Legal Definitions - stopgap tax

A stopgap tax is a temporary financial levy imposed by a government to address an immediate, short-term funding need or budget shortfall. It is typically enacted to bridge a gap until a more permanent or comprehensive fiscal solution can be developed and implemented.

• Example 1: City Budget Emergency

  A major city experiences an unexpected and severe economic downturn, leading to a sudden and significant drop in sales tax revenue. This creates an immediate budget deficit, threatening the city's ability to fund essential services like public safety and sanitation. To prevent service cuts while a long-term financial recovery plan is being drafted, the city council implements a temporary, six-month surcharge on property taxes.

  This property tax surcharge is a stopgap tax because it is a temporary measure designed to fill an urgent financial gap (the revenue shortfall) and ensure critical services continue without interruption until a more sustainable budget strategy can be put into place.

• Example 2: State Infrastructure Crisis

  A state discovers that a critical highway bridge is structurally unsound and requires immediate, costly repairs to prevent collapse and ensure public safety. The state's existing transportation budget does not have sufficient funds allocated for such an unforeseen emergency, and a permanent funding solution like a bond issue would take too long to approve.

  In response, the state legislature passes a temporary, one-year increase in the motor fuel tax, specifically earmarking the additional revenue for the emergency bridge repair project. This temporary increase in the motor fuel tax acts as a stopgap tax. It provides the necessary immediate funding for an unforeseen and urgent infrastructure repair, bridging the financial gap until a more permanent funding mechanism for infrastructure can be established or regular budget cycles can address the need.

• Example 3: National Government Funding Impasse

  A national government is facing an impending deadline for its annual budget, but political disagreements prevent the passage of a full, long-term spending bill. Without funding, many government operations would cease, potentially leading to a shutdown of non-essential services.

  To avoid a government shutdown and allow more time for negotiations, the legislature passes a temporary, three-month increase in certain corporate income taxes, specifically to fund essential government services during this interim period. This temporary corporate income tax increase is a stopgap tax because it serves as a short-term solution to an immediate funding crisis, preventing a shutdown and allowing the government to continue functioning while a more permanent budget agreement is negotiated.