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Republican Governors Look to Sales Tax for Revenue

  • Jan 25, 2013 | Gail Cole

 Nebraska's Governor Would Like to Eliminate Many Sales Tax Exemptions.

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 Arkansas would like to reduce the sales tax on groceries.

The governor of Kansas has proposed extending a sales tax increase that was scheduled to expire in July of this year.

The governor of Louisiana would like to eliminate personal and corporate income taxes but increase and broaden the state sales tax.

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.

The governor of Nebraska would like to eliminate numerous sales tax exemptions.

The governor of Virginia has proposed eliminating the state gas tax and raising the state sales and use tax by 0.8 cent. That additional sales tax revenue would be dedicated to transportation.

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.

No Guarantee

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… ."

photo credit: O'BrienDigital via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.