Sales Tax

Thumb tacks. Horse tacks. Sales tax.

Sales tax is yet another way the government collects money to spend on things they need to, uh...govern us. So if you buy an Acme Chihuahua Launcher in California, you pay 8% tax on it. Meaning that you thought you were only spending $100, and it turns out, that that the launcher really cost you $108.

Each state has different sales tax charges. Some are high; some are low. Sales tax is considered regressive, which sounds like a bad word, and it kind of is intended to be. Why? Because everyone pays the same rate, whether they are hard-working plumbing supply parts vendors making 200 grand a year...or tollbooth collectors who love keeping their Facebook pages up to date.

When either one of them buys a 2-in-1 Laminating Toaster Oven, they pay the same sales tax. That is called “regressive.” the thought process being that paying 8% taxes on 200 grand in earnings a year is a whole lot easier than paying 8% on 20 grand.

The opposite of regressive is the positive-sounding progressive, where the plumbing supply parts dude pays meaningfully more tax than the tollbooth collector with the really up-to-date social media accounts. Of course, that toll collector didn't study in school, didn't work hard early in life, and now lives in a cockroach-infested apartment, while the plumbing supply vendor is about to purchase their second home. So maybe there is something after all to that "education" thing.

Is progressive tax good? Bad? Maybe, maybe not. Who knows? Not Shmoop. All we know is that progressive and regressive taxation both live in American society. They're the one-two punch that the friendly IRS man uses to knock you out.