Question

"Sales taxes are fairer than income taxes because sales taxes cannot be avoided by the rich." Evaluate this idea. Describe the evidence about the distribution of sales tax burdens among different income taxpayers. Would it be possible to design a sales tax that is more progressive than an income tax?

Answer 1

Sales tax is indirect tax and burden of this tax is shifted to that person who consumed that goods.We can say sales taxes are fairer then income tax because no person can denied to pay sale tax.As he do not know how muct tax is added in the cost.Hence before consuming that goods he must have to pay sales tax on that goods.Rich person and poor person both pay similar tax.hence rich person can not avoid that tax.because tax is included in the cost of goods.

Sales tax burden is passed to consumer through charging higher prices.lower income affect more then the higher income group because lower income person have low income and they spend higher amount of their income towards buying of that goods which gives adverse impact upon their saving.burden of sale tax is more proportional to income.Burden of sales tax is regressive when measured as a share income.Hence higher income of low income person is spent upon paying sales tax.

Yes ,it is possible to design sales tax which is progressive means higher income , higher tax and low income , low tax.For designing progressive sale tax goverment should ensure how much person are low income group.In sale tax no refund is made to consumer for that portion of tax which he has paid.but in income tax lower income group get refund.government shall ensure that low tax is paid by lower income group.