A sales tax by definition is a proportional tax - i.e., as taxable purchases increase, the sales tax rate (i.e.,
the marginal tax rate) remains constant. For this reason, Milton is correct. Nonetheless, when you consider
that the proportion of one's total income spent on taxable purchases likely decreases as total income
increases, the sales tax may be considered a regressive tax. For this reason, Rocco is correct.
Vertical equity is achieved when taxpayers with greater ability to pay tax pay more tax relative to taxpayers
lesser ability to pay tax. One can view vertical equity in terms of tax dollars paid or in terms of tax rates. Pr
of a sales tax (e.g., Milton) are more likely to argue that vertical equity is achieved when taxpayers with a
greater ability to pay tax pay more in tax dollars. Opponents of a national sales tax (e.g., Rocco) are more
likely to argue that taxpayers with a greater ability to pay should be subject to a higher tax rate. This view
is based upon the argument that the relative burden of a sales tax decreases as a taxpayer's income (e.g.,
disposable income) increases.
Certainty means that taxpayers should be able to determine when to pay the tax, where to pay the tax, and
how to determine the tax. It is relatively easy to determine when and where to pay the federal income tax.
For example, individual federal income tax returns and the remaining balance of taxes owed must be filed
with the Internal Revenue Service each year on or before April 15
(or the first business day following
). Thus, from this perspective, the federal income tax scores high.
However, the federal income tax is often criticized as being complex. What are taxable/nontaxable forms o