A policy paper from the Jack Kemp Foundation, published on March 24, argues that making sales taxes more progressive could enhance economic growth by increasing disposable income for low-income households. The change could also reduce reliance on government redistribution programs.
According to a report from the Jack Kemp Foundation, tiered sales tax systems—exempting low-cost necessities and increasing rates on big-ticket items—could improve equity without sacrificing revenue. Economists Erik Bergren and Ike Brannon argue that this approach would make state tax codes less regressive and offer a policy template for national consumption tax debates. The paper highlights how low-income households bear a disproportionate burden under flat-rate sales taxes. Bergren and Brannon contend their model could inform future reforms at both state and federal levels.
Unlike income taxes, consumption taxes do not discourage saving and investment and are often seen as more efficient. The Tax Foundation explains that while consumption taxes may affect work incentives slightly, they encourage behaviors that support long-term economic growth.
Programs like the Earned Income Tax Credit (EITC) and Supplemental Nutrition Assistance Program (SNAP) help offset regressive tax effects by boosting after-tax income for low earners. According to the Food Research & Action Center, these programs support millions of working families and contribute to economic mobility.
Engel’s Law states that as household income rises, the proportion spent on necessities like food declines. A 2016 report from the United States Department of Agriculture (USDA) explains that this principle illustrates why lower-income households are more affected by taxes on essentials.
Established to carry on the legacy of former congressman and Housing Secretary Jack Kemp, The Jack Kemp Foundation promotes inclusive, pro-growth public policy rooted in the principles of free enterprise, economic mobility, and equal opportunity, according to its website.
