Does Broadband Shrink Local Tax Revenue?

Many politicians and Main Street/Chamber of Commerce organizations have been leery of increased Internet usage in their areas, fearing that local customers will begin shopping online and ultimately diminish the local tax base. Using Oklahoma data to study the relationship between broadband adoption and local retail sales tax collections, we found that increased broadband does not, in fact, lead to lower tax collections.

Instead, we found that tax rates and poverty rates are the features that markedly affect whether sales tax collections rise or fall. As broadband Internet access becomes more common across the country, this technology has generally been heralded as positive for opportunities it can offer in commerce, education, and entertainment. But the impact of broadband on local retailing– and on the tax income derived from local sales – have been unclear.