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Sunday, August 4, 2013
According to a new study by economic experts Arthur Laffer and Donna Arduin, closing the online sales tax loophole would jumpstart economic activity of the kind we desperately need after more than a decade of anemic growth. A current bill in Congress — the Marketplace Fairness Act — would do just that.
As chairman of the Roanoke County Board of Supervisors, I feel that it is my duty to my constituents to express my strong desire for Congress to pass this bill as soon as possible and help get our local businesses and local economy moving again.
According to the study, while “online and other remote sales are subject to state and local sales and use taxes, they are often inaccurately perceived as ‘tax free’ because the taxes legally owed on these purchases go largely uncollected by remote sellers due to a Supreme Court ruling that pre-dates the Internet.” In short, those who claim that the Marketplace Fairness Act is a new tax or tax increase are simply wrong. These taxes have always been due, plain and simple. The fact that they are not collected efficiently does not negate their existence.
A pro-growth, market-based tax system would favor sales taxes over more burdensome taxes like income taxes because they are more broadly distributed and are at lower rates. But under the current system, just the opposite is happening. As more and more consumers go online to buy goods, states are collecting less and less in sales taxes. To make up the difference, some other states have increased income taxes, which is slowing growth and making it difficult to create jobs.
If we were to close the online sales tax loophole, the government would no longer be picking winners and losers in the marketplace, and greater economic efficiencies would be created. In this updated system, states could take the increased revenues they get from collection of sales tax online and put it toward lowering marginal tax rates for all citizens. This would amount to a massive, revenue-neutral stimulus that would create jobs and spur growth.
It’s worth noting that in Virginia, a portion of the sales tax reverts to localities. The Marketplace Fairness Act would also better enable local governments to keep taxes low.
Don’t take my word for it, though. Just look at recent developments in Wisconsin and Ohio. In both state legislatures, budget bills have been passed and signed into law that would utilize the increased sales tax revenue from closing the online sales tax loophole to lower income tax rates — something that all taxpayers should embrace.
Additionally, if Virginia took a similar approach, we could see more than 23,000 jobs over the next decade, and at least $1.5 billion added to the economy. For the United States as a whole, an amazing 1.5 million jobs would be created and more than $560 billion added to gross domestic product over the same time period. These are highly persuasive numbers that cannot be ignored by our elected officials in Washington, D.C.
Unfortunately, this bill does have its detractors, who are trying desperately to cling to the status quo in which online-only retailers have a government-subsidized advantage in the marketplace. Among the misinformation they like to spread about this bill is the claim that the Marketplace Fairness Act constitutes a new tax, or a tax increase. This couldn’t be further from the truth. Not only are these taxes already due, but the current system defies all free market logic by treating two types of businesses in the same sector with completely different rules.
Under the current regime, the government is picking winners and losers in the marketplace — hardly a conservative policy decision or one that is in line with market principles. Those who are opposed to the Marketplace Fairness Act need to take a step back, review the bill again, study the report cited above and realize that the time to pass the Marketplace Fairness Act has come.
Businesses here in Roanoke — and across the country — deserve their support of this legislation.
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