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Sales Taxes as Social Policy: Incidence, consumer responses and benefits distribution of wax waivers and inclusions

Friday, November 14, 10:15 to 11:45am, Property: Hyatt Regency Seattle, Floor: 6th Floor, Room: 604 - Skykomish

Session Submission Type: Panel

Abstract

This panel explores new exemptions and inclusions in the design of local sales taxes and their respective consequences as it applies to essential goods. From diapers and femenine hygiene products to unprepared food, localities vary widely in their decisions to tax or exempt some necessitites, trying to make these goods more affordable. The first paper presents novel evidence on how diaper tax exemptions affect household purchasing behavior and the equity of such policy, showing disproportionate responses from low-income families but also broader savings for other consumer groups. The second paper reconsiders the often-sacrosanct  exemption of groceries from the sales tax base, quantifying foregone revenues, volatility and hgiw taxing food might improve equity between local jurisdictions. The third paper investigates the elimination of sales taxes on feminine hygiene products, revealing minimal behavioral response but highlighting the limited progressivity of such waivers compared to targeted transfers. Together, these studies provide timely insights into the behavioral, fiscal, and equity effects of including or excluding essential goods from the sales tax base—raising critical questions for state tax reform.

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