Sales Tax Vs. Income Tax
Government entities impose taxes as a means to fund their activities for the benefit of the population. Although they are often unpopular, taxes pay for costly provisions such as social services, humanitarian programs, infrastructure, the military and government administration. Businesses are required to pay taxes because they avail themselves of government services, and individuals are required to pay taxes as part of their social conscience and community stewardship. President John F. Kennedy referred to tax as "the annual price of citizenship." Income tax and sales tax are just two of the most common taxes.
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Income Tax
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The Internal Revenue Service, a federal agency, administers income tax laws. Anyone employed by an employer, or self-employed, and earning more than $400 per year, at 2009 rates, is required to pay income tax on an annual basis. The percentage rate of the tax due is dependent upon the amount of income, and ranges between 10 percent for those earning less than $8,025 per year to 35 percent for those earning $357,700 or more. Most states also charge income tax to their residents, and this is, on average, an additional 10 percent. The states that do not charge income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Sales Tax
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Sales taxes, which are added onto the price of goods and services at the point of consumption, are based on a percentage of the sale price. Typically, they are assessed at the state level, but in some places, such as California, counties and cities may also assess them. Some states do not charge sales tax. These states are Alaska, Delaware, Montana, New Hampshire and Oregon. The average sales tax rate is 6 percent, but it can be as high as 9.75 percent in some parts of California.
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Debate
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Income tax is often considered fairer than a sales tax because income tax is based on an individual's earnings, whereas sales tax is the same rate for all consumers, regardless of their income. Sales tax is considered to be regressive because it is inequitable to those living at or below poverty levels. Yet the unsuccessful bill known as the Fair Tax Act of 2003 proposed abolishing income tax and implementing a national sales tax of 23 percent across the country. This bill was revived in 2005 and 2007 but was equally unsuccessful.
Controversy
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While all citizens are subject to pay income tax if they work, not all items are subject to sales tax. Those items that are subject to sales tax often fuel controversy. Most tangible items are subject to sales tax, as are items such as gas, utilities and occupancy of hotel rooms. People often complain that sales tax should not be charged on items such as personal hygiene goods, non-prescription medications and even caskets because these are essential and cannot be avoided, unlike candy, alcohol and tobacco, for example.
Income vs. Sales Tax
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The issue of taxation in the United States is a complex one, with some states charging income tax and some not and some charging sales tax and others not. There does not appear to be a one-size-fits-all solution to taxation because all taxing methods favor some and not others. Those people who do not work, such as retirees, may not be adversely affected by income tax increases, and are more likely to favor them than sales tax increases. Whereas those who do work might favor sales tax increases over increases in income taxes.
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