In a time when polarization and self-sorting can make every map look like an Electoral College map, sales taxes are an exception.
While it is generally true that blue states are high-tax states and red states are low-tax states, that does not follow for every type of tax. The Tax Foundation put out its annual midyear report on state and local sales-tax rates today, and it doesn’t look like an Electoral College map at all.
The report combines the state sales-tax rate with a weighted average of local sales-tax rates and adds them together to get an average combined sales-tax rate for each state. Some states you might expect — like Washington, California, and Illinois — are in the top ten. But there are also plenty that you wouldn’t expect if all you knew were partisan leanings. Louisiana is No. 1, followed by Tennessee and Arkansas. Alabama and Oklahoma are No. 5 and 6. The bottom ten includes blue states like Hawaii and Maine.
Then there are the five states that don’t have statewide sales tax at all. Two are blue (Delaware and Oregon), two are red (Alaska and Montana), and one has been competitive in presidential elections (New Hampshire).
Why have sales-tax rates been resistant to partisan impulses? One reason is historical. The sales tax was first introduced in its modern form in many states during the Great Depression, and it wasn’t on a partisan basis. All states were strapped for revenue, and the sales tax seemed like a good way to close the gap. The concern was primarily financial, not political. Once the tax existed, states became dependent on the revenue and kept it around after the Depression was over.
Another reason is that there is no federal sales tax, so the national political parties don’t spend much time talking about sales taxes. The debates are insulated within each state, and each state has different revenue needs. Tennessee has a high sales tax to compensate for not having a state income tax. A Tennessee Republican is likely to support a higher sales-tax rate than a Republican from a state with an income tax. Oregon has no sales tax but a very high income tax. An Oregon Democrat is unlikely to propose the creation of a sales tax even if other states’ Democrats want to raise theirs.
Sales-tax rates demonstrate how more political issues could look if they were left to the states to decide. In the absence of national partisan pressures, sales-tax rates are set based on each state’s unique needs. Each party within each state fights it out over rate changes, and they come to their own equilibria. There’s no reason every political issue should map onto the results of presidential elections. Sales tax rates show that when an issue isn’t nationalized, it doesn’t have to.
#Sales #Taxes #Dont #Match #Partisan #Expectations #National #Review