Last month, the sales tax revenue collected by New York, and other states around the country soared. There seems to be a direct correlation with the increase in inflation. The concept makes sense since as inflation continues to rise, consumers will need to spend more money on goods, leading to them having to pay more in taxes per purchase.
Breakdown of Inflation
Inflation is the decline of purchasing power your dollar has over a given period. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level on a specific basket of selected goods and/or services.
Recently, inflation has steadily gone up and has been reaching record highs over the last 40 or so years across the entire country, meaning if you had $50 a year ago, you’d have a lot more purchasing power than if you had the same $50 today.
The U.S. government is always trying to find ways to fight the rise of inflation but has found little success. Some of these methods include price control and decreasing the overall money supply to raise interest rates and discourage consumer spending, among other methodologies.
The Numbers
Local New York Governments have reported a combined 15.7% increase in sales tax revenue from the same period last year. Revenue across New York State reached almost $1.7 billion in April, a $232 million increase. These sales revenue numbers line up with the sharp increases in inflation the state has experienced. New York City alone reported $726 million in sales tax revenue for April which was about a 10% increase from the month before. The highest increase percentage-wise in the state was 113%, in Oswego county. Schenectady was the only county to report an overall decrease in sales tax revenue at -12.6%.
How can we combat inflation?
The simple answer to combat inflation is to buy less. Cutting out non-essential things from your budget can be a good idea to try and slow the demand for a product. One way many Americans are trying to cut back is eating out less and cooking more, driving less, utilizing carpooling and public transport, as well as working remotely more often, if possible.
Wrap Up
Inflation will always be something that’s a part of our daily lives whether we like it or not. It is always important to keep up with the news on how inflation affects the taxes we pay daily so you can adjust your spending habits accordingly. If you ever have any questions on the inflation rate or how it is affecting sales taxes, call your accountant or trusted financial advisor for the facts.