Sunday, April 17, 2011

As Good An Argument Against Internet Commerce Sales Taxes As Any I've Heard

From Jeff Jacoby of the Boston Globe:
All other things being equal, consumers no doubt prefer a tax-free shopping experience. But all other things are rarely equal. E-retailers (or mail-order catalogs) may have a price advantage, but well-run “Main Street’’ businesses have competitive advantages of their own. They attract customers with eye-catching window displays. They play up local ties and neighborhood loyalty. They give shoppers the chance to see, feel, or try on items before buying them. They enable the serendipitous joys of browsing. They don’t charge for shipping. And they offer potential customers a degree of personal service and warmth that no website can match.

The current system is far fairer than the one Durbin wants. Bricks-and-mortar merchants charge sales taxes based on their physical location. The same rule applies to online merchants. A Pennsylvania tobacco shop doesn’t collect Ohio sales taxes whenever it sells a humidor to a visitor from Ohio. Amazon shouldn’t have to, either.

“Out-of-state companies that aren’t paying their fair share of taxes,’’ Durbin argues, “are sticking Illinois residents and businesses with the tab.’’ What tab? Taxes paid should bear some relation to services received, and merchants with no “substantial nexus’’ to a state receive no services from it. They don’t use its firefighters or sewers, don’t send their kids to its schools, and don’t expect it to plow their streets after a blizzard. To force them nevertheless to collect and remit that state’s taxes would be grossly unreasonable.

Durbin’s bill would only hurt the consumers he claims to be “looking out for.’’ The existing arrangement has worked well for 40 years. All it needs from Congress is a good leaving-alone.

I'm sure my favorite commenter on all issues related to economics will agree. Max?


mazenko said...

Colorado tried the state tax, as Illinois. It doesn't work well - but the reasoning is sound. It's interstate commerce, and it should happen at the federal level.

maxutils said...

wow, I get a shout-out.

Well, here's the thing -- people who buy stuff from are happily evading tax law, and, if you wnt to have a state sales tax law, it absolutely violates the premise of the law. And I get extreme pleasure by buying things on amazon for a net savings of one dollar, over going down the street, and giving the extra buck to the government. That does two things: I 'deprive' the state of one dollar, and, I hurt local merchants.
I feel bad for the merchant, but not for the state. This is called arbitrage (buying something at a low price, knowing the price is higher elsewhere.) . . . if you live in Sacramento, and want to buy a huge big screen TV with surround sound, you would be absolutely foolish NOT to to travel to Tahoe City, where there is no sales tax.

That said, sales taxes are regressive. No matter how you slice 'em, they will always hurt the poor more than the rich. If you think that's a good form of taxation, go for it. Personally, I feel that it's wrong.

My ideal? We eliminate every single tax, government fee, everything . . .
and replace it with a progressive tax set at a state level and a federal, which pays for everything. that way, you know what you're paying, and you can't be nickled and dimed to death.

I've been listening to FOX news all week purport the canard that the wealthy fund the government out of proportion. But, that is a lie. 3 out of the 5 biggest government programs (Social security, Medicare, Medicaid) are funded by FICA, which is capped at 109k. I pay almost as much s Bill Gates. Want to solve the budget crisis? Remove that cap.

Honestly, I have no ho much freedom as they get.
pe. But let the peeps have as

Anonymous said...


I don't think that Medicare and Medicaid taxes are capped. That's the 1.45% bit that has no cap (versus the 6.2% that is capped at around $110K).

-Mark Roulo

Anonymous said...

Not to derail the thread, but arbitrage is not just buying something cheaper in one place than in another.

Arbitrage would require that you buy in the inexpensive place and then *sell* in the more expensive place.

I can't arbitrage between Amazon and the local price because I need to charge sales tax on a local sale.

-Mark Roulo

socalmike said...

i have always felt that a national sales tax, instead of income tax, was more fair. You spend more, you get taxed more. Sounds like Max agrees with me.

allen (in Michigan) said...

No, Max doesn't agree with you.

Max believes that the poor have a claim on the wealthy by virtue of being poor. Or rather, the rich have an obligation to fund the demands of Max's moral outrage. An obligation which does not fall on Max's shoulders.

mazenko said...

Baloney, Allen.

Max makes no such claim. He points out the regressive nature of some taxes which weigh heavier on the disposable income of those who don't have as much.

Taxes are the revenue the state uses to fund state business. The greatest percentage of revenue will come from its greatest concentration of it. The wealthy can simply afford to pay more for the functioning of the state, and they have clearly gleaned as much from a society that has been stable enough - because of said government/society - to create such wealth.

No wealthy business owner amasses wealth in a vacuum - it accrues from all contributers along the supply/demand line. And the infrastructure that allows that to occur and flourish is maintained by a government of representative democracy.

Your class warfare cries make for great talk radio - but they don't have much value in terms of policy.

Left Coast Ref said...

The question becomes the definition of "fair share", and it runs corallary to the GPA vs Money video. What is "fair"? Percentages or dollar amounts? Fair in the minds of the Liberals is "They (the rich) have more than enough, so they should pay more". And guess what - THEY DO! I got an e-mail from CTA the other day about "restoring fairness to the system." It said "the bottom 20% of wage earners pay 11% of their income in taxes...while the Top 1% of wage earners only pays 7.8%."
What this lie.. er, sorry, statistic fails to point out is the fact that the 7.8% is still about an order of magnitude larger than the 11%, and that is just comparing a $1,000,000 earner to me, a $70,000 earner.
Eliminate federal and state income taxes, implement a National and state flat sales tax (8% fed, 3% state, total 11%) and then you have "fair" as those making more money spend more money and pay more in taxes.

maxutils said...

Mark, you're wrong on both counts. Social Security, Medicare , and Medicaid are all paid out of the FICA tax, which IS capped. As for arbitrage . . . just because you can't make a profit selling something from in California, due to sales tax, doesn't change the definition -- it just means the opportunity for arbitrage doesn't exist. Transaction fees (delivery, tax) are assumed to be part of the process.

Allan, in Michigan, . . . What tax system would you have? I believe in a one tax, progressively tiered, transparent one. It's nice to speak of everyone being charged a flat tax, and it has elements of fairness -- but the fact is, there is no possible scenario in which we could enact a flat tax and maintain our current government structure. Not that that's a good thing-- It's important to remember that when the rich pay more in income tax, they still pay exactly the same tax rate on their first 100kas do the poor. It's also important to remember that the poor, and the rich, are subject to an effective tax rate of 17% for FICA before they even see their checks.

maxutils said...

Mazenko, thanks for getting it, and the props. We have disagreed, but I am absolutely sure that you, me, and Darren could share a row of classrooms and not kill eac other Left Coast Ref, figure out what 'orders of magnitude' actually means, and quit pulling numbers out of your butt. Because, you're so far wrong I don't even know where to start.

allen (in Michigan) said...

Oh, of course Max is making the claim that the rich owe something to the poor. Otherwise your entire structure of misrepresentations and convenient definitions has no purpose.

Disposable income is one of the convenient definitions meaning nothing beyond its utility to justify redistributionist policies.

The notion that some amount of income isn't disposable is as fictitious is those "contributors" along the supply/demand line. That wealthy business owner absolutely does amass his wealth in a vacuum. A vacuum empty of "contributors". And any particular level of income doesn't demarcate the line between undisposable and disposable. Income is income and construing some arbitrary level as proper for snipping off for use by the morally elevated is a rationalization hardly more ethically defensible then a junkie's armed robbery.

So while my class warfare cries do make for good talk radio the reason's because they're an important consideration in policy development and it's a consideration you'd rather not have to deal with.

Max, if expenditures aren't made by government then there's no need to discuss how to fund them.

The fact is that Social Security, Medicare and Medicaid were all predictably failures. It was just a matter of when the failure would occur and what degree of self-destruction the nation would engage in to forestall the day of reckoning. That being the case the obvious course is to undo, as quickly and painlessly as possible, but with no hope of avoiding all pain, these predestined policy failures.

I would say that the results of the most recent general election suggest strongly that the day of reckoning is seen as dangerously close by a large cross section of the electorate.

maxutils said...

Allen, would you please show me at what point I said the rich owe the poor?

I didn't think so.

I support progressive taxation on grounds of practicality: it's the only way to raise the necessary revenue. It also treats everyone's money the same. My first 100k is taxed just like yours; after that we both face a higher tax rate. I might not make any more, and you may, but we were treated equally.

I absolutely agree with you that, Social Security, Medicare, and Medicaid were doomed to fail, but we have them. Give me a way out and I'm there.

By the way, you didn't suggest a viable tax system.

Go wings, though. :)

Left Coast Ref said...

Okay Max, then let me show you my math using CTA's numbers with my income, which by the way is NOT in the lower 20% of wage earners. And is it from Algebra 2(?), an order of magnitude means "by a factor of 10". So, I make approx $70,000. If I were to "pay 11% of my income in taxes", that would be $7,700. If Joe Richguy were to make $1,000,000 and pays "only 7.8%of his income in taxes", that would be $78,000. Just over an order of magnitude larger than me being paid by Joe. Not only that, he pays more in taxes than I make total! Tell me now, how am I so wrong that you don't know where to start? I am willing to listen and learn where I am wrong. I was just using CTA's numbers for comparison.
Here's the link to the CTA's socialist taxation agenda:

socalmike said...

Max, you're the one who doesn't understand orders of magnitude. 7.8% is in the "ones" column. 11% is in the "tens" column. Ten is an order of magnitude larger than one. And LCRef said "about an order". You're wrong on this one.

I think we all need to step back and ask ourselves, who's money is it to begin with? Is the government entitled to our money? Or are we just "borrowing" it from the government? No, the government would not be able to do ANYTHING without OUR money. Up until 1913, we didn't even pay an income tax (thanks Woodrow Wilson!).

I don't know why i have to explain this. The only reason the government can do ANYTHING is if they have OUR MONEY. They are NOT a business, they do not make a profit. They do not manufacture goods. They do not provide consumer services (don't call the DMV a service - it's a license that they make us have).

I guess I'm turning into a libertarian, but dad gum it, it is MY money, and unless the government is providing for the common defense (i. e. the Military), they should NOT be playing social justice advocate on my behalf.

I am so mad at our government, and our people for letting it happen. Yeah, I'm a Tea Party guy, and proud of it. It's MY money.

maxutils said...

Left Coast Ref, socalMike . . . an order of magnitude is actually a power of 10, not a factor of 10. when I suggested you seek out the definition, I guess I thought you would. Thanks for codescenidngly lecturing me, and getting it wrong, though.

maxutils said...

oops. condescenDingly

Left Coast Ref said...

Max, you are *still* wrong. Where did I mention factor of 10? "Factors of 10" are 1,2,5,10, and numbers that are multiples of 10 end in a zero (10, 30, 900, etc.) "Order of magnitude" is based upon the exponent on the ten when writing a number in scientific notation. Thus, 7.7x10^3 and 7.8x10^4 differ by ABOUT 1 order of magnitude. Thus, $78,000 is ABOUT 1 order of magnitude greater than $7700. How much more do I have to spell it out!?!? Mr. RotLC, you are the math teacher. Am I wrong here?

maxutils said...

when you say that 7.8% and 11% differ by abut an order of magnitude, since 11 is in the tens column.

Left Coast Ref said...

Ah. I hadn't read socalMike's post closely (nor my original)until just now, and he's wrong too. My verbage was poor, and I apolgize.
7.8% and 11% are percentages, and we must know the number we are taking a percentage of. So, hopefully you see I was not implying that 7.8% and 11% differ by an order of magnitude, because they don't. I am saying that the VALUE of [7.8% of $1M] is 1 order of Magnitude larger than [11% of $70k]. That's where the fairness factor is a joke. The higher earner has paid more in taxes than the lower even earned! The only way to have "tax fairness" is if everyone paid the same overall percentage, with no loopholes. FLAT TAX. (Mr. RotLC, Sorry we have taken this thread away from the discussion at hand - Taxation. Taxing internet commerce is asinine.)

maxutils said...

. . .Which was actually my first point. :)