Monday, May 20, 2013

Tax the Internet?

I buy quite a bit of stuff online. I also bank online. At first I was a bit trepidatious so the card I use for internet purchases is for that purpose only while my bank password is as close to random as possible. Indeed the two times my credit cards have been compromised were with cards I do not use for the internet. Tennessee’s republican governor is actively pushing for taxing the internet and has the backing of the state’s two senators. The house delegation however has not rushed to embrace the initiative. Many are saying that they would like to protect small businesses but don’t advocate an increase in taxes period. This got me thinking. The small businesses that I used to frequent that went out of business said that the big box stores, not the internet, were the culprit. The owner of my local pro archery shop said that Gander Mountain and Bass Pro could sell high-end bows cheaper than what he could buy them for and customers would come shoot his bows and then go buy them at Bass Pro. Of course you have heard the same regarding the impact of Wal-Mart on a community. The choice is cheaper or more expensive. Usually cheaper wins. The same is true with the internet. Itunes and Amazon have put the record stores out of business. Remember Tower Records? Amazon also threatens the book stores (re: Borders) and Barnes and Noble has countered with its own internet service and reader. I download all my music but not my books. I still like the physical entity in my hands. So what else do I buy online? I just bought a new microwave from Amazon. Not only did it list for $30 cheaper than at the big box stores (Sears, Walmart, Best Buy), I also got free shipping and saved $20 in sales tax. Choice? No brainer. Now I don’t think that Tennessee governor Bill Haslam particularly wants to go on record has trying to save the profits of Sears, Walmart and Best Buy so it is more fashionable to advocate raising taxes to save the small appliance dealer, bookseller or small archery pro shop. The question is whether this works as a solution to the problem of diminished sales. The obvious answer is no. I will still buy my music and books online. The microwave will still be at least $30 cheaper and the state’s coffers will swell from the increased “revenue”. Now if the governor were really concerned about small business, he would then advocate that any increase in tax receipts from internet sales would not be held by the state but would be allocated 100 percent to small businesses to compensate for revenue loss. How likely is that?

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