Question

Some states exclude necessities, such as food and clothing, from their sales tax. Other states do not. Discuss the merits of this exclusion in terms of both efficiency and equity.

Consider your own home state MIAMI FLORIDA , does it exclude necessities, why or why not? As with all things, one decision can lead to another. Once necessities are excluded, “necessities” must be defined. Research the tax definition of “necessity” in your state (or another if your state does not exclude) and evaluate it.

Answer 1

Ans) Over the years, it has been experienced that whenever government excludes necessities, it has proved to be favorable to low-income people, since most of their paying for taxes goes on necessities. On the other hand, high-income people mostly spend their income on luxuries. Thus this clearly demonstrates the regressive nature of sales tax. The more necessities government excludes, this tax becomes less regressive, and thus the principle of equity becomes applicable. Indirectly due to this the burden of taxes in a way shifts from the poor to the rich.

Sales tax in Miami, Florida consists of the sales of retail goods, repairs or alterations of personal property, real estate rentals, hotel rooms and similar short-term accommodations, rental of personal property, sporting event tickets, recreation and amusement park admission fees, vending machines and certain household services.

Miami excludes certain food Grocery from sales tax which does not include soda and candy etc in it. from its sales tax, but levies 6% tax on clothing. Certain groceries are common household remedies, thus they are expected from it, but the pre prepared food are not exempted and are subject to sales tax. On the other clothing is not excluded since it can be a matter of not just necessities but of luxuries and personal choice and several duties and taxes may have already been paid for its clearance.