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 taxes are fairer than income taxes because sales taxes cannot be avoided by the rich.. here the idea is true that the sales taxes cannot be avoided by the rich but then it cannot be avoided by the poorers either making it a regressive one as the burden of tax is more on the poorer. the distribution of burden of a sales among rich and poor is not equal as it pinches the poorer more than the rich. as its a regressive tax being an indirect tax, its burden is more on the poor than on the richer. designing a sales tax that is more progressive in nature is difficult as sales tax is paid by all categories of buyers be it rich or poor. putting more tax on luxury purchase and less on necessities might be a way of making it progressive because necessary goods are consumed by all but luxury goods are consumed mainly by the rich people.