Vanderbilt Law Review

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Sales and use taxes have been the great growth taxes of state and local governments during the past half century. The general sales tax, along with selected levies on gasoline, tobacco, and liquor, has had phenomenal growth during the past fifty years. In 1932 only Mississippi imposed a general sales tax. It produced seven million dollars, less than one percent of Mississippi's total tax revenues. Taxes once introduced, however, tend to grow at least until widespread dissatisfaction leads to a taxpayers' revolt,such as California's Proposition 13' or the election of President Ronald Reagan and the ascendancy of political conservatism and supply side economics. The more typical tax experience, which took place with the growth of state sales taxation, is reflected in the history of the New York City sales tax. That tax was introduced into the city's tax structure during the Great Depression as an emergency measure to relieve the inhabitants of the City of New York from the hardships and suffering caused by unemployment. The authority granted to the city by the state legislature to impose the tax was "temporary," expiring on February 28, 1934. That temporary levy has now been part of the city's tax structure for more than fifty years. In 1933 the tax rate was two percent; it is now four and one quarter percent and is imposed alongside the state's four percent sales tax.

At the end of 1984, in contrast to the single state that levied a general sales tax in 1932, the tax was in full force in forty-five states and the District of Columbia-every state except Alaska,Delaware, Montana, New Hampshire, and Oregon.' General sales and gross receipts taxes produced sixty-three billion dollars in 1984, accounting for thirty-two percent of all state taxes. Sales taxes also have become an important revenue source for local governments, although property taxes always have been, and remain today, the mainstay of local tax revenues. In 1932 sales and gross receipts taxes were insignificant, producing only .4 percent of local government tax revenues. They have burgeoned in recent decades; in 1984 local governments levied sales taxes in thirty-one states and collected eighteen billion dollars, or 14.5 percent of their total tax revenues, from sales and gross receipts taxes. I propose to examine several of the major developments in sales taxation that have taken place during this past half century of growth of the tax.'