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Sales Tax Incentives for Economic Development: Why Shouldn't Production Exemptions Be General?

Principles of sales taxation hold that production input purchases should be exempt for efficiency and burden transparency. State legislative politics collides with principles. Rather than providing general exemption, states encourage economic development through special preferences for businesses making certain purchases, although some offer wider general production exemptions than others. States do not provide broad exemptions because lawmakers focus on taxing final sales of things without understanding the consumption base intent of the sales tax, because they like the political safety of hidden taxes and apparent avoidance of burden on individuals, and because they prefer taxes more likely to be borne by non-residents.