Sales Tax On Necessity Assignment Help
Some states exclude necessities, such as food and clothing, from their sales tax. Other states do not.
Discuss the merits of this exclusion in terms of both efficiency and equity.
Consider your own home state, does it exclude necessities, why or why not?
As with all things, one decision can lead to another. Once necessities are excluded, “necessities” must be defined. Research the tax definition of “necessity” in your state (or another if your state does not exclude) and evaluate it.
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Sales tax on necessity:
When the government of the state excludes the necessity products then it is favorable to the lower income people because if tax will be imposed on the necessities such as foods and clothes then most of their income is spent on paying taxes on the necessities. In addition to this the high income earning people will spent their most income on the luxury products. Moreover the sales tax is regressive in nature and thus to make the sales tax less regressive the government does not imposes sales tax on the necessity which will ensure the equity and efficiency. All the states is having different point in regarding the execution related to the state tax. It totally depends on the state to determine whether the tax should be imposed on the necessities or not. Necessity is defined in the law as necessary goods which are a normal goods and it is bought by the people irrespective of their income and change in their income. Thus the state government ensures principles of equity by not imposing tax on the necessity. In addition to this the person who can afford luxury goods such as movies, electronics will have to pay tax on such goods and the people with low income who will only buy the necessity is not required to pay tax.
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