Attention, Amazon shoppers—and BN.com fans, too, as well as those at other Internet stores selling e-books and more!
Randall Stross, the New York Times columnist, wants you to pay sales taxes on Net purchases no matter where you live, at least if you’re in the U.S., where he says Amazon collects for just five states.
I respectfully disagree with Stross despite the grotesque botch that Amazon has made of my novel’s listings. Here’s a pro-Amazon post—at least if just sales taxes are the issue. Let CEO Jeff Bezos lavish money on lobbyists to rid us of the scourge. Amazon’s customers, inside or outside the United States, shouldn’t have to pay a penny in sales taxes on e-books, paper ones, stereos, baseball bats or washing machines. Sales taxes are legalized pickpocketry, no matter how noble or official the uses of the money are. But read on, Jeff. You might not like all I have to say.
No, I’m not anti-tax, just anti-sales tax. They are inherently regressive and beset the planet’s retailers with gig after gig of paperwork. But should we starve government? Emphatically no, just so the money is well spent. At all levels—local, state and federal—I want the super-rich to pay a larger share of income taxes than they do now. Care for some numbers arguing for an end to sales taxes and the expansion and better targeting of income taxes? Here they are.
1. Here in the United States, the odds are already stacked against the nonrich. Take a look at the Gini index used by the Central Intelligence Agency to measure “the degree of inequality in the distribution of family income in a country.” We Yanks are in Mexico’s class or getting there. Our index reading was 40.8 in 1997, 45 in 2007—the wrong direction. By contrast, Mexico’s was 53.1 in 1998, 47.9 in 2006. We’ve become more Banana Republic-like, Mexico less. The number for Germany was 30 in 1994 and 27 in 2006. For France? 32.7 in both 1995 and 2008. I’m not saying, “Soak the rich into bankruptcy”; and, in fact, I recognize the value of capital in the expansion of old industries and the creation of new ones. But clearly, the rich and super rich in the U.S. have room to pay more taxes and still live very good lives. I don’t care if the National Taxpayers Union notes that the top one percent of Americans paid 40 percent of federal personal income taxes in Tax Year 2007. As individuals, the rich collected a lot more income on which to pay.
2. State and local taxes are already regressive. The average state and local tax rate on the best-off one percent of families is 6.4 percent before accounting for the tax savings from federal itemized deductions,” according to the Institute on Taxation and Economic Policy. “After the federal offset, the effective tax rate on the best off one percent is a mere 5.2 percent. The Institute goes on: “The average tax rate on families in the middle 20 percent of the income spectrum is 9.7 percent before the federal offset and 9.4 percent after—almost twice the effective rate that the richest people pay.” Washington State, where Bezos lives and has located Amazon’s headquarters, is among the “Terrible Ten” states with the most regressive tax systems. It doesn’t even have an income tax, just a small business-and-occupation tax on gross receipts.
3. Total state and local sales tax revenue in the United States was $412 billion in 2006, and state sales and gross receipts revenues were $357 billion the next year—which sounds huge; but then consider the Gross Domestic Product, $14.2 trillion in 2008. Would it really be that horrible to make a careful transition over time to replacement of state and local sales taxes with revenue from progressive income taxes?
Granted, the super rich love to say they’ll flee the U.S. if taxes get too high. Let ‘em. I’m sure we can grow some gifted tycoons to replace them. The key could be a mix of improvements in childhood nutrition (for mental development) and education (complete with more resources to encourage children to excel in computer science) and other areas. If anything, I’d like to see more money going to deserving activities within the public sector. I just want taxation—whether in the U.S. or other countries—to be fairer. Taxing a lower-middle class family—buying e-books from Amazon for their kids—is not the way to do it. And how dare any state tax groceries, even a nickel!
Oh, and in case you’re curious, if you repeal sales taxes, local stores will be on an equal footing with Amazon. In other words, politicians wanting to tax Amazon in the interest of parity with local stores have it backwards. Don’t expand sales taxes. Get rid of them.
Despite my loathing of sales taxes, I do not want this to happen overnight—yes, I am sensitive to the needs of public schools and other parts of the public sector—but let’s at least make it a long term goal.
Come to think of it, lack of sales taxes could mean something else: permanent economic stimulus, through more money going to people who’ll spend it on a number of items ranging from Fords to Kindles. If there are inflation worries, well, perhaps income taxes could be increased. But that’s hardly the biggest risk right now. Here’s to more disposable income for e-books and everything else! This is an e-book blog, not a tax blog, but you can’t separate e-books from the rest of the life.
All right, you anti-income tax libertarians—have at it! Speak up, and try as much as possible to discuss the above issues in an e-book-and-Amazon context, and in a civil way that attacks the arguments, not the other TeleRead community members making them. But before you do, consider the source of this passage written in the year 2000:
“Repeal all sales taxes. They’re unfair, they hurt consumers and they’ll hurt our economy if they’re expanded to include cyberspace. Don’t believe these politicians who say that you won’t have fire and police departments without sales taxes. Only 16% of local government revenues come from sales taxes.
“At the state level, several governments impose no sales taxes at all and 45 states receive most of their revenue from other sources.”
Well-put. And if anything, those words apply in this recession, where sales taxes crimp consumer spending.
So who wrote the passage? A socialist in Sweden? Perhaps a Serbo-Croatian anarchist? Hardly. None other than James K. Glassman—for Reason Magazine (“Free Minds and fee markets”). I don’t know his exact and complete views on progressive income taxes these days. But I know where he stood nine years earlier on the sales variety. Against!
Picketpocket photo credit: CC-licensed image from Matiasjajaja.
Although I agree about the regressiveness of sales taxes (among many other taxes) and would like to see the sales tax disappear (along with many other forms of taxes), I also would like to see a level playing field among competitors. Until the sales tax is rescinded as it applies to all other booksellers (and other retailers), Amazon should be forced to collect it. There is no reason why we should choose Amazon to be the acceptable monopolist or the entity that doesn’t have to obey the laws.
Rich, you’ll love the stat I’m about to post on Amazon’s apparent domination of the e-book scene, at least if some stats are representative.
No, I don’t want any company to be an “acceptable monopolist.” I’d rather that B&N not have to collect sales taxes, either. Or local merchants!
I suppose the case could be made to force Amazon to collect until the law changes. I’m open to that. But the real solution is to abolish the sales tax on everything.
Thanks,
David
I can understand why some people say there should be a level playing field. Amazon already has sales tax on my purchases, but I’m a resident of Washington state where the company resides, so that is to be expected. Barnes and Noble also charges me sales tax because they have retail operations in Washington.
Also, Washington has no state income tax, only the sales tax. So if the sales tax was repealed, there would have to be a new tax system to replace it, probably the income tax. So which is worse: the sales tax or the income tax? When I lived in Virginia and Maryland, the states had both, but in the long term the amount I paid to the taxman was about the same. Other states may very. If I recall correctly, Vermont pays the the most overall tax and Alaska the least.
As for the sales tax, at least there are no loop holes for tax lawyers and accounts to finagle downward for the rich.
All taxes are “legalized pickpocketry.” I would say virtually nothing the government does is money well spent and most at Reason.com would agree. I doubt anyone at Reason would agree that raising any taxes on wealthier people is a good idea (if there is such a person he definitely shouldn’t be working for Reason). Income tax is certainly a worse form of theft than sales tax. Taking money from a person simply because he’s trying to make a living should be criminal.
Amusing to use the word ‘criminal’ in the context of a note suggesting all tax dollars are wasted. Surely defining criminals and dealing with them is something better left to the government (although there are those who would prefer to define and punish themselves…still this seems a bit arbitrary and frightening to me).
Sales taxes would be regressive if applied on all products (because poor people spend a higher percentage of their income). Where sales taxes apply only to some products (in California, for example, food is excluded), determining regressivity is trickier.
All taxes have their problems. I personally like the idea of a progressive sales tax (i.e., consumption tax), rewarding those who save. But I agree with Rich that a level playing field is essential.
Rob Preece
Publisher
David,
Here in California, we have to pay “use tax” on items we don’t pay sales tax on. It’s the same thing–same tax rate–except that it’s much more of a burden to have to file a report than to pay when you buy something. Frankly, it would help us enormously if Amazon would collect them at the point of sale. Tiger Direct too, for that matter. We’ve gone through a huge rigamarole (and had to pay interest on back taxes) just because Amazon *doesn’t* collect sales tax.
Paula
Getting rid of all sales taxes would be nice of course. If only there were a way actually do it without completely gutting services for the poorest and most needy. Sales tax revenue mostly goes to cities, especially for things like transit projects. Which is more regressive — sales taxes, or huge bus fare increases? Sales taxes, or fees to use public parks?
And if the idea is to replace sales taxes with higher, more progressive income taxes, how will cities replace their lost revenue? Especially in red states with legislatures that oppose ALL taxes?
Seems to me that if you want to make taxes fairer and more progressive, exempting taxes from folks who have the means to easily order online with credit cards isn’t the way to go about it.
I don’t have a strong opinion about the worth of sales taxes vs. other taxes, but if you’re going to have them, they should be as fair as possible. Exemptions to help out poorer citizens sound reasonable, and justify exemptions for necessities like food and clothes that exist in many states. Exemptions for folks who can easily get online do not have that same quality.
Plus, as has been pointed out upthread, most of us buying from Amazon *are* supposed to pay tax on what we buy, because of use tax laws. So why should we get a special way to evade it? It’s not like Amazon wouldn’t be able to calculate and collect it if they had to– big brick and mortar chains do it as a matter of course. The rules may be a bit complicated across different jurisdictions, but that’s what databases are for.
I’m with Rich’s position — We can’t fix this problem (if you believe sales tax is a problem) by carving out yet more exemptions based on reasons that have nothing to do with David’s underlying concern (Sales Tax in general is bad, and we should abolish it in total).
In fact, I would submit that much of the problem arises from the continual habit of creating the maze of exemptions every time somebody makes enough noise. By doing that, we get rid of the political willpower to address the big problems.
So, before we abolish sales taxes, let us abolish exceptionalism (Internet exceptionalism as well as services exceptionalism, religious organization exceptionalism, and all the rest). Make the misery of these things real and palpable for the rich, the powerful and the rest of us instead of artificially lessening it by handing out goodies to the loudest squeaky wheels. Once that happens, the political willpower to abolish the things in total will come about (or at least lead to something closer to an honest debate).
mff
“Sales taxes are legalized pickpocketry”
… and all compulsory payments to government where the payee is not the proximate and immediate beneficiary are legalized robbery which is evil. Thus the notion of the minimum evil required for the necessary “common good.” Is a tax on one of the more successful internet business models warranted? Should it be a local tax, a state tax, or a federal tax? Rothman posits that any such tax on consumption is regressive and income taxes should prevail.
“deserving activities within the public sector”
Some areas we may see as a “common good.”
Some areas I may view as a “necessary minimum evil” and you may protest.
The remainder of what is deserving in your eyes is unjustifiable evil in my eyes.
However, most of the tax money goes to activities completely obscured from your and my eyes and we have no clue if it is for the common good or for some unfathomably unspeakable evil that will curse all the generations to come. Most likely, the tax money goes to “entitlement” subgroups, programs and government contractors where political payback is primary and any alleged “deserving activity” benefits are secondary.
So, how does government pick a specific target for the “shakedown?”
First, the mark has to have the money. There goes the middle class under the bus.
Second, the mark must be easy enough to make it worth going after.
Third, (and for a wise government) the goose must not be killed to get that golden egg. The failure of most taxing schemes is that they tend to drive the primary cash generator (not beneficiary) out of the tax jurisdiction. Also, tax schemes tend to be shaped by special interest rather than some egalitarian notion of the “common good” …
http://www.pogo.org/investigations/government-corruption/
A first principle for any taxation (sales/consumption tax or income/production tax) esp one that claims “common good” or “deserving activity” should be complete transparency. Everybody’s data becomes verifiable public record. That includes the income as well as all the outlays.
The second principle is that the administrators (tax collectors, tax spenders) be completely accountable for their actions. The review of that accountability must also have complete transparency.
The third principle is that the government model must be a business model. It must meet its own standards that it places on the business community for accounting and financial surety. The inability and unwillingness to account for spending taints the whole process.
I don’t know of any government in the US that meets any of the these principles in a verifiable way, much less all three of them. Randal Stross sees a good way to make money for himself by throwing Amazon under the bus. Rothman says “No fair! ,,, throw all those elderly ladies (demographically the core of the “tax base rich”) … under the bus! Until we can agree on transparency, accountability, or fairness I submit that the vast majority of us are all “marks” for going under the bus and only the clever and resourceful minimize the damage (while fairness dies first). The really big sharks, the few globally rich, only net more money off any of the taxing schemes, which is why they tend to be proponents. Those billionaires have the means (and exercise those means) to exclude themselves from the “tax base rich.” The rule for them is that regardless what they pay to any governments, the governments pay them back more.
Before exceptionalism is abolished, political obscurity and lack of transparency must be absolutely abolished. Once everyone sees that there really is no pea under any of the walnut shells, the rules will change.