The Internet Sales Tax Shuffle

The U.S. Senate is considering a law taxing Internet sales. If passed, it may alleviate some pain at the pump from Governor Martin O’Malley’s gas tax hike, but we would feel a sting at the mouse click.  The Marketplace Fairness Act, would allow states to collect sales tax on Internet purchases.

If the measure is signed into law, the Maryland law would halt the phase-in of a wholesale tax on gasoline at 3 percent, and apply revenue collected from taxing Internet purchases for transportation spending.  In addition to indexing the per-gallon excise tax to inflation, O’Malley’s Transportation Funding Act of 2013 contains a 5 percent sales tax (phased in over three years) levied at the wholesale level.

 This scenario would not lower Marylanders’ tax burden–gas prices would still rise approximately 20 percent.  Rather it would merely open a new entrance for government spelunkers enter our wallets.

 If O’Malley wanted to use sales tax revenue to augment transportation funding, he already has a significant amount of funding from that source.  According to state revenue figures compiled by the non-partisan, grassroots group Change Maryland, the state takes in $613 million annually from O’Malley’s 20 percent state sales tax increase passed during the 2007 special session.

 It also bears repeating that given past behavior, there is no guarantee for Maryland motorists that the extra revenue from the gas tax or Internet sales tax will go to road maintenance or traffic congestion relief.  Governor O’Malley and the overwhelming majority of legislators who voted for the gas tax hike, also voted to raid $868 million in Highway User Funds from the Transportation Trust Fund.  Those funds, used to cover increased spending on other programs, have not been repaid. 

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