Actually, if anyone ever needed an obvious illustration of how government overreach can damage an economy, they need look no further than the Colorado legislature's foolish attempt to wheedle a few extra bucks out of consumers via an Internet sales tax.
After legislation forcing online companies to collect sales tax passed, Amazon.com moved to protect its consumers and long-term interests by severing its ties with Colorado. Unfortunately, this meant closing its associates program, which involved an estimated 5,000 jobs.
Amazon's actions were not surprising, as it did the same in North Carolina and Rhode Island (a state, incidentally, which reportedly saw no additional revenue generated after passing a similar law taxing Internet sales).
"They've done nothing here but spit in our face," bristled Colorado Senate Majority Leader John Morse in a ludicrous rant on YouTube, wherein he went on to describe Amazon's actions as "such tyranny!"
1. Colorado spit in Amazon's face.
2. Amazon can't force anyone to buy their stuff. The State of Colorado can force people to do things.
3. The article goes on to say that if all 50 states did this, companies like Amazon (and any other company that sells over the internet--including eBay sellers?) would have to deal with over 8000 different tax computations.
4. Refusing to do business in your state isn't "tyranny".
This petty power-and-money grab cost Colorado 5,000 jobs. Rhode Island's experience shows that you don't always get increased revenue from increased taxes--thank you, Dr. Laffer.
Instead of looking at new things to tax, perhaps governments should cut as much as possible and then raise taxes, if need be, to make up any remaining difference. I think most people are practical and would accept that if they believed that no more of their money was being wasted or given away.
now Darren, being from CA, you know that CA is also trying to do this to Amazon. Do you think they will still do it despite this?
ReplyDelete"Instead of looking at new things to tax, perhaps governments should cut as much as possible and then raise taxes, if need be..."
ReplyDeleteand therein lies the problem for the Colorado politicians. They can't raise taxes without putting it to a popular vote. See...
http://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights
Not a bad idea in my mind, but politicians don't have the courage to put a tax increase to a popular vote. Instead the create fees out of thin air or come up with taxes that avoid TABOR such as the Amazon tax.
Darren, have you watched the video? Unbelievable...
ReplyDelete(Hope I input the link right, had to look up my html!)
Yes, I know California is considering this. Yes, I think they'll try it despite the evidence that they'll be biting their noses to spite their faces.
ReplyDeleteI'll eventually watch the video. Not now. zzzzzzzz
Colorado has cut $2.2 billion from its budget, and ranks near the bottom in a myriad of spending areas. The problem, once again, is that the state puts tax increases and budget issues in the hands of uninformed voters who don't understand how to fund the very government they expect. That's why we are supposed to have a democratic republic and not a pure democracy.
ReplyDeleteBTW, I agree that the Amazon law was poor legislation, as it should be handled at a federal level. Colorado has incredibly low taxes and low spending already, and it has been the Democrats over the last six years who have been fiscally responsible for balancing the budget.
The solution is very simple. States need to get together and devise a single, simple system of sales tax. Every state that participates could be assured of getting basic sales tax on every product shipped to it. Venders could be given certain advantages for accepting this system. In this system Amazon would have one sales tax to collect on every purchase. Any state that tried to put special conditions would be considered as opting out of the system and venders could ignore them.
ReplyDeleteI don't know much about business, but common sense tells me that Amazon couldn't care less about charging sales tax if they had security that the system would remain simple.
It seems to me that this simple solution has been obvious for about a decade now. Of course states want sales tax. That's perfectly legitimate. What is not legitimate is for a state to think that it can put binding requirements on a business that has no connection to their state. And it is very legitimate for a vender to recognize that submitting to such state demands is a very bad precedent. What amazes me is that the crowd that loves to talk about working together, about collaborative effort, about doing it together, (liberals, if you will) doesn't think of this.
Thanks for posting some sensible commentary on this issue! The tax-happy left seems determined to blame Amazon for terminating the Colorado Associates, when the Democratic legislature is clearly to blame.
ReplyDeleteYou and your readers might be interested in my super-quick web site:
http://www.RepealTheAmazonTax.com/
(I'm going to add a link to your post to the "further reading" section.)
If you want to help pressure the Colorado legislature to repeal this awful law, please join the low-volume e-mail list, NoAmazonTax:
http://groups.google.com/group/noamazontax
Please spread the word! Thanks!
This is just another example of government thinking that it can make income off of tax revenue without any downside. Taxation is ALWAYS passed onto the consumer through higher costs or less access. I personally wish that elected officials were required to take basic economics before they were allowed to vote on any bill requiring taxes, unfunded mandates or other such nonsense.
ReplyDeleteThere should be, at most, three taxes: a fedral income tax, a state income tax, and a local property tax. Anything else obscures what you're actually paying, creates inefficiency, and adds unnecessary collection costs.
ReplyDeleteAdd a value-added tax and eliminate a majority of credits and you could actually fund the government.
ReplyDeleteStop the government from transferring *so much* wealth from the productive to the non-productive in our society, and we might actually fund the government *without* new taxes.
ReplyDeleteExcept, mazenko, that value added taxes are always shifted to consumers, and are therefore more regressive. With an income tax, you can most precisely tailor the tax to the revenue you need, and you can make it more or less progressive by fiddling with the rates, deductions, and credits. The problem is, people will then actually know how much government is taking . . . which might, actually lead to people paying atte3ntion to the sort of programs they ask government to provide . . .
ReplyDeleteI understand your point Max. However, I'm tending to support Bruce Bartlett's idea and David Walker's position with the Concord Coalition and the Peterson Foundation.
ReplyDeleteIt is going to be most fiscally conservative to acknowledge the government we have and fund it accordingly. Thus, by, as Bartlett and Walker point out, making the revenue system lower but flatter, thus more equitable, the people will be able to fund the government they have created.
I acknowledge the regressive nature of the VAT - and its drawbacks. However, the revenue of the state is the state. And if the expenses are known, the revenue must be met. Expenses are pretty clear right now. It's the revenue that is lagging everywhere.