How States Should Now Consider Expanding Sales Taxes to Services, Part 2

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As we explained in our prior essay, state governments are experiencing severe revenue needs because of COVID-19, and expanding state sales tax bases to include services is a promising option for state governments to manage their budget shortfalls. In this, the second essay in this series — a contribution to Project SAFE: State Action in Fiscal Emergencies — we explain some of the implementation details and options for how states might go about expanding their sales tax bases to include services. In particular, we argue that there are some incremental steps that seem to be technically and politically feasible as responses to the current crisis.2 In particular, we argue the states should start by expanding their sales taxes to include services that are least problematic as a matter of policy and politics.