Government
3:03 pm
Thu May 23, 2013

Internet Sales Tax Bill Could Restore Some State Budget Cuts, Kentucky Group Says

Your online purchases could alleviate some of Kentucky's budget woes.

The federal legislation that allows states to collect sales taxes from more online retailers would benefit the Kentucky state budget, argues a policy group focused on economic policy.

If such legislation passed, Kentucky could gain $130 million to $200 million in revenue per year, the state's Blue Ribbon Tax Commission has estimated. That sort of money could lead to a restoration to programs that have recently been cut, including the child care subsidy for low-incoming, working families, says Jason Bailey, director of the Kentucky Center for Economic Policy.

The new revenue wouldn't be a miracle fix for the state budget, Bailey says, but it could reverse some serious cuts made the last few years.

"But there's some key cuts that have gotten a lot of attention that people are concern about, like the child care cuts, like the textbooks, that this could definitely help with," he says. 

Bailey argues that the bill's opponents are wrong to call it a new tax—because online sales are already suppose to have sales tax applied to them. But, under current law, the onus is on the customer to pay those taxes and compliance and oversight is low, he says. 

The proposed federal legislation would put an onus on large companies to collect state sales taxes on their products when sold online, but would exempt businesses that have less than $1 million a year in revenue.

The bill has already passed the U.S. Senate, but is hung up in the House. Of Kentucky's federal delegation only U.S. Rep. John Yarmuth, a Democrat, is supporting the bill. Republican Congressman Thomas Massie has opposed it, while the other four Congressional members have not weighed in yet. 

The bill passed with heavy bipartisan support in the Senate. But both of Kentucky's Republican senators, Mitch McConnell and Rand Paul, voted about the bill. 

Bailey adds that under currently law many small businesses lose out on revenue to online sales, yet the so-called internet sales tax bill could level the playing field. Also, many poor families don't have the luxury of computer to buy things online, Bailey says, which is another way the bill would help level things out. 

"It's a win-win across the board for the budget, for small businesses, for tax fairness," he says.