Many apparently are convinced that corporate income taxes come out of the pockets of some impersonal institution rather than of some individual, or perhaps that the only individuals affected are a corps of fat cats who either own the stock of, or hold executive positions in, large businesses. The truth, as many undergraduates studying microeconomics or public finance discover, is somewhat more complex. Producers do bear at least part of the burden of excise or sales taxes. They do so because the tax raises the apparent consumer price of the goods they sell, and there is usually some reduction in the quantity demanded when the tax is imposed or raised, and producers' sales go down. Nowhere is this more apparent than in reactions to proposals to broaden the base of state sales taxes.
Sales taxes cover some retail purchases in all district states except Montana.
From time to time, as states face funding squeezes, proposals surface in legislatures to lengthen the list of goods or services to which the tax applies. In many states some services, such as the preparing and serving of food in restaurants, is already subject to the sales tax. On occasion, proposals are made to extend this to legal services, another commonly procured type of service. Because they know that producers do bear some of the cost, and that their business and income would suffer if their fees were raised by 4 percent or 6 percent. Another example is the tax on luxury automobiles, boats and aircraft that was introduced in 1990.