Consumption Tax

As far back as 1872, when Montgomery Ward issued its first mail-order catalog, vendors have sold to customers without being physically present in the customer’s state. Although sales taxes have existed since the 1920s, we have no effective system for collecting sales-and-use tax on sales by remote sellers.

Today we’ll look closer at the history of the remote sales tax issue, clarify New York’s law change and note possible solutions.

As a 1965 congressional report noted: “The present system of State taxation as it affects… more

California State Board of Equalization Chair Judy Chu believes it is time to address our deficit and modernize our sales tax by applying it to services. Her call to modernize our sales tax would be a good start in addressing an underlying cause of our budget problems.

Taxing services is not an outlandish idea. Most states already tax more types of services than does California.

Taxing services is also not a bad idea. Lifestyle changes have led us to spend less on… more

The 1984 Treasury Department report (PDF) that laid the foundation for the base broadening and rate reductions of the Tax Reform Act of 1986, called for complete repeal of the itemized deduction for state and local taxes. Citing similar reasons, the 2005 final report of the President’s Advisory Panel on Federal Tax Reform also called for repeal. Yet, there are also proposals to make permanent the ability to deduct either state income or sales tax (for… more

Politicians don't like to talk about taxes except to brag about cutting them. But with California's widening budget deficit threatening deep cuts in education and other public services, it's difficult to avoid discussions about raising taxes.

Unfortunately, what's likely to be lost in the upcoming partisan melee over whether new taxes are needed to close the $16-billion gap is an equally important tax issue -- California's aging and often unfair tax system needs to be overhauled.

The goal of tax… more

In recent years, there have been enactments and proposals for a variety of new taxes at both the U.S. state and local levels. A key impetus for these changes is the need for more revenue to fund state and local governments. While existing taxes could be increased to generate revenue, other sources have been considered for a variety of reasons. This article looks at a few recent examples and how they stack up under the principles of good tax policy.

Sources… more

California Lawmakers Want to Tax Downloads (Orange County Register)

Democrats would revise the definition of what's taxable instead of proposing a new tax that requires GOP support. . .

So what do you think will happen with downloads?

"You're just going to have a bigger use tax problem," admits Annette Nellen, a San Jose State tax professor who nonetheless supports taxing downloads.

Nellen likes the tax, in part, because increasing revenues isn't her biggest concern – rationale tax policy is. A… more

State sales tax bases have traditionally included only tangible personal property. Often services are either ignored completely in describing the tax base, or a small number of services are specifically targeted as legally taxable. One reason for exclusion is historical. Tangible personal property was the main consumption item back in the 1930s when many states started imposing a sales tax. However, in the past two decades, consumption of services has become significant.

Since 1990, the Federation of Tax Administrators ( more

Click here for a brief video discussion of this idea.

For more than 70 percent of American families, the payroll tax is the largest tax they pay. Yet the tax is regressive, inefficient, and insufficient to fund the programs it finances. As a 15.3 percent wage tax levied on employers and employees, it deters job creation and depresses wages at the low end of… more

The greatest challenge in politics is to understand when a political era is closing and the door to a new one is ready to be opened. Thirty years ago, a small band of conservatives understood that what they called the era of “tax and spend” -- in which government grew inexorably on a tide of invisible tax increases through Republican and Democratic administrations -- was ready to be challenged.

In 1977, Rep. Jack Kemp and Sen. Bill Roth introduced a bill… more

Will 2007 be the year of fundamental tax reform? It should be, but in all likelihood, it will not be. Still, there are plenty of changes that could be made to move the tax code in the right direction.

First, the reasons there should be tax reform. Everybody hates the tax code. There is no better political rallying cry than "I am going to reform the tax code to make it simpler, fairer, and better for the economy." The same… more