Amidst soaring inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. , policymakers across the political spectrum proposed many ideas to soften the blow of higher prices–especially for low-income workers and families.
One idea that caught on quickly: sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. relief on groceries.
The idea had its merits, but TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation research shows that it may have missed the mark. Tax Foundation Vice President of State Projects Jared Walczak joins Jesse Solis to discuss how grocery sales tax relief became a popular idea, and why it is so hard to nail down progressive vs. regressive taxA regressive tax is one where the average tax burden decreases with income. Low-income taxpayers pay a disproportionate share of the tax burden, while middle- and high-income taxpayers shoulder a relatively small tax burden. policy.