The problem with a sales tax is that it is, by its very nature, regressive. That’s the economist’s way of saying that it falls harder on low-income households than it does on higher-income folks.
Yes, the published rate is the same for everyone within a given jurisdiction. But people who live paycheck to paycheck, spending basically every dime that comes in, are effectively paying sales tax on a huge portion of their income. Generally everything that isn’t rent or the mortgage.
But families that finish the month with money in the bank — or, especially, in the 401(k) — haven’t paid sales tax on money they didn’t spend at the store. A phenomenon unknown to their less affluent neighbors.
To their credit, some members of the Utah Legislature are promoting a way to make the state sales tax just a little bit progressive.
First, as called for in a bill that passed through a House committee last week, the state would cease charging any sales tax at all on non-prepared food, aka groceries.
To make up the revenue that would be lost by such a gesture to the working classes, House Bill 148 would also raise the sales tax paid on everything else — from the current 4.7 percent to 4.92 percent.
The lower a family’s income — the higher percentage of that income that household spends on the one thing it has to have, food. Thus, even though the sales tax is slightly higher on non-food items, the family that doesn’t have much money left after buying groceries winds up paying a lower percentage of its limited income on sale tax.
In a nation with rising levels of inequality, in a community that has more than its share of homelessness, helping low-income families to save anything at all is worth the effort.
That was the reason why the Legislature a few years ago lowered the state sales tax rate on groceries to a mere 1.7 percent, while other taxable purchases were assessed at 4.7 percent. The new idea is to move the sales tax on food to 0, and the rate on everything else taxable to 4.92.
Such a break would be a nice thing to have accomplished in case any other tax rates go up, such as the general sales tax or income taxes, as the state seeks more money for education.
It would be helpful to also pass HB57, the creation of an earned income tax credit of up to $600 for some low-income households. That measure is too narrowly targeted, benefiting only families that, in the opinion of the state, are trapped in “intergenerational poverty.” But it’s a start.