In a study that may have implications for the debate over a possible national sales tax, researchers have found that close to one-third of consumers pay little or no attention to sales taxes expressed as a percentage in making spending decisions.

Critics of a national sales tax are concerned that it would depress consumer spending. But a new study published by the Journal of the American Taxation Association suggests that such a tax might actually have a contrary effect.

shoppingbagResearchers from the University of Rhode Island and the University of Colorado at Denver said consumers who were presented with a hypothetical selection of add-ons to the price of a refrigerator were more likely to compute the total price mathematically if the sales tax was expressed as a dollar amount rather than as a percentage of the base price.

And on the whole, the study says, consumers find sales taxes less burdensome than other price add-ons such as service warranties or shipping charges that they encounter in their daily lives.

The Future of Finance Has Arrived

The pace with which finance functions are employing automation and advanced technologies is quickening. Rapidly. A new survey of senior finance executives by Grant Thornton and CFO Research revealed that, for just about every key finance discipline, the use of advanced technologies has increased dramatically in the past 12 months.

Read More

“Given our study’s finding that sales taxes expressed in percentages have relatively little effect on people’s purchase decisions, a national consumption tax could conceivably increase consumer spending if counterbalanced by tax reductions that would enable people to keep more money from their jobs,” co-author Cynthia Blanthorne said in a news release.

As The Wall Street Journal reported last month, “U.S. lawmakers on both sides of the aisle increasingly are finding appeal in an ambitious concept for overhauling the nation’s income-tax system: a tax based on consumption, a tool long used around the world.” In Europe, such taxes commonly take the form of value-added taxes, or VATs.

But Blanthorne said her study suggests that if a U.S. tax was folded into the price of products, as VATs are, “it would likely have more of a dampening effect than if it was a distinct percentage add-on, as is typically the case with state and local sales taxes.”

The results “should encourage policy-makers to reconsider the drag on the economy caused by the imposition of excise taxes,” the authors say.

Image: Thinkstock

, , , ,

4 responses to “National Sales Tax Wouldn’t Depress Consumer Spending: Study”

    • Cite your source. I could just as easily say this article is just plain truth from top to bottom and our comments would cancel out. I’m not saying your wrong, just don’t make claims without evidence if you with to influence a rational person’s opinions (full disclosure, I suspect you were right)

  1. I call 100% BS. I would immediately, and significantly, reduce my family’s purchases of all new items. 2nd hand, barter and garage sales would thrive because I don’t want an extra nickle being spent, by those traitors in Washington, on un-Constitutional and otherwise immoral activities. Go ahead, create a national sales tax and permanently crash the economy. We know “our Representatives” can’t be trusted. The money will go to their corrupt friends.

  2. 4-16-2015. Ms. LeeJai Cook, Roaring Springs, TX.
    A National sales tax would definitely be a VERY regressive tax. Persons living at the bottom of the income ladder would pay the same amount in taxes as would the persons in high economic brackets. Under the sales tax, poor people might be unable to purchase numerous needed items.

Leave a Reply

Your email address will not be published. Required fields are marked *