Yesterday, immediately following the closing bell in New York, CNBC’s Maria Bartiromo interviewed Curtis Dubay of the Heritage Foundation and Michael Mazerov from the Center on Budget and Policy Priorities on whether collecting sales tax online is the right move for states that are in need of revenue.
Ms. Bartiromo initiated the questioning:
Collectively, states are facing a fiscal budget shortfall of $130B according to the Center on Budget and Policy Priorities, and requiring online-only retailers to tax their sales, particularly in states where they don’t have a legal presence, could generate a much needed $10B according to a study by the University of Tennessee. Not everybody believes is the right solution to solving the states fiscal problems. The Heritage Foundation Senior Policy Analyst Curtis Dubay says “such attacks won’t raise any revenue.” Michael Mazerov a Senior Fellow from the Center on Budget & Policy Priorities says “states need the revenue, and should collect it to plug the holes.”
Mr. Dubay then started off:
Rather than nickel and dimeing their already over-taxed citizens with more taxes, states should be focused on cutting their spending. . . No amount of tax increases can bail them out of their profligacy.
As our regular readers already know, nobody in this debate is suggesting any new taxes, or any tax increases! We hate it when people suggest such nonsense. Fortunately, Mr. Mazerov is no stranger to this subject, and he quickly set the record straight:
Well this isn’t a tax increase. Everything you buy on the internet is subject to tax, and has already been subject to tax. All we’re really talking about here is changing the law so that companies like Amazon and Overstock have to collect the same tax that every store on Main Street has to collect. . . Internet sales are already subject to tax in every state [that collects sales tax]. If the seller doesn’t collect it from you, you have to pay it yourself directly to your state. It’s not a new tax. It’s not a tax increase.
Well put, Mr. Mazerov! On the estimates that states could collect between $10B and $23B and how states may consider this revenue significant in light of the many budget cuts they have already made or are planning to make, Mr. Mazerov continued:
States have been making huge cuts, and $10B isn’t going to offset a very large share of what they’ve been forced to [cut] already. But it is a significant amount of revenue, and it could be the difference for whether kids have a summer school program in a certain state, or whether tuition goes up at the community college by only 5% rather than 10%. So it’s definitely worth doing. Nobody says this is going to solve the fiscal problems of the states, but it can help.
Smartly, Mr. Dubay agreed, but then he quickly went on to try and argue once again that this is a new tax:
Well he’s right, residents are required to file use taxes, but the fact remains this would be, uh, kind-of a new tax.
No, Mr. Dubay. Mr. Mazerov is correct and you are not. This is not “kind-of a new tax.”
Mr. Dubay went on to describe how states that have been enacting the affiliate nexus laws have been seeing companies like Amazon and Overstock terminate their affiliate relationships in those states, with the result that the state not only doesn’t gain any meaningful revenue, it actually loses revenue when the jobs created by those relationships go away. In response, Mr. Mazerov quickly pointed out that:
. . . the states basically have to stick together to solve this problem. The best solution is not at the state level. The best solution is at the federal level.
We strongly suggest you go and check out the the video yourself—and we look forward to introduction of the Main Street Fairness Act (very soon!), which will finally address this problem at the federal level, as Mr. Mazerov and many, many others have suggested.