on sales taxes would also be inequitable, since the wealthy spend a smaller share of their income. One Dem dismissed the trend as mere “shell games.” Another problem pointed out in the article is that the economy is more serviced-based than it used to be, so the definition of what is taxable would have to be expanded to account for this.
On the whole, states currently receive 42% of their revenues from personal and corporate income taxes and 46% from sales taxes. I consider myself wholly ignorant of this subject, so I have a lot of questions. I wonder who is right in this case? Would increased sales taxes really be better and more efficient than income taxes? If so, is there a way to make them more equitable? Is there a detailed economic argument behind it? It will be interesting to see how this trend develops.
You can access the article here.