A sales tax imposes a mandatory levy on the price of retail goods and services consumed, charged to the purchaser at the point of transaction.
Key Features:
- Usually a percentage of the purchase price, like 5-12%
- Applies broadly across most item categories from groceries to electronics
- Revenues support state/local budgets rather than federal programs
Example:
During an economic downturn, some called for temporarily waiving sales tax on dining to energize restaurant spending.
Takeaways:
Sales taxes are resistant to inflation and raise substantial income through extensive retail activity. However, they disproportionately impact lower earners spending larger incomes on living essentials. Creative exemptions can stimulate preferred sectors during difficult times.