Friday, August 22, 2014

Local and StateTaxes

Getting rid of of local and state sales taxes and substituting them with uniform sales taxes such that it would become the prerogative of the federal government do the collection and subsequently give back to state governments in piecemeal would gradually set a wrong precedent and usher in centralization which is alien to democratic governance. The constitution of the United States has been crafted in such a way that states enjoy independence and freedom that allow them to run their affairs without federal government involvement and meddling.

According to Bowen, Haynes, and Rosentraub (2006), states spend tax dollars with the view of developing their economies in the fields of education, social and safety programs, and healthcare. Giving the federal government what would have been the prerogative of state governments would undermine infrastructural development and lower the living standards of citizens in all states. When states collect local and sales taxes, there is that sense of ease and competition and the tendency to prosper to a desired level.

Devolution of power, a significant model of governance that spreads power such that states enjoy the right to administer state public policies, is a vital tool for increasing state and local government responsibilities especially the formulation of local laws, and the delivery of goods and services without federal government involvement (Bae, 2008). State and local governments are more capable than the federal government in the delivery of goods and services to the local population. The closeness of state and local government to the people in need of goods and services and the efficiency of service delivery is one factor that cannot be ignored. States have a better role to play in local and state matters than the federal government.

Retail taxes are usually generated from individual purchases from sales transactions. A sales tax is a tax levied on a buyer when a product is purchased for its usefulness (Hyman, 2011). Retail taxes emerge during transactions. In essence, in the cause of transaction, the buyer acts as a government intermediary.

It would be futile to carry out representative and encompassing service stipulation to society from sales tax managed by a federal government. The impact from transferring such a tax to a central administration would be catastrophic for the national economy as their would be a lot of mismanagement, inconsistencies, and incongruities resulting from the transfer of sales tax management to a generally powerful jurisdiction such as the federal government in Washington, DC. The notion of democracy is based on the devolution of power and also separation of powers. This system allows local jurisdictions to craft streamlined systems that make their operations attainable in a manner that brings in satisfaction in the effective delivery of goods and services to the population inhabiting in that jurisdiction.

Transferring local and sales taxes to a central authority would undermine state development and lower human progress especially the social and economic sectors that will be severely impacted by mismanagement ultimately spearheading drastic decline in the effective delivery of goods and services. The notion of freedom that is enshrined in the constitution will also be undermined and the general national administration will be akin to authoritarianism as the state and local governments will be deprived of the rights and privileges enjoyed previously. There will be mismanagement of taxes as some states would receive better preferential treatment than others.

The men and women on the helm in the central headquarters will be driven by favoritisms and affection for states inclined to their political ideals and philosophical thoughts. There is no question that humans have inherent sense of irrationality and preferences for people of like mind and ideas. Any preferential treatment of a state over another state would result in massive migration of people seeking better opportunities and avoiding burdening taxation in their original areas of settlement. Taxation is a government monetary imposition that cause reduction to citizen finances and that is why many abhor it altogether. However, despite citizenry abhorrence of taxation, what is worth comprehending is the significance taxation has on human progress especially when jurisdictions resourcefully and effectively deliver goods and services as demanded without any lapse whatsoever. There are nations on this planet that are free of taxation. However, people pay more for services such as plethora of commodities, groceries, insurance premiums, diesel and gas, electrical and heating utilities, water and garbage collection, school tuition, and other amenities to supplement the missing taxation. 

It would be improper to tax people and redistribute from a government-managed central jurisdiction. This would place a strain on the progress of local and state jurisdictions. In a nutshell, local and state jurisdictions would be unable to make recommendations to the central authority and as well be unable to design a formality that would usher in progress and prosperity to their areas of jurisdictions. On the other hand, the central government would have a hard time making universally encompassing deliberations on tax dispositions in such an expansive nation like the United States.

Centralization of taxation has failed in many authoritarian and dictatorial regimes where hunger and starvation, abject poverty and underdevelopment are the norm. The decline of national infrastructure in undemocratic countries results from poor management of national revenues and other sources of finances. Gross injustices and political decline visible in undemocratic countries emanate from mishandling of the overall governing structures that is based on individual philosophical thoughts as opposed to uniform social deliberations and freedom of choice. Thus, centralization of taxation is inconsistent with modern governance.

Taxation handled by a single governing entity would accelerate a decline in people’s purchasing power. However, since not all jurisdictions share equal resources, the federal government would be tempted to impose hefty taxation on states and local jurisdictions that it finds having significant resources. Likewise, the federal government would put more emphasis on the development of the region having potential for resource production such as in the fields of petroleum, forestry, fisheries, industries, education, medicine and pharmaceutical products, and mineral extraction.

In 2009, the total revenue raised by state governments from sales tax was 30% (Hyman, 2011). Some states depend more on revenues generated from retail sales than others such as Washington which accounted for 63% of total tax collections in the year 2009. Sales and retail taxes are regressive in nature and they are higher for low-income tax-payers. E-commerce, a modern way of conducting business over the internet is gaining ground as consumers become more adept at using this innovative technology. In e-commerce, transactions are usually done between businesses to business where taxation is nonexistent. One problem with the state sales tax is that government and nonprofit organizations are exempted from taxation during transactions. The aging of society may also impact sales tax revenue in the near future.

According to Hyman (2011), retail sales taxes are the prerogative of local and state government and never administered by the federal government. This is already an answer to the question that drives this essay. It was first enacted in New York in the 1930s because there was desire for stable revenue source. In most local and state governments, the administrative costs of running a government are made possible by retail sales taxes. It would be extremely difficult for any local and state government to administer a jurisdiction without collecting state and local taxes. Thus, transferring these taxes to a central government for redistribution would undermine the effective administration of local and state governments.




Bae, S. (2008). Revenue, growth, structure and burden across state and local revenue sources: The impact of state budgetary rules.  Conference Papers-Midwestern Political Science Association. Department of Public Administration: San Francisco State University
Bowen, W.M., Haynes, M.E., & Rosentraub, M.S. (2006). Cities, tax revenues, and a state’s fiscal future: The value of major urban centers. Public Budgeting and Finance, 26 (1), 47-65. DOI: 10.1111/j.1540-5850.2006.00838.x.

Mason, OH: South-Western, Cengage Learning.


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