There is referendum in two parts of Virginia increase the sales tax and spend that money on transportation.
Anti-tax advocates have pointed out that since the tax is expected to raise $2 billion, that money has to come from some where. But, the hypothetical example they provide as a reason to avoid the sales tax is not particularly convincing. They suggest that you might buy a suit, but not get the tie to mathc. That doesn't sound right to me, and it doesn't sound right to the man on the street. If you ask the average person, they argue that it won't change what they buy at all. So how do you explain where the money comes from? One explanation is that 99% of the time basically no one thinks about a .5% sales tax, but there is a 1% chance that it is the straw that breaks the camel's back. That seems more plausible. Perhaps a better explanation is that most of the time people don't take the small increase into consideration, but by the end of the month they're a little bit short. So they buy less during the last week of the month. That seems reasonable and it has a very testable implication. After a sales tax increase, you should either see less spending during the fourth week of the month, or you should see more credit card spending during that month. (It would be very interesting to see if there is a difference between months with 31 days and February.) Since I havne't been able to find anyone who has done this test: I'm left with the following dilemma. My explanation of where the money goes is wrong,(Very plausible.), my search of the literature went awry (very plausible), or no one has done this test (not so plausible). Any thoughts? Yours, mitch
