The Merits of an Expanded Sales Tax

Josh Barro of the Manhattan Institute has a recent op-ed on the idea of states broadening their sales tax base, noting that several states are looking this direction.

There are a couple of clear advantages – namely tax neutrality (not picking and choosing favored special interests for an exemption), and the ability to lower the overall rate.

The negative, however, is that some will try to expand the sales tax simply to increase revenue and spending. This is the plan floated by Gov. Rendell, whose sales tax expansion would take an additional $531 million next year and $900 million/year when fully implemented out of the pockets of Pennsylvanians.

Barro contends that may be a less-bad tax than other tax increase, but perhaps looking to control spending, cutting corporate welfare, repealing prevailing wage laws that drive up the cost of government construction, reforming our public pension systems, reducing Medicaid fraud and reforming the system, and privatizing state liquor stores should take precedence over yet another tax hike.