Dearborn Mayor and Chairman of the U.S. Conference of Mayors Urban Economic Policy Committee Michael A. Guido opened the January 18 meeting by pointing out that the census count and Internet taxes were critical issues for cities across America. The census issue because it is the basis for redistributing both political representation and federal aid. And Internet taxes because the current inability to collect taxes on remote sales conducted over the Internet has the potential of seriously eroding state and local sales taxes. Committee members heard from two speakers who provided an update on each issue.

Census Bureau Chief Kenneth Prewitt told members of the committee that the 2000 Census count had gone exceptionally well. On December 28, the Bureau reported the first set of numbers from the census count, the national and state population totals. He reported that as of April 1, 2000 the population of the United States was 281,421,906, a 13.2 percent increase over the 248, 709,873 in the 1990 census. As required by law, this new total was submitted to the President and will be used to apportion the 435 seats in the U.S. House of Representatives among the 50 states. Detailed population counts must be submitted to the states by April 1, 2001 for use in redrawing congressional and state legislative districts.

Successful Census

Prewitt praised the Bureau staff and stakeholders for conducting a successful census. He said the numbers released so far have a good level of accuracy. However, he cautioned that the Bureau does not yet know how accurate the count is. Final state and local population totals may still need adjusting if the Bureau finds that a significant amount of undercounting and over-counting took place. Professionals at the Bureau are in the process of evaluating data from a 314,000 - individual nation-wide "post enumeration survey" to determine if adjustments should be made to improve the accuracy of the census count. The Bureau is planning to release the adjusted numbers in the next two to four weeks.

When asked if he thought the new Administration would release the adjusted numbers, Prewitt said he had no idea. The new Administration has not indicated one way or the other, its views on the issue. Undercounting has been a huge problem for many cities in past census counts. For that reason, Mayors have been overwhelmingly in favor of using modern scientific methods to in order to improve the accuracy of the census count.

Sales Tax Reform

Harley Duncan, executive director of the Federation of Tax Administrators, told committee members that the Streamlined Sales Tax Project, which involves representatives from 35 states developed recommendations last December for reforming state and local sales taxes. The Project, which received considerable input from local governments and the private sector, is intended to overhaul the existing sales and use tax system to better accommodate interstate commerce, particularly the changes presented by the growth of electronic commerce. It is aimed at developing a simplified system that uses advance technologies to remove or reduces the burden on sellers for collecting state and local sale taxes.

In describing the Project, Duncan said it was designed to achieve uniformity in sales and use tax systems, provide a safe harbor for vendors that comply with states uniform simplification standards, place more responsibility on states to control changes in state and local tax rates, and promote the use of technology and software to make the collection of taxes simple and easy.

Duncan told committee members that the goal of the Project is to get remote sellers to collect sales and use taxes on a voluntary basis. The idea is to make collection simple and easy. And provide remote sellers protection from certain liabilities as an added incentive to get them to collect state and local taxes. To achieve this goal, the Project would require each state to adopt model legislation authorizing its chief state tax administrator to enter into an agreement with other participating states to achieve certain uniform tax simplification standards. States would also be required to sign a multi-state agreement containing the actual standards that must be met as well as acceptance and governance provisions.

Modifications Expected

Project recommendations have been submitted to the National Governors' Association and the National Conference of State Legislatures where some modifications can be expected. Duncan pointed out that local officials and state legislators have raised concerns about some of the standards. While the proposal allows state and local governments to maintain separate tax rates, both would be limited to a single rate that applies to all goods and services. Currently in some states, the tax rate is lower on certain items. This would be eliminated under the proposal.

The biggest issues he mentioned for local governments were provisions in the proposal that call for a single tax base (which delineates items that are taxable), and state administration of both state and local sales taxes. In some cases, local governments have a different tax base from the state and administer their own taxes. For example, some states do not tax food but allow their local governments to do so. Going to a single tax base would eliminate this and could cause these local governments to lose an enormous amount in revenues. The Conference believes technology can be used to make it easy for local governments to retain a separate tax base. It is hoped that a solution can be found that, at the very least, will hold local governments financially harmless.

To get started, Duncan said the Project hopes to get a few states to adopt the model legislation and sign the multi-state agreement this year. More states are expected to join once a few states demonstrate how the Project can benefit state and local governments and the private sector. It is hoped that Congress will adopt legislation authorizing states to require Internet companies and other remote sellers to collect state and local taxes after states comply with uniform simplification standards supported by state and local governments.