Tax Games and Redistributing Income Upward by Dean Baker

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http://www.commondreams.org/view/2013/02/05-1

The corporate profit share of national income is near a post-World War II high. The share of income of going to the richest one percent is almost at its pre-Depression peak.

These would seem like impressive accomplishments but the process of upward redistribution, from Joe Sixpack to Joe Six Houses, is a never-ending struggle. Toward this end, Louisiana Governor and Republican wunderkind Bobby Jindal has just proposed replacing the state's income tax with a sales tax.

Sales taxes will generally be more regressive than income taxes for the simple reason that low- and moderate-income people will spend a larger share of their income than upper-income people. That means that the portion of income that wealthy Louisianans save will escape taxation, imposing a larger burden on low- and middle-income families in any revenue neutral shift.

However saving is only part of the story in this picture. Wealthy Louisianans are likely to spend more time and money outside of the state than less affluent residents. Insofar as wealthy Louisianans spend money at out-of-state vacation homes or Parisian shopping trips, they will be creating a tax gap for the less affluent and less well-traveled to fill.

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