●The more budgets are cut and taxes increased, the weaker an economy becomes.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Austerity = poverty and leads to civil disorder.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
Online sales taxes involve several issues. The proposed solutions make the situation worse, not better, and new thinking is needed.
States, Congress rallying for an e-sales tax
Washington Post, By Amrita Jayakumar, Published: July 8, 2012
A wave of states have passed laws that will require consumers to pay sales tax on all Internet purchases as soon as next year.
For states struggling in the troubled economy, this could mean $23 billion in new revenue each year. The movement in state capitals is driving newfound support for a proposed bill in Congress that could make collection of sales tax a standard practice on the Web, no matter where a consumer logs in to shop.
Bricks-and-mortar retailers are cheering the moves. For years, their online rivals have resisted charging sales tax, giving them a price advantage. They have cited a 1992 Supreme Court ruling that let online companies off the hook if they didn’t have a physical presence in the state where the customer lived.
A Web trade association that includes eBay, Overstock.com and Facebook is fighting the new bills. But notably, Amazon.com appears to have waved the white flag and supports the sales tax measures.
Prices are so low online that retailers have long decried what they call the “showrooming” effect. Customers visit shops, try out different products and then buy them cheaper online, sometimes on their smartphone while they are still standing in the store.
On the other side is Net-Choice, the trade association of e-commerce companies. Its argument is that tax calculation for thousands of jurisdictions country-wide is an impossibly complicated task.
“The burden falls disproportionately on a small business,” said Steve DelBianco, executive director of NetChoice. The new bill exempts online businesses making less than $500,000 a year from collecting sales tax. NetChoice says that threshold is too low.
Buried in this article are at least five issues. Let’s briefly comment on each:
1. The states need the money: Unlike the federal government, the states are monetarily non-sovereign. They cannot create dollars at will, so must rely on income to pay their bills.
For long term survival, a monetarily non-sovereign entity must have income from outside its borders. Some states rely on a positive balance of trade — exports such as oil, agricultural products and tourism — and most states enjoy income from federal spending.
Because state taxes are internal, they merely recirculate dollars within the state, and do not provide long term, financial support. A portion of online tax dollars would come from outside the state, so would provide needed support, while negatively impacting other states’ economies by taxing their citizens.
Online sales taxes are a “beggar-thy-neighbor” strategy.
2. Collecting online taxes will burden the lower income 99% (who spend the largest portion of their income on purchases of goods). This tax will increase the net income gap between the 99% and the upper 1%.
3. Retail fairness: “Brick-and- mortar” stores have an advantage, too. They allow people to handle merchandise and be helped by in-person representatives. Is this “unfair” to online retailers?
On the other side, brick-and-mortar store require people to travel to the store, to see the merchandise. Is this unfair to them? States tax some in-store merchandise, while not taxing other in-store merchandise. Is this unfair to some manufacturers? Some states tax more than other states. Is this unfair to the taxing states?
It is not the role of the federal government to support various definitions of retail “fairness.”
4. Complexity: A retailer in my town collects Illinois, Cook County and Wilmette taxes on every purchase. Multiply this by thousands of taxing bodies in America, and you have massive complexity.
Yet, a computer program — probably an inexpensive app –could handle this complexity easily. In today’s computer world, complexity is not a valid excuse for non-compliance.
5. Would the counties, villages et al receive their fair share of online taxes? Each state would handle this differently, but I suspect that for the most part, the counties, villages et al would be screwed. The states would keep all the money.
The federal government should not step into state internal business and address this “unfairness”.
So there are at least five issues:
–State money needs
–The gap between the 1% and the 99%
–Intra-state tax allocation fairness
All of these issues could be resolved by the simple expedient of federal, per capita support for the states.
State and local government tax collections totaled $1.4 trillion in the 12 month period ending March 2012 (U.S. Census). This approximates $5,000 for every man, woman and child in America.
What if every state, county, city et al gave up the costly, arduous and economically unfair practice of levying, collecting and adjudicating myriad taxes, and instead received from the federal government, $5,000 per capita.
There would be no local income taxes, no sales taxes, no property taxes — no lost time filling out tax forms, no non-productive cost of tax collection, no non-productive cost of prosecutions for tax avoidance, no unfair burden on the lower 99%, no burden on businesses, in fact, no tax burden at all. It would be pure economic stimulus.
The whole, local tax payment/enforcement process, as it currently exists, is the most monumental waste of human resources in America. We need new thinking.
Instead of that waste, each year, the federal government should provide America with a $5,000 per capita stimulus, benefiting not only the national economy as a whole, but individually, the economies of every state and local government.
Rodger Malcolm Mitchell
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports