The Distributive Effect of Expanding the Sales Tax

Abstract

This article examines the distributive effect of expanding the Minnesota sales tax Abstract base to include additional consumption items. Two indexes, Kakwani and the Suits, are calculated for the existing sales tax base and expansion options. The indexes consistently indicate that the existing tax base is regressive, as are the major base expansion items. Effective tax rates indicate that expanding the sales tax will widen the burden gap between low-income and high-income taxpayers. The aggregate property of the Kakwani and Suits indexes is used to examine the overall distributive effect of sales tax and other tax systems.