Republicans for Bigger Government
On today's Coffee & Markets podcast, Francis Cianfrocca and I discussed the dreams of more tax revenue to fuel bigger government in the form of the Amazon tax. The latest, from the Wall Street Journal:
“The newfound support among Republicans is a dramatic change from just a few months ago. In February, at the Republican Governors Association meeting in Washington, one agenda item was online sales taxes. The reaction was decidedly cool, with Louisiana Gov. Bobby Jindal worried that the effort sounded like a new tax, according to two attendees…”
“Seizing on the recent political shift, Sen. Lamar Alexander, a Tennessee Republican, and co-sponsors from both parties are attempting to speed up action on a bill they wrote to give states authority to compel online companies to collect sales taxes… “Mr. Alexander fine-tuned the arguments for a federal solution to his fellow Republican lawmakers. "Conservatives don't want to pick winners and losers" in business, said the former Tennessee governor… "The handwriting is on the wall that states will collect sales taxes on online purchases," Mr. Alexander said. "This is going to happen—if not this year, then definitely by next year.”
And while most online retailers oppose it, Amazon is willing to cut a deal to get the same day delivery opportunity which is their Holy Grail (plus, they get to charge affiliates for calculating the tax).
“Republicans' general opposition to new taxes, particularly broad-based ones, led GOP governors to avoid considering the sales tax, even as its potential value to state coffers grew. In most cases, the no-new-taxes sentiment trumped pleas from in-state retailers that they would have to lay off employees or close their doors if their online competitors kept undercutting their pricing… "But the current economic environment made states start looking harder at this for new revenue that costs them nothing," said Sandy Kennedy, president of the Retail Industry Leaders Association… "What we saw here was a rapidly growing bipartisan coalition of business groups, labor, Republicans and Democrats coming together because money and jobs were more important than political gamesmanship," said New Jersey Assemblyman Troy Singleton, a Democrat and union official who strategized over beer with an official from the state Chamber of Commerce on supporting the Amazon package.”
Republican governors who claim they need these sales tax revenues to keep other taxes from going up are describing something that, in practice, has never happened. As I noted last week, the revenue has gone straight back into state coffers… when there’s been revenue at all. The vast numbers NCSL quotes in the WSJ have never materialized for states which attempted to collect, because in practice it's just a shift: local retailers lose out on income, lowering their income tax burden and mitigating the increased sales tax revenue.
But that’s not what this push is about – instead, it’s about future Democratic administrations which will have, in effect, the ability to create a vast new revenue stream to continue the grow of the size of government.
Most Republicans think of this as a one for one inequity – you buy a bag of widgets from Amazon instead of from Home Depot. But by opening this door, Republicans will allow the creation of a vast new tax on digital product lines and downloadable content. This legislation will inevitably make an iTunes Tax like the one Democratic Governors Association head Martin O’Malley has proposed a reality.
This represents nothing less than Republicans accepting their role as tax collectors for the pension/entitlement state, unwilling to take political penalties from cutting government employment or Medicaid, and willing instead to cave to create a higher tax burden on their citizens. If they were really interested in shrinking government, they'd be closing avenues to taxation, not opening up new ones.
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Jul '10
Re: Republicans for Bigger Government
HVTs
You've not addressed the well-made point (by Conservative Wanderer) that traditional retail space draws on local govt services and thus 'should' collect taxes from local customers to cover those costs. A web site in Timbuktu does not impact local govt-provided services. This internet tax is just protectionism by another name. It protects traditional retailers from competition--from a better, more efficient way of providing goods & services.
Because that point is irrelevant. First, "localities" aren't states.
A neighborhood isn't a sovereign polity.
Second, he misses the mark in #32. The fact of the matter is that he isn't going to a different jurisdiction to purchase his wares in that example. He's buying them in his own. If he doesn't dig the tax rates, he should try to change them.
Finally, the notion that I should have the added burden of collecting and remitting sales taxes beyond the income and property taxes that I pay, while the intertube guy must be exempt as a matter of "principle" is ludicrous.
May '10
Re: Republicans for Bigger Government
Ben, you make a persuasive argument about where this leads (especially on Coffee and Markets) but I think you miss the mark on the motivation of these Republican governors. The Amazon tax is part of a now three-decade old competition between the states to tax taxpayers in other jurisdictions more heavily than within a given state. They are limited, to an extent, by the Commerce Clause and Due Process Clause but they have fought fiercely within the Constitutional margins.
For instance on the income tax side, we have seen most states move from a three-factor apportionment formula (property, payroll, sales) to a single-factor formula (sales) (apportionment being the constitutional method for determining how much a state can tax a particular interstate entity). This reduces the burden on in-state taxpayers and shifts the burden to other states. I can list dozens of other little games played like this in income, sales, and property taxes.
The Amazon Tax is an outgrowth of this effort--Republican governors want to increase taxation on out-of-state taxpayers and "protect" in-state taxpayers (you make the case, to which I agree, that the Amazon tax does not achieve either goal effectively).
Edited on July 17, 2012 at 6:48amMay '10
Re: Republicans for Bigger Government
But I don't think Republican governors see these efforts as an attempt to raise revenue for a larger government. Most see this merely from the myopic view of one state: state X has an opportunity to bring in revenue from state Y with no economic repercussions within state X. Furthermore, we have a standoff--if state X does not impose a tax, state Y may be taxing state X's online retailers and state X does not have the reciprocal revenue.
This explains why low tax stalwarts like Chris Christie and Mitch Daniels have supported the Amazon tax.
I think the answer from the Right should be this: collectively, Amazon taxes are another stream of revenue for the Democrats to play with and getting caught up in inter-state conflicts only helps Democrats. Instead, Republicans in the House and (hopefully soon Senate and Presidency) should unite behind federal legislation that governs what the Commerce Clause was actually meant to permit Congress to regulate--interstate commerce. The precedent has been set. States are forbidden from imposing income taxes on entities who are merely soliciting orders for tangible personal property by Public Law 86-272 (since 1959).
Edited on July 17, 2012 at 7:10amMay '10
Re: Republicans for Bigger Government
The Commerce Clause can break up the standoff (as it was intended) and prevent states from destroying the internet with a proliferation of sales taxes. I fear - as you've seen with the Amazon deal in New Jersey - that a truly conservative response may now be out of reach. In hindsight, the intellectual groundwork should have been laid when New York passed an Amazon law in 2008. I guess it is just another lesson in the Right being slow to respond to our rapacious governments.
Edited on July 17, 2012 at 7:04amJun '12
Re: Republicans for Bigger Government
HVTs
cdor
HVTs
You've not addressed the well-made point (by Conservative Wanderer) that traditional retail space draws on local govt services and thus 'should' collect taxes from local customers to cover those costs. A web site in Timbuktu does not impact local govt-provided services. This internet tax is just protectionism by another name. It protects traditional retailers from competition--from a better, more efficient way of providing goods & services.
I always thought conservatives were for limited government, not against all government. Some taxes are necessary.
Red herring alert. There are no anarchists here. No one is saying all govt should be eliminated or that some taxes aren't necessary. · 2 hours ago
Amen.
It shocks me -- truly -- that so many conservatives are picking up the concepts of the left... "tax fairness" chief among them.
Dec '10
Re: Republicans for Bigger Government
So, if I sell off my extra junk via the web-- as an antique store-- sales taxes should not apply.
If I open my front door and give someone a cup of coffee in my living room while they pick through my stuff, and then process the order on the same software, sales taxes should apply.
Clear as mud.
Equal protection under the law, people. We can-- and should-- debate about what that equal protection should be. But having different taxation regimes for different storefront facades is the very definition of crony capitalism.
Edited on July 17, 2012 at 2:38pmFeb '11
Re: Republicans for Bigger Government
Paul A. Rahe: The heart of the matter is that no one in office -- Republican or Democrat -- is willing to say to public-sector employees: "Folks, tax revenues are down. We are going to have to lay some of you off." The answer is always a tax increase.
Michigan is a good example. The Republicans control the governorship and both houses; the population has dropped by more than 10% since 2000; the number of civil servants has increased in the last decade dramatically. The last Democratic governor raised taxes. Her answer to unemployment was to raise taxes and hire in the public sector. So what do the Republicans do after 2010. They raise taxes! · 13 hours ago
It may be so in Michigan, but is not so in North Carolina, so you're statement is too broad brush. The Republican legislature let a "temporary" sales tax increase expire as part of the 2012 budget. Gov. Perdue (a Democrat) vetoed the budget, but it was overridden. There were state government workers laid off as a result of the expiration of the sales tax. Perdue has vetoed budgets in 2011 & 2012 wanting to spend and tax more.
Feb '11
Re: Republicans for Bigger Government
KarlUB: So, if I sell off my extra junk via the web-- as an antique store-- sales taxes should not apply.
If I open my front door and give someone a cup of coffee in my living room while they pick through my stuff, and then process the orderon the same software, sales taxes should apply.
Clear as mud.
Equal protection under the law, people. We can-- and should-- debate about what that equalprotection should be. But having different taxation regimes for different storefront facades is the very definition of crony capitalism. · 38 minutes ago
Edited 37 minutes ago
Could not agree more.
Mar '11
Re: Republicans for Bigger Government
You are wrong, the statement is only true at the federal level right now. This works at the state and local level.
Over the long-term it might actually work at the federal leval. Would the tea-party of come about if we kept our debt lower but had higher taxes?
Nov '11
Re: Republicans for Bigger Government
Right. I am now leaving to work on the ecommerce site we are starting to support our main business, which is now a hobby. The other consumers, our employees, are on vacation right now. The internet has kept us alive during the recession anyway. I would love the internet to be taxed and help pay for unemployment of the fellow who came in yesterday and told me that he has to apply while waiting for his unemployment to run out. He is third applicant that basically said this however the other two were deciding whether or not to take the job we offered them (didn't say it before obviously- just had a 2 year non work gap). Let's raise prices on everything 10% or more (plus being almost unworkable for businesses as making people tax themselves didn't work as the Use Tax) so the money can go into the vacuum- I mean pay teachers to help our children, IRS agents and bureaucrats. Sorry for the sarcasm but it's my form of a rant. I guess Ricochet may be finally getting trolls.
Jul '12
Re: Republicans for Bigger Government
Brian Clendinen
You are wrong, the statement is only true at the federal level right now. This works at the state and local level.
Over the long-term it might actually work at the federal leval. Would the tea-party of come about if we kept our debt lower but had higher taxes? · 2 hours ago
If you look at the earlier entry from Ben Domenech linked in the OP, he shows a graph that indicates the rise in persons employed by the government. It shows virtually no growth at the federal level, modest growth at the state level, and explosive growth at the local level.
State and local governments look for handouts from the federal government to finance payroll (as seen in the “stimulus” bill). Debt is shunted up until it reaches the Federal level, and printing money remains a lender of last resort. Federal spending as a percentage of GDP has remained fixed at nearly 20% since about 1950, while state and local spending has nearly doubled in that time.
May '10
Re: Republicans for Bigger Government
Am I missing something here? All items purchased over the internet are indeed taxable. The question becomes who is responsible for collecting them.
If I purchase an item from Amazon over the internet and it is delivered to me in Pennsylvania, it is a taxable transaction (as it is in all but about 5 states). The issue is whether I report the tax directly to the state (a use tax) or whether Amazon collects the tax on my behalf (sales tax) and remits it to the state. Either way, it is a taxable transaction the way most state statutes are written.
The problem is that the state lacks the resources to enforce that each individual pays their $5 in sales tax. What states are seeking to do is have Amazon collect the tax from me and all those similarly situated. There are compliance costs on business to make sure they are collecting and remitting the proper amount in each state and/or locality that imposes a tax but looking solely at the purchase transaction itself, this would not be imposing a new tax, only imposing a collection responsibility for a current one.
May '10
Re: Republicans for Bigger Government
I can think of few things generating bi-partisan hatred as much as an iTunes tax. Let the Ds be alone in suggesting it.
May '10
Re: Republicans for Bigger Government
I'm not a fan of download taxes, etc., and the rationale for the Amazon tax based on the location of a blogger in a state who posts an Amazon link is ridiculous (as well as self-defeating).
But I find it ironic that conservatives are just as opposed to actual consumption taxes that are flat and visible as they are to other (e.g., progressive, hidden) types. I suspect that if you scratched a "Fair Tax" proponent you would hear screams of "No Amazon Tax!"- that doesn't seem consistent to me.
May '10
Re: Republicans for Bigger Government
Those of us who hate iTunes.....