by Sarah Curry
Director of Fiscal Policy Studies
The changes to the state’s sales tax aren’t the same that was proposed earlier this year. Many of the previous proposals included an expansion of the sales tax base and then a lowering of the overall rate. This plan does expand the base a small amount, but keeps the sales tax rate untouched.
One of the goals of tax reform was to remove some of the complications in the tax code. Certain items are taxed through a combination of taxes, making tax revenue less transparent. In efforts to make taxes more transparent and remove unnecessary tax code, many taxes were consolidated into the sales tax category.
The taxation of electricity and natural gas are great examples of how the tax reform package is simplifying the tax code. In current law, the franchise tax is responsible for the taxation of electricity and a special excise tax for piped natural gas. In both of these taxes, a percentage of the tax collected by the state is then sent to the local municipalities. This tax plan removes these two provisions and makes natural gas and electricity both taxable under the sales tax.
Below are the specifics of the sales tax, as found in the tax reform plan:
Effective January 1, 2014:
Effective July 1, 2014:
The total impact for the sales tax revenue to the state budget is listed below. These figures include the shift of electricity and natural gas tax from other tax sources to the sales tax, making the amount look larger than it actually is. For example, the total electricity tax shift amounts to $157 million in 2015, making the sales tax figure inflated when that tax is just shifting in its categorical name and not in the amount collected.
|State Revenue Sales Tax Change:
||Local Revenue Sales Tax Change: