Sales Tax Equity Again: By Age Groups and Income Classes

Abstract

This paper investigates sales tax inequities from a new perspective: by house-Abstract hold heads' age groups and income classes. With income constant, spending variations exist due to family head's age, just as variations exist due to family size. This study examines effective rates (and composite burden indices) for three age groups over ten income classes, computed by applying food-exempt and food-taxed structures. There is evidence of vertical and horizontal ineguities for various age groups, though such inequities are reduced when food is exempt. An important policy implication is that food exemption (or tax credit) can mitigate both types of inequities for different age groups, an argument already well established concerning family sizes.