Sales Tax Ripoff

Aug 17, 2009

Politicians all over the country are boosting the sales tax, a very regressive tax that hits workers and the poor much harder than the wealthy. In cities like Chicago and Los Angeles the sales tax now approaches 10%.

Politicians blame tax hikes on skyrocketing budget deficits. In fact, those budget deficits are caused by the draining of state budgets into the pockets of the biggest corporations. The system of collecting sales taxes is one way states provide money to major retailers.

There are no national figures on how much sales tax money companies like Wal-Mart, Target, Best Buy and Home Depot get to keep for themselves. But a research group called Good Jobs First estimates that Wal-Mart alone pockets close to 100 million dollars every year.

Former New York Times reporter David Cay Johnston exposed this fraud in his book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).

He showed, for example, that local governments rebate or advance sales tax money as a direct subsidy to the stores. Other localities divert a portion of the sales tax to finance tax-free bonds, used to pay for roads and other infrastructure projects for the stores.

And that is just the beginning. State and city governments often provide land for the stores. They build the stores to companies’ specifications. Finally, the stores are given decades-long tax breaks, allowing them to avoid paying any property taxes.

Jobs are destroyed. The big stores drive the smaller stores–which don’t get any of these subsidies–out of business. The drop in taxes leads to cutbacks in government services and more job cuts. One more vicious capitalist circle.