How online retail is starving states

By Ezra Klein

Speaking of state budgets, Kevin Drum brings up an important issue that's largely flying under the radar. One of the main ways state governments fund themselves is through collecting sales tax. But you can't collect sales tax on Internet retailers who aren't based in your state. And, as you can see in the graph atop this post, they're accounting for a lot of retail these days -- $44 billion in the last quarter alone, or about 4.3 percent of total sales. That total, as you might imagine, is rising steadily, and states that rely on sales taxes are finding they're raising less and less.

There's an easy answer to this: Shift over to income taxes, or some other kind of tax. But conservatives in state government won't allow that to happen. And in a state like California, where you need a two-thirds majority to raise taxes, they've got the veto power to keep it from happening. Drum comments: