What are the effects of sales tax on consumers?
Although sales tax may seem like a small amount that couldn't possibly affect the way consumers think, it actually has some extraordinary effects on our consumerism. Sales tax as a whole reduces the purchasing power of the consumer as they have to pay more than the original price tag. Sales tax rates differ from state to state. Sometimes it can be as low as 5.5%, but can be as high as 11%. When the rate is higher, it'll cause consumers to purchase less goods because the opportunity cost of purchasing other products gets higher since they are paying more for their goods. For example, say I were to go grocery shopping in two different states and both carts were valued at $250. If State A has a sales tax of 6%, then the final total would be $265 ($15 added sales tax). If State B has a sales tax of 11% like some parts of Los Angeles, then the final total is $277.50. That is an extra $12.50 that could've been spent on other goods. And since the average household goes to the grocery store once a week, that can add up to $650 of extra sales tax paid per year, or $650 worth of other goods. Needless to say that sales tax, no matter how minimal, has effects on consumerism.