recommended reading

If the Internet Sales Tax Fails, Expect Higher Gas Prices

Paul Sakuma/AP file photo

Legislation allowing states to collect sales taxes on purchases made over the Internet—approved by the Senate in a 69-27 vote Monday evening—faces an uncertain future in the House.

What would happen if the push for Internet sales taxes falls apart? In at least a couple of states—Maryland and Virginia—it could mean higher gasoline prices.

One reason the Senate’s Marketplace Fairness Act came up now is that states are hungry for new revenue. Balanced-budget rules and the slow economic recovery have combined to produce a $55 billion budget shortfall affecting all states this year.

That hunt for revenue makes online shoppers an appealing target; estimates are that collecting sales taxes on Internet purchases could put an additional $23 billion a year in state coffers.

Some states are so anxious for the anticipated revenues they’ve already committed the money to various projects. Virginia recently approved a landmark transportation bill that assumes $258 million in tax receipts from online sales—about 65 percent of which would go toward infrastructure and abolishing the state gasoline tax.

Maryland is also dependent on congressional action, though to a lesser extent. The state plans to apply online-sales revenue toward offsetting an increase in its own gas taxes. Plans call for phasing in a hike of 20 cents per gallon between now and 2016, but about 7 cents of that could be offset by Internet sales taxes.

If the Marketplace Fairness Act doesn’t make it through the House, both Annapolis and Richmond will be left with revenue shortfalls in programs already approved in state budgets. I Maryland, drivers would be hit with the full 20 cent hike in gasoline taxes.

“They’re going to get the money they want for transportation,” said Stephen Lee Davis of Transportation for America, “whether it’s coming through the Internet-sales tax or not.”

The consequences for Virginia will be a little more extreme. Instead of abolishing its gas tax as planned, the state will reverse course and raise it—probably the last outcome motorists want.

In the long run, this might be a good thing. Because gas taxes haven’t kept up with inflation in most places, they’re no longer the moneymakers for states they used to be. Raising gas taxes would correct for that downward trend.

And while they don’t affect fuel costs to the same extent that crude oil prices do, gas taxes are between six and 14 times more effective at cutting fuel consumption than new fuel-economy standards, MIT researchers have found. That’s because, unlike advances in fuel efficiency that take place over years, gas taxes produce immediate changes in behavior—such as switching to public transit or ditching the car entirely, both of which could have offsetting social benefits.

Threatwatch Alert

Thousands of cyber attacks occur each day

See the latest threats

JOIN THE DISCUSSION

Close [ x ] More from Nextgov
 
 

Thank you for subscribing to newsletters from Nextgov.com.
We think these reports might interest you:

  • Modernizing IT for Mission Success

    Surveying Federal and Defense Leaders on Priorities and Challenges at the Tactical Edge

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • Effective Ransomware Response

    This whitepaper provides an overview and understanding of ransomware and how to successfully combat it.

    Download
  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download

When you download a report, your information may be shared with the underwriters of that document.