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Online Sales Taxes Won’t Solve States’ Budget Problems

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States aren’t lacking tax revenue. A group of states is asking the Supreme Court to give states the power to tax sales between their residents and out-of-state retailers. They claim Internet commerce is costing them tax revenue. Jessica Melugin provides some facts:

An often-quoted study updated in 2016, and funded by proponents of expanding sales tax collection, projected a total of $211 billion in lost revenue between 2018 and 2022.

But a 2017 study from the nonpartisan Government Accountability Office found something very different. The potential new tax revenue lost, it said, is a mere fraction of that, somewhere between $8 billion and $13 billion. That is “2-4 percent of total 2016 state and local government general sales and gross receipts tax revenue.”

That’s a very small revenue gain for a lot of compliance pain. For a relative handful of change, the states litigating this point are threatening to send folks who sell their wares on eBay or Etsy out of business.

With big box stores collecting sales taxes everywhere they have a physical presence, and Amazon now collecting in every state that has a sales tax, the revenue emergency that was predicted is a red herring. In fact, total state and local tax collections, across income, property, and yes, even sales taxes just hit an all-time high.

[Jessica Melugin, “Online Sales Taxes Won’t Solve State’s Budget Problems,” Competitive Enterprise Institute, June 12]

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