You raise a number of great points about exemptions and compliance costs, etc. I would like to point out that the taxes at the base of the original post, local sales and property, have decidedly lower compliance costs then corporate or personal income taxes, capital gains taxes, etc. Sales taxes can have a substantial cost to get started, but after that the collection and remission of them is fairly simple. Property taxes (if you agree with the assessment, which is a huge “if”) also have a generally low compliance cost of one payment at the end of the year. These types of taxes tend to get complicated exactly when you get to the point of TIF, abatements, etc, which require a lot more work by attorneys, accountants, etc. to make sure the business gets full credit for whatever the gov’t gave them credits for.

“Why don’t you actually tell me why you think some things should be exempt from taxation and others taxed more highly as a result, as opposed to taxing more things broadly and lowering the rates for all of them as a result.”

Assuming that each scheme generated same govt revenue, I do prefer the ‘exemptions’ model.

Besides the direct loss from paying taxes, the overhead of hiring accountants/lawyers to comply w taxes at the minimal rate possible, is an additional cost. Also enforcement costs for non-compliance has reduced pool of potential targets. Thus, if taxes were concentrated in only a few industries, the amount of deadweight loss to tax-compliance-overhead is reduced, and society as a whole suffers less net loss.

Why don’t you actually tell me why you think some things should be exempt from taxation and others taxed more highly as a result, as opposed to taxing more things broadly and lowering the rates for all of them as a result. The state’s Hancock amendment prohibits the state from raising too much total revenue (Thank God), so if Missouri greatly expanded the items it taxed it would be forced, at some point, to lower the rates or return the money for taxpayers.

Anyway, the 4% tax has definitely pushed this marginal consumer of yoga classes out of the market.

There are lots of tax exempt entities in Missouri, especially for purposes of property taxes, and I don’t think all of them deserve to be tax exempt. As we remove entities from the tax rolls, we make the burden larger on the remaining taxpayers. Now, would I love to see a greatly reduced government sector which might make all this moot? Of course, but that is not how it works right now. Taxes should be spread more evenly and be lower for everyone, not higher for most people or businesses because a few of them succesfully claim property or sales tax exemptions in Missouri.

I think many more service businesses, including yoga classes, should be charging sales taxes if we can follow the state fair tax plan and replace the state income tax with higher and broader sales taxes.