Isaiah the Prophet and the Tax Code

I have many faults, and only a few virtues. On hot steamy nights I roll and toss thinking of the things I’ve done that I’m ashamed of (some of which date to my elementary school days at PS 193 in Brooklyn). So, yes, I have my faults, but being a professional economist isn’t one of them. I say that to alert you to the fact that what follows is the product of thought experiments, not statistical analysis. (You know Mark Twain’s comment on statistics, of course: “There are three kinds of liars—Liars, damned liars and statistics.”)

The question: Which is more deleterious, income tax or sales tax? The answer is, obviously, sales tax. It’s regressive, with the poor paying the same amount as the rich; it discourages, or at least does not encourage purchases; and it’s annoying—always to my surprise the $10.00 item really costs $10.70 by the time I get to the cash register. It may add to the coffers of the state or city, and it may be used to discourage things society wants to discourage—cigarette smoking and gasoline guzzling, but on the whole it’s pretty indefensible. The income tax is no less annoying, but at least in theory, before the lobbyists get to add loopholes for the accountants and lawyers to exploit, people pay into government in accordance to what government does for them. Rich people need armies to protect them more than poor people; they need roads to transport their goods more than poor people who have few goods to ship.

So, here’s the thought experiment: What would happen if the solons who make up the state legislature voted to drop the sales tax (except on gasoline and cigarettes) and, to keep the state’s coffers from running out of cash, increased the income tax? Well, on the one hand there would be great hurrahing by the poor, of which we have many; on the other hand the wealthy would complain that the poor had their hands in other people’s pockets, as though Curt Schilling hadn’t already thought to do that.

If there were no sales tax, people would buy more, improving the state’s economy (this assumes that the capitalists who control the market don’t take advantage of the situation by raising their prices by 7%). People would shop in Rhode Island rather than in near-by Massachusetts and Connecticut. I have been known to take a day trip to New Hampshire because the state liquor store has no sales tax; no sales tax here might encourage people from the Nutmeg State to come here and buy a car. A week ago I went to Home Depot in Attleboro to price some materials. The place was practically empty, which struck me as odd. Then it hit me. Everybody was waiting for the tax-free weekend that would arrive in a few days. Clearly the tax-free weekend was doing nobody any good. People were not buying in advance of it (fewer profits to the store, fewer tax dollars to the Commonwealth which would not receive anything on the weekend. The problem is the temporary nature of the tax holiday. The solution would be to have no sales tax at all. More stores would open employing more people, providing more goods and services to the people. It’s simple; no sales tax means greater prosperity for Rhode Island.

And the income tax? If (as I do) you believe that taxes are a necessary evil to pay for the services we have come to depend on, such as schools and police and firefighters and the court system and (sadly they are needed) the jails, etc. increase the amount paid in income tax and eliminate the loopholes. The poorest among us won’t suffer, the richest can afford it. After all, the BMW they buy will only cost $60,000 not $64,200.

Where’s the Jewish content in this? The High Holidays approach. Each year we read:

This is the fast I desire:
To unlock the fetters of wickedness,
And untie the cords of the yoke
...
It is to share your bread with the hungry,
And to take the wretched poor into your home;
When you see the naked, to clothe him,

Surely, one way to approach the ideal set forth by Isaiah, which Jews since time immemorial have read on Yom Kippur, would be to abolish the sales tax and increase the income tax. Amen, Selah.