A version of the following commentary appeared in the Examiner.
On November 3, voters in Blue Springs will decide whether to institute a use tax in their city. Use taxes in Missouri are simply sales taxes on goods delivered to your home from out-of-state sellers. While a use tax can be a beneficial way to help fund local government, Blue Springs is going about it all wrong. This use tax proposal is poorly structured and will be just another tax increase on residents.
Local governments have been authorized to collect use taxes for a long time—predating the Internet, even—but such taxes were not widely adopted until recently. Collecting sales taxes on an average family’s catalog purchases was a lot of work for very little revenue. The internet has changed that. The Supreme Court’s 2018 decision in the Wayfair case, changes to state law in 2021, and, most obviously, the tremendous increase in e-commerce over the past two decades have combined to greatly increase the need or desire (depending on your point of view) for governments to tax online sales.
E-commerce now makes up over 17% of total sales in the United States according to the U.S. Department of Commerce. For cities like Blue Springs, 17% is a lot of sales not to tax. Expanding the tax base with a use tax, if done in conjunction with reductions of other more harmful taxes, could have been a beneficial change for Blue Springs. But that is not what the city is proposing.
Blue Springs officials have pledged to spend the use tax revenues on street improvements. They likely made this promise—they even put it in the ballot question—because two prior attempts at passing a use tax failed and they wanted to be very specific for voters. I understand the decision, but it is nonetheless a bad policy choice. If Blue Springs wants dedicated revenue for its roads, it should enact a local gas tax (which is legal but admittedly rare in Missouri). Passing a use tax that is completely unrelated to the use of local streets to fund those same streets is poor public policy. Paying for roads with sales or use taxes subsidizes driving by disconnecting the act of driving from the cost of driving. I love driving, but I should pay for it through gas taxes, not a new, higher tax on the laundry detergent delivered to my house.
It is a central tenet of tax policy that a tax base should be as broad as possible. The more expansive the tax base, the lower the rate that must be imposed to fund government functions. A use tax could have been proposed to responsibly expand the tax base and equalize the competition between online and physical stores, alongside tax reductions elsewhere. Imposing a use tax in a revenue-neutral manner is not a new idea. It is exactly how the Missouri legislature addressed this issue with the state’s new use tax law in 2021.
The current Blue Springs property tax rate of $0.5743 is relatively high, especially when you consider that Blue Springs—unlike other comparable cities—does not provide fire service, a health department, or a municipal library. Blue Springs also has a high local sales tax rate. City officials could have pledged to enact offsetting revenue reductions that embrace the positive aspects of the use tax. Instead, they dedicated the new revenue to road improvements, which, while certainly an important function of local government, should not be funded in this manner. This Blue Springs use tax plan is just another harmful tax increase.
