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Republicans propose using sales tax money for new tax cuts

A U.S. Supreme Court ruling making it easier to collect online sales taxes could yield billions of dollars for state and local governments — if they decide to keep it.

Posted: Jun 30, 2018 11:11 PM

JEFFERSON CITY, Mo. (AP) — A U.S. Supreme Court ruling making it easier to collect online sales taxes could yield billions of dollars for state and local governments — if they decide to keep it.

Rather than spend the windfall on schools, prisons or other government services, some Republican governors and lawmakers are proposing to give it away in the form of tax cuts.

Wisconsin Gov. Scott Walker, running for re-election this year, has suggested the extra revenue could be used to expand tax breaks for seniors or households with children. Nebraska Gov. Pete Ricketts, also on the November ballot, wants to put it toward property tax relief.

Some Kansas lawmakers are eyeing a reduction in the food sales tax; the Tennessee House speaker wants to lower the state's 7 percent sales tax rate; and a Missouri lawmaker plans to sponsor an individual income tax reduction to negate the sales tax expansion.

"To just take that revenue would be a tax increase," said Missouri Sen. Andrew Koenig, echoing the reasoning of many tax-adverse Republicans leery of simply spending or saving the expected influx.

The court ruled June 21 that South Dakota could enforce a law compelling many out-of-state businesses to collect taxes on sales made to its residents. The ruling overturned a decades-old precedent stating that businesses without a physical presence in a state — like a store, office or warehouse — didn't have to collect sales taxes on behalf of the state. In such cases, customers technically were responsible for paying the tax, but most didn't.

As online commerce has grown, some large retailers such as Amazon already had begun collecting sales taxes for all 45 states that charge them. But others with a physical presence in only a few places haven't been doing so.

How quickly that will change could vary by state. In the past two years, 15 states have enacted laws attempting to require out-of-state companies to collect sales taxes, according to the National Conference of State Legislatures.

Many other states may have to wait until legislatures reconvene in 2019 to set specific requirements for out-of-state sellers. Most states already have set their budgets for the 2019 fiscal year.

State and local governments stand to gain $8 billion to $13 billion annually by collecting taxes from all remote sellers, according to a report issued last fall by the Government Accountability Office. Other estimates have been even higher.

Most states will see revenue gains equaling 1 percent to 2 percent of their total state tax collections, though states that rely more on sales taxes instead of income taxes could gain more, said Moody's Investors Service.

In Tennessee, which ranks high in sales tax reliance, Republican legislative leaders already are discussing ways to offset the anticipated surge in revenue with a new tax reduction.

"I think it's an opportunity for us to do something that I've wanted to do for some time now, which is lower our sales tax" rate, House Speaker Beth Harwell, who is running for governor, said during a recent candidate debate.

Tennessee's Democratic gubernatorial candidates suggested the money could go toward higher pay for public school teachers.

How states decide to use sales tax revenue may depend on their overall financial situation and could be complicated by varying estimates of how much to expect, said Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center.

"The amount of money is uncertain, and that would suggest states would want to be a little careful before they go and spend it," he said.

Mississippi Gov. Phil Bryant, a Republican, has said he will ask lawmakers to earmark the extra revenue for transportation.

In Kansas, lawmakers also may face pressure to use at least part of the money to comply with a court order to boost school funding, said House Taxation Committee Chairman Rep. Steven Johnson, a Republican.

In neighboring Missouri, however, the Supreme Court ruling could provide justification to continue a tax-cutting spree. A corporate income tax cut was signed into law in June. Legislation deepening an already planned individual income tax cut is pending before the governor. And Koenig said he will sponsor a bill during the 2019 session to use the online sales tax collections to offset yet another proposed cut to the individual income tax rate.

In some states, the ruling could lead to automatic tax cuts.

A 2016 South Dakota law raising the sales tax rate from 4 percent to 4.5 percent requires it to be scaled back by one-tenth of a percent for every additional $20 million the state reaps, if it's able to collect from out-of-state online retailers. The rollback is likely to be a top issue next legislative session. Though a Democratic senator wants to use the money to reduce food sales taxes, Republican Sen. Jeff Partridge, who sponsored the provision, said his goal remains to "give the money back to the people."

A 2013 Wisconsin law mandates an equal cut in state income taxes if federal law requires the collection of online sales tax. Walker said his administration is examining whether the Supreme court ruling triggers that provision.

"One way or the other," Walker said, "we'd want to get that back to the hardworking taxpayers."

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 115763

Reported Deaths: 3263
CountyConfirmedDeaths
Hinds7973177
DeSoto703979
Harrison522384
Jackson457884
Rankin394086
Madison383194
Lee357380
Forrest304678
Jones292484
Washington258399
Lafayette250443
Lauderdale2478135
Lamar225538
Oktibbeha202454
Bolivar201677
Neshoba1849111
Lowndes179962
Panola170040
Leflore167187
Sunflower162349
Warren154855
Monroe150673
Pontotoc147220
Marshall143129
Lincoln140157
Pike138456
Copiah137536
Scott125429
Coahoma124937
Grenada122638
Yazoo122234
Simpson121549
Union118825
Tate116839
Leake115041
Holmes114760
Itawamba113925
Pearl River113660
Adams108544
Prentiss106120
Wayne101722
Alcorn100112
George99218
Covington97527
Marion95042
Tippah90322
Newton86627
Chickasaw85526
Tallahatchie84526
Winston84121
Hancock84028
Tishomingo81241
Attala79426
Clarke75851
Clay69321
Jasper68717
Walthall63927
Calhoun62612
Noxubee59817
Smith59416
Montgomery54923
Yalobusha54514
Claiborne53716
Tunica53517
Lawrence51814
Perry49423
Carroll49312
Greene47818
Stone47514
Humphreys43816
Amite42513
Quitman4206
Jefferson Davis41011
Webster37613
Benton3416
Wilkinson33820
Kemper32615
Sharkey28514
Jefferson27610
Franklin2423
Choctaw2086
Issaquena1074
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 158701

Reported Deaths: 2680
CountyConfirmedDeaths
Jefferson23292377
Mobile16916315
Tuscaloosa10345140
Montgomery10250197
Madison935096
Shelby739063
Baldwin665869
Lee654665
Calhoun459961
Marshall439550
Etowah428551
Houston417034
Morgan416435
DeKalb342629
Elmore320853
St. Clair295542
Limestone287230
Walker279492
Talladega266435
Cullman248024
Lauderdale229442
Jackson215915
Autauga205931
Franklin205531
Colbert202132
Russell19493
Blount193225
Chilton188432
Dallas186627
Coffee177111
Dale176351
Covington174729
Escambia172730
Clarke135217
Chambers135044
Pike134113
Tallapoosa132987
Marion108129
Barbour10339
Marengo101922
Butler101140
Winston92913
Geneva9067
Lawrence85832
Pickens85218
Bibb84014
Randolph82716
Hale76830
Washington74912
Clay74412
Cherokee73814
Henry7176
Lowndes71328
Bullock64917
Monroe64610
Crenshaw60830
Perry5926
Fayette57713
Cleburne5698
Wilcox56812
Conecuh56113
Macon53620
Lamar4965
Sumter47221
Choctaw39212
Greene34216
Coosa2043
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