In the Depression years, our government was doling out far more money than it was taking in. Being in the deficit, our national, our state, and our local governments had to do something to bring in more revenue.
A man by the name of Caleb Johnson came up with a plan that had worked in other states such as Mississippi. His proposal was to create a state-wide sales tax which would affect Daviess County as well as any adjoining counties. A quotation shown above states his view of the future. He used Mississippi as the basis of his argument. Johnson made this statement on June 7, 1933:
“I think it is as certain as anything in the future can be that the United States will adopt a general sales tax, as a means of raising national revenue. I am sure that will come about as soon as the majority of the people understand what is meant by a sales tax, and when they have had an opportunity to observe the operation of the sales tax in the State of Mississippi.”
It seemed as though the main objection to the tax came about because of the misunderstandings it generated. The theory behind the sales tax was not so much that everybody would pay it, as much as it was everyone knew he/she was paying it. It was said there was no tax of any kind imaginable that was not paid in the long run, by the consumer. By using the new sales tax, everyone would pay proportionally as to what he purchased whether it was a twenty-five pound of flour, a new rocking chair, or five gallon of gasoline.
As long as there was a large number of people who thought they did not pay taxes, and the government’s revenues was derived from only the rich, there was a large group of individuals who tried to get money from the government on the theory that it came out of someone else’s pocket.
The best argument in favor of the new ta was that everyone pay proportionally two cents out of every dollar they spent. The man who bought nothing, paid no taxes.
As the sales tax brought both pros and cons to the Depression’s victims, the principal outcry against the sales tax came from the retail merchants who, in absence of the exact knowledge of the subject, assumed they would have to absorb the tax, that it could not be passed on to the consumer.
When the first day the tax went into effect, merchants announced new prices with the two cent sales tax added and had no difficulty on passing on the tax burden. People realized it was not a tax on earnings, but a tax on spending. They also realized the measure was needed in order to balance the state’s budget.
The business men were to keep accurate books reflecting their gross income, preserving all records relating to, and being subject to inspection at all times.
Deductions allowed from gross sales were as follows:
- Sale price of goods taken in exchange for new goods.
- Credit sales by retailers and wholesalers may be reported as collected.
- Taxes collected on gasoline and tobacco.
- Gross receipts from sale of agricultural products when sold in the original state or preparation for sale.
- Sale of fertilizer, seeds, boxes and crates used in preparing agricultural products for market.
- Sales of schoolbooks when sold under State contract.
- Sale of cotton, seed cotton, lint, and baled cotton.
- Amounts recycled from life insurance policies and annuity contracts up to the amount of premiums paid thereon.
- $1,200 each year, to be deducted from total loss income and on gross proceeds of sale.
A feature of the sales tax is that it makes practically every person engaged in business, a tax collector serving for the State without compensation, keeping a record and making monthly returns without even being allowed postage on the remittance.
All businesses collecting more than $10 a month must make monthly reports. Smaller concerns report quarterly.
Some classes of manufacturing concerns are also included: soft drink establishments, being required to pay one percent, and cotton seed oil mills, and ice factories one-quarter of one percent.
The danger in the sales tax was, as in any other form of taxation is the likelihood it will encourage tax spenders to new extravagances. If adopted merely as an added burden upon the tax paying public, it will fail as its purpose. If adopted by states as a means of reducing the burdensome taxes which fall on owners of real estate, it is to be highly commended.
— written, researched, and presented by Wilbur Bush, Gallatin, MO