Does the General Sales Tax Impact the Personal Consumption Expenditure Research Paper

Does the General Sales Tax Impact the Personal Consumption Expenditure - Research Paper Example This paper seeks to study the relationship between sales tax and individual consumer expenditure and saving. Table of Contents Table of Contents 2 1.0. Introduction 1Sales tax is part of consumption tax, tax on imposed on spending on goods or services in various states. Sales tax is usually imposed to buyers during the purchasing of goods or services. The sellers are the one who collect the tax. Tax rates vary from one state to another. In United States, the sales tax has been increasing drastically since 1997 and this has led to rise of prices of both services and commodities. The people who are affected indirectly by sales tax are the buyers. Their expenses rise per month forcing them to draw narrow budgets. This is the same in the whole world and the economies of many nations are going down. What it exported or imported is also highly taxed. Sales tax is different from value added tax because it is only imposed once at the retail level. Different states in United States have diffe rent tax rates. There are some jurisdictions in these states that determine the tax rates to be imposed on various goods and services. Goods for manufacture or resale are usually exempted from sales tax. Some other jurisdictions also exempt sales tax on foods sold in grocery shops, agricultural supplies and prescription medications. Sales tax greatly affects the spending of consumers, changes their consumption behavior and marketplace at the household level. 2.0. Literature Review There are many researches that have been done to show how the increase in sales tax affects personal consumption expenditure. Most of the results got from these researches have showed negative impacts on personal consumption expenditure. As Kevin 2001 puts it, this has been the case in the 2United States of America and the rest of the world. In a case study conducted in California in 2007, it was revealed that the best sales tax rate was 7.25%. This was a rapid increase from 6.6% in 2004 while in 1990s it was less than five percent. Most of this was taxed because of transport expenditures that were incurred during transportation of the goods or services. The estimation for the next year after 2007 was 7.75% tax rate and this was observed to be the trend to be followed unless the economy in the whole world is restructured since the people in California must rely on imported and exported goods and services. In this case study, the main objective shall be to show the effects of increased sales tax on the well-being of people in California. The methods that shall be used shall help to come up with resourceful data that shall be analyzed in depth. From the analysis, it shall be clear on the real effects that are caused by increased sales tax. Increase in tax rate has been there in California just as it is with other states in America. Some of the effects may be positive; however, many of them are negative. To the unemployed the situation is worse thus, there must be proposals to look into the issue deeper before it goes beyond recognition. From another research done in the same state to identify the much that is used for consumption by individual persons, according to Kanbur and Spence, it was found out that 65% of the spending per individual was on consumption. It was not, however, constant as it varied with genders and age. There were many reasons that were given for the high spending in consumption and the main one was increased sales ta