Republican Governors Look to Sales Tax for Revenue
- Sales Tax News
- Jan 25, 2013 | Gail Cole
The governors of the nation are afoot, seeking creative ways to fill state coffers and balance budgets. T'is the season of State of the State Address, after all, when governors talk about what their states are doing well, what needs to improve, and how they're going to pay for everything. It's the perfect time to put forward proposals for change.
This year, there seems to be a trend among Republican governors to "increase reliance on state sales taxes… ."
The governor of Michigan is open increasing the state's sales tax by 2% to fund transportation needs. The people of Michigan would need to approve that by vote. The governor himself would prefer to raise the funds by imposing a sales tax on gasoline at the wholesale level and increasing vehicle registration fees.
Tax Consumption, Not Income
The New York Times notes that there is growing debate among politicians "over what kind of tax system most encourages growth in a 21st-century economy." The idea "that the economy would be better served by focusing taxation on consumption rather than on income" has long been "championed by conservatives but accepted up to a point by economists of all stripes… ."
Supporters of taxing consumption over income argue it makes states more competitive. Businesses are drawn to states with no corporate tax, and employees are drawn to states without an income tax.
Those against shifting the tax burden from income to consumption argue that it's not fair. Lower income households spend a higher percentage of their income on goods than do the wealthy. Danny Kanner, spokesman for the Democratic Governors Association, called the policies "shell games that reward the wealthiest Americans at the expense of everyone else." Democrats also worry that vital services will end up losing their funding.
The proposals listed above are just that -- proposals. They need to be approved by state legislatures, and that may prove difficult, "even in states with Republican-dominated legislatures… ."