Preface

By 2002, it is estimated, 30 percent of the American population age 14 and over will have purchased something online. However, according to most estimates, only a small percentage of the sales and use tax owed on such purchases will be paid. This indicates an alarming trend for state and local governments, since many depend heavily on sales tax revenue to finance government operations and programs. The purpose of this report, therefore, is to educate the public and policymakers about the range of issues surrounding this topic, provide estimates on the long-term implications for the state budget, and discuss the policy options for increasing compliance to the use tax.

The report is designed so that it is not necessary to read it in its entirety. That is, each chapter can be read as a separate piece, and understanding it does not depend on having read the previous chapter, although on occasion one chapter will refer to material in another. This structure enables readers who have an interest in a specific topic to read only the chapter that deals with that area. The work can also be read from front to rear; however, some explanations will be repeated.

The KENTUCKY LONG-TERM POLICY RESEARCH CENTER

The Kentucky Long-Term Policy Research Center was created by the General Assembly in 1992 to bring a broader context to the decisionmaking process. The Center’s mission is to illuminate the long-range implications of current policies, emerging issues, and trends influencing the Commonwealth’s future. The Center has a responsibility to identify and study issues of long-term significance to the Commonwealth and to serve as a mechanism for coordinating resources and groups to focus on long-term planning. Michael T. Childress serves as Executive Director of the Center.

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Footnotes

Michael Childress is the Executive Director of the Kentucky Long-Term Policy Research Center. He received a Bachelor of Arts degree from the University of Kentucky in 1984 and a Master of Arts degree from the University of California, Los Angeles, in 1986-both in political science. From 1988 to 1993, he was a social scientist at the RAND Corporation in Santa Monica, California. While at RAND, he authored numerous studies on topics ranging from demographic trends in the third world to the implications of declining budgets for the U.S. Army. In August of 1993, he became the first executive director of the Kentucky Long-Term Policy Research Center, where he oversees the Center’s numerous research activities.

Robert W. Cox is the Deputy Executive Director of the Governor’s Office for Economic Analysis (GOEA). He is principally responsible for the official General Fund and Road Fund revenue estimates used to prepare the Commonwealth’s biennial budgets. Mr. Cox received his Master’s Degree in economics at the University of Virginia in 1985. After working as a research economist at the University of Virginia’s Center for Public Service and Tayloe Murphy Institute for five years, he began working within the Kentucky Finance and Administration Cabinet in 1990. His primary interests are in the areas of public finance, regional economics, and input-output analysis.

Merl M. Hackbart is Professor of Finance and Public Administration and Director of Graduate Studies for the doctoral program in Public Policy and Administration at the University of Kentucky. He also serves as a member of the Kentucky Council on Postsecondary Education, the Kentucky Consensus Revenue Forecasting Group, and is a Senior Fellow at the Council of State Governments. He has held several administrative positions at the University of Kentucky, including Associate Dean of the College of Business and Economics, Director of the Martin School of Public Policy and Administration, and Special Assistant to the Chancellor. He has also served two times as State Budget Director and is currently a Senior Policy Advisor to the Governor.

Charles W. Martie is currently Director of the Division of Research and Development at the Kentucky Revenue Cabinet. His current research includes tax policy, data warehousing, and the application of data mining techniques to tax compliance. He was formerly an Associate Professor and Chair of the Economics Department at Quinnipiac College in Hamden, Connecticut. He has also served as an economist in the Bureau of Economics at the Federal Trade Commission, specializing in antitrust and merger policy. He earned his doctorate in Economics from the University of Connecticut. His publications include research in local government organization, tax policy, and health economics. He currently resides in Scott County with his wife and two children.

Kevin O'Neil got to know the world of Internet commerce while a summer intern at the Kentucky Long-Term Policy Research Center. He currently studies Economics and English Literature at Swarthmore College in Pennsylvania. Kevin’s other experiences include study abroad in Spain, summer work with the Lexington-Fayette Urban County Government, and volunteer work as a firefighter and teacher of English as a second language.

Peter Schirmer was a policy analyst with the Kentucky Long-Term Policy Research Center from 1994 to 1999. While at the Center, he authored, co-authored or edited eight book-length reports on topics ranging from rural Kentucky in the global economy to the role of information technology in the delivery of governmental services. He has a B.A. in Political Science from the University of Kentucky and an M.A. in Public Policy from the University of Michigan. Currently, he is working on an M.B.A. at Georgetown University.  Return to text.