Sales Tax – How High is Too High?

Sales Tax – How High is Too High?
Eileen St. Pierre, The Everyday Financial Planner

No-Sales-TaxI have lived in seven states in three time zones, and worked in many more states. The amount of sales tax I’ve had to pay has jumped all over the board, but there is one trend that I can’t escape. Sales tax just keeps going up. If you’re lucky, you live in a community that does not charge sales tax on food. But I have recently started working in a town that charges 9.75% sales tax on everything from groceries to a brand new car. This is the highest sales tax I have ever had to pay on basic necessities.

The level of sales tax has started affecting my buying behavior.

What level of discount do you need to be offered to get you to buy something? If you are like me, getting 10% off can convince me to make a purchase now if it is something I am planning to buy anyway. Now look at it the other way around. By being charged close to 10% sales tax, I now have to pay a 10% surcharge when I buy something. Do I really need it?

  • Maybe I will buy the cheaper cut of meat or piece of fish instead.
  • Perhaps I will wait until I get a coupon that might be doubled to offset the sales tax.
  • Can my purchase wait until I visit a place with a much lower sales tax?
  • If I purchase a new car for $25,000 and have to pay 10% sales tax, I need to come up with an additional $2,500 before I can register it.

A high sales tax hurts those with low incomes the hardest.

Even though everyone has to pay sales tax, it is considered a regressive tax. It takes a larger chunk out of the budgets of those with lower incomes. I’ve lived and worked in a lot of college and military towns with high sales taxes. It is how these communities get students and service members to help pay for city services. There’s got to be a better way to do this.

Research sales tax ballot proposals before you vote.

It always seems like such a small increase – just a ¼ of a cent for every dollar. Why shouldn’t we fix the roads or give the fire department more money? But it is starting to add up. Don’t feel guilty about voting no – it’s the only way to make your local leaders re-examine their budgets and be held accountable.

I finally reached my limit. Keep it under 10%, please.