Sales tax equity: Who bears the burden?

Sales Tax Collections in Nonmetropolitan Communities

“…Retail sales are highly responsive, but inelastic, with respect to population and income. The inelasticity of sales with respect to income appears to indicate that sales taxes are regressive (Derrick and Scott 1998). Keep in mind, however, that the dependent variable here is sales taxes received by a community rather than sales taxes paid.…”

Consumption taxes in the internet world

“…Exemptions apply to all consumers and require correspondingly higher rates on the remainder of consumption, limiting their impact on sales tax regressivity [Derrick and Scott, 1998]. The sales tax base has narrowed from 51 percent of consumer income in 1979 to 42 percent in 2000 [Fox, Luna, and Murray, 2002] in part due to the growth of exempted services.…”

Just pricing: the distributional effects of congestion pricing and sales taxes

“…In a widely cited 1996 study, Poterba (1996) found evidence for complete forward shifting and even over-shifting because prices rose more than the cost of the tax. Another study conducted in Maryland found that even though assuming complete forward shifting overstates the overall regressivity of the sales tax by failing to consider the effect of business-to-business transactions, the forward-shifting assumption does accurately reflect sales tax incidence among consumers (Derrick and Scott 1998). As a result, we assume forward shifting.…”

“…The net effect of a tax payment depends not only on the tax rate or payment, but also on the supply and demand effects the tax produces (Due and Mikesell 1994). As a result, there may be no strong a priori basis for assuming how much of a sales tax consumers will pay (Fullterton and Lim-Rogers 1993;Derrick and Scott 1998).…”