State & Local Government Policy, Business and Technology

The State and Local Stake in a Federal Digital-Commerce Tax

Governing: New taxes are always unpopular. Macroeconomists and policy wonks generally agree that It is counterproductive and unwise to impose new taxes in the middle of a recession, with the possible exception of a fat-cat income surtax that would not materially impact the economy. However, governments at all levels are desperate for new post-COVID-19 revenue sources.

Meanwhile, the stock market and the economic data both reveal a growing "COVID chasm" between leading digital businesses and smaller companies that rely on local storefront sales and services. The global technology giants' shareholders have recently enjoyed new all-time-record highs. Yet most economists expect that when federal pandemic-stimulus aid dries up, small-business bankruptcies will increase. And the pandemic has accelerated America's migration away from shopping malls and Main Street shops.

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