Picking Winners
By Mitch Berg
Remember when Democrats claimed to be for the little guy and against big institutional businesses?
Obama supports the “Marketplace Fairness Act”, which would tax online purchases:
Senators advanced the bill in 74-20 procedural vote on Monday evening, just one vote short of the backing it received in a test vote last month. Twenty-six Republicans joined Democrats in moving forward with the bill.
(Or when Republicans claimed to be pro-business?)
Oh, yeah – both A-Klo and Stuart Smalley voted for the bill.
Major retailers are putting all their lobbying muscle behind the legislation, arguing it would close an unfair loophole that benefits online merchants over brick-and-mortar stores. The National Retail Federation, which represents chains such as Best Buy, Macy’s and J.C. Penney, and the Retail Industry Leaders Association (RILA), which counts Target and others among its membership, announced it would score lawmakers’ votes.
The bill would also make it possible for states to tax financial transactions – trades for your IRA, moving money around in your 401K and the like.
But signs of trouble for the bill also emerged as Wall Street groups urged the Senate to slow down and eBay began marshalling its users in a massive campaign to kill it.
The Securities Industry and Financial Markets Association and the Financial Services Roundtable said the measure could pave the way for financial transaction taxes on the state level, an idea that Wall Street and its supporters fiercely oppose.
“A transaction tax on financial services products will hurt retail investors, retired Americans, and small businesses, effectively making it more expensive for them to invest and plan for the long-term. Without hearings, these implications and others will not be properly addressed” [said Scott Talbott, senior VP of public policy at the Securities Industry and Financial Markets Association and the Financial Services Roundtable]
Democrats (and some Republicans); dragging the parts of the economy that work down into the same pit of suck that the rest of the economy is in.
April 23rd, 2013 at 7:44 am
All this talk of regressive taxation gets back to a very American problem. The American tax and benefit model is to rely heavily on graduated income taxes, which are referred to as ‘progressive’, and to offer the major government benefits universally, i.e. irrespective of need. The European model uses far more flat taxes, such as a VAT or a flat tax on earnings, but offers benefits only to those who most need it (universal health care being a partial exception). This is why Europe sees its system as being more ‘fair’ despite taxes that American liberals label ‘regressive’. Economically, the European system is much more efficient. ‘Progressive’ taxes discourage work and encourage evasion. Taxing to pay for benefits for wealthy people is clearly inefficient, and serves a purely political purpose.
That political purpose is key. American liberals since FDR have been trying to sell the message that government services, which we should all want because they are equally for all, can be expanded while only taxing the rich. This doesn’t work of course, and the middle class ends up paying money to the government in hopes of seeing some of it come back in the form of services that the middle class could have bought for itself, had it not been taxed. To a large degree, the success of the American right in keeping tax rates low has been because of the dissatisfaction of the American middle class with the inefficient system of progressive taxes and universal benefits, which repeatedly makes American Liberals seem economically incompetent. Only in those countries where there are flat taxes and progressive benefits has the scope of government services been able to expand to the level desired by American Liberals.
April 23rd, 2013 at 7:47 am
Will the dems EVER have enough money from taxes? Would 100% from everyone be enough? I doubt it.
April 23rd, 2013 at 8:01 am
And yet Best Buy, Penney’s and most of the other retailers have websites and sell on-line, not collecting sales tax. Do they want to introduce this administrative headache – as well as annoy their clients – by pushing this?
April 23rd, 2013 at 8:16 am
I wonder if anyone has reminded Congress that people already pay Capital Gains taxes on investments. Lowerinf the initial investment by taxing the input will only increase calls to lower or do away with Cap Gains entirely.
April 23rd, 2013 at 8:59 am
“If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subside it.” R. Reagan.
Fairness? What’s fair about doing nothing – and getting paid for it – at taxpayer expense? The charity being exhibited with my taxes defy my sense of charity.
April 23rd, 2013 at 9:04 am
“We need to focus on creating jobs, and getting the economy moving again” Every DC Politician
“Stupid jobs and economy….who needs ’em??!!” The Actions of Every DC Politician
April 23rd, 2013 at 10:19 am
I would have to argue that, by coming out against this bill, Wall Street is demolishing a liberal stereotype by coming out in favor of Main Street.
April 23rd, 2013 at 1:39 pm
What is the justification for this? How can a state’s taxing authority extend beyond its borders? In other words, how is this not just a money grab?
April 23rd, 2013 at 2:18 pm
You may wonder why Al Franken, a leftwing hero, is carrying the water for a mega-corporation, that has outsource thousands of jobs to India, like Best Buy.
When I worked at the corporate offices (not known as “Chuck” while there) I learn that Best Buy wrote out a healthly check each year to Al Franken’s campaign fund in order to purchase access to the Senator.
I don’t have a problem with this, except for the hyprocisy of lefty Al.
April 23rd, 2013 at 2:20 pm
Read an interesting concept. Don’t tax internet sales at the point of purchase, but at the point of sale (like physical store purchases). That would lead to online retailers to move to low tax states.
So would see two online retailers selling the same product at the same price. One in Illinois would charge you about 10% tax, one 45 miles away in Wisconsin would charge you 5.5%.
April 23rd, 2013 at 2:53 pm
When they talk about the unfair advantage that online retailers have v. local, brick and mortar stores, no one ever talks about removing or reducing that advantage by removing or reducing local sales taxes.
Local sales taxes are very regressive. Why do liberals support them?
April 23rd, 2013 at 4:15 pm
It makes no economic sense to tax sales in shops and over the internet differently. The prohibition is constitutional. The Supreme Court ruled that states could not force out-of-state retailers to collect tax on sales to residents unless Congress, which oversees interstate commerce, said so.
In theory, online customers are required to pay sales tax themselves. Since there are no means of enforcement, few do. Best Buy and Target must charge tax not only in shops but also online in states where they have stores.
Washington seema to be sympathizing with local governments that are trying to build public works, such as sewers, while their tax base migrates into cyberspace. You can’t flush your toilet over the internet.
April 23rd, 2013 at 4:38 pm
Emery wrote:
It makes no economic sense to tax sales in shops and over the internet differently.
It doesn’t make economic sense to have sales taxes at all, if ‘economic sense’ means ‘economic efficiency’. Sales taxes are a form of rent-seeking by local governments. The people that have to collect the rent experience a disadvantage compared to people who don’t have to collect the rent. States want to eliminate that advantage.
Why go for a complicated system like the one being proposed rather than simply insist that states raise local income or property taxes (or whatever) and eliminate sales taxes?
Sales taxes are nasty things. In my state (Hawaii) the sales tax is 4.17% because years ago the legislature set it to 4% on everything, no exceptions. the 0.17% of the 4.17% is the tax on the tax.
April 23rd, 2013 at 5:11 pm
I am curmudgeonly and moderately conservative. Though I may not be a tax policy expert, I hope my undying love for the VAT counts for something.
I think it should be brought in as a replacement for the payroll and corporate income taxes. It’s between the two in terms of it’s regressiveness. If you wanted to make it more progressive, you could remove wages from the VAT, like an X-tax. It eliminates a Byzantine corporate tax code which should make Republicans happy. And it allows capital gains and dividends to be taxed as earned income without double taxation which should make Democrats happy. I
April 23rd, 2013 at 7:42 pm
I would like to see the federal government financed by a tariffs-for-revenue-only, Emery. Vat taxes are too easy for the government to fiddle with.
With a tariff, a decrease in government spending would result in lower prices for consumers. An increase in government spending would mean the opposite, of course.
April 24th, 2013 at 11:10 am
This is actually a move to squeeze out the smaller vendor by the big retailers. They already have staff to collect and report sales tax. Smaller vendors do not. Over 9000 different sales tax districts in the US. Non-uniform definitions of what is taxable.
The vendor is exposed to the cost of collection, fines and penalties for any mistakes in assessment. And now every state which charges sales tax can send their auditors into your business to give you the financial colonoscopy. And if you didn’t collect enough, you, not your customer, upon who the tax is levied, gets to pay the shortage. And, if by some strange fate you incorrectly assessed a sales tax on a customer, you don’t get that back, unless you first refund the customer. Then the state will refund to you in 60 days, without interest.
I hate sales tax collection.
April 24th, 2013 at 4:57 pm
Isn’t there software that will help facilitate these types of transactions?
April 25th, 2013 at 9:32 am
The software can be of some help, but you still have to distinguish between billing address and ship to address, and sometimes the address where service is performed. Is the item taxable in that district? Is the shipping taxable? Is the handling taxable?
Then add in a business that does custom manufacture, so there are not standard item codes. Is the the labor to repair an item taxable? Or just the materials that goes into the repair. Overhead allocated to the repair? Taxable or not?
Even within the state of Minnesota, you have things like this: Almonds, unsalted are food (not taxable). Oreos are food (not taxable). Cover Almonds with chocolate, it becomes candy (taxable). Cover Oreos with chocolate, it remains food (not taxable). Now multiply that by 42 different states, and then account for some 9000 other tax districts which may apply sales tax to some, all or different categories of transactions.