The city of Herculaneum in Jefferson County is showing how use taxes can be properly added into the municipal revenue mix. A use tax is simply a sales tax on goods you purchase online (or through catalogs) and have delivered to your home. Many cities and counties have added them in recent years as online shopping has grown. Voters often approve them, but sometimes they say “no, thank you.”
Supporters of use taxes say they level the playing field between online purchases and actual stores from a cost perspective, along with raising revenue for local services. That is true, and I have generally been supportive of use tax expansion in recent years. Broadening the sales tax base is a good thing.
However, I have also called for cities and counties to offset the increased revenues from use taxes with cuts to other taxes (at least partly). That approach gives you the benefits of expanding the tax base, equalizing competition between types of retailers, and some increased tax revenues without giving local governments a windfall in tax money. Unfortunately, most local governments have shared my enthusiasm for the first three parts, but not the last one.
But Herculaneum is doing it the right way. Herculaneum has included in the ballot language for its use tax vote on April 7 that, if the use tax is passed, the city will reduce property taxes by ten percent to partly offset the new revenue collections. Regular readers will know that I support making property taxes the foundation of local government revenue, but that doesn’t mean I want high property taxes. If Herculaneum can expand its sales tax base while lowering its property tax rate for everyone, that is a reasonable trade-off for taxpayers and residents.
