| WASHINGTON, July 18
WASHINGTON, July 18 Legislation to allow U.S.
states to collect sales taxes on purchases made online is
garnering support from both sides of the political spectrum,
with a leading conservative economist saying on Thursday the tax
would foster growth and job creation.
Arthur Laffer, a former chief economist at the White House
Office of Management and Budget best known for the "Laffer
Curve" relating tax rates and revenues, released a study
estimating states will lose out on annual revenues of between
$27 billion and $33 billion by 2022 without Internet sales
"All taxes are bad. Some are a lot worse than others. And
governments need to collect the requisite revenues to carry out
their functions," Laffer told reporters on a call.
The former member of President Ronald Reagan's
administration estimates that by 2022 taxing online sales would
add $342.9 billion to the country's gross domestic product and
916,627 jobs to its workforce. When considering the full
legislation, which would also apply to catalog and other remote
sales, Laffer found U.S. GDP would increase by $563.2 billion
dollars and add 1.51 million jobs.
The bill, known as the "Marketplace Fairness Act" passed the
Senate this spring and is now in the House of Representatives,
where it faces challenges from Republicans viewing it as a tax
increase. But it also has bipartisan backing there. Rep. Steve
Womack, a Republican from Arkansas, and Rep. Jackie Speier, a
Democrat from California, sponsored it.
Under a 1992 U.S. Supreme Court ruling, states can only tax
Internet sales made by companies with a physical presence within
their borders. The Senate bill would extend the authority of
states to require retailers to collect sales taxes, although it
exempts merchants with annual out-of-state sales of $1 million
States say the bill enables them to patch budget holes
without relying on the federal government. Many also say the
bill gives "brick-and-mortar" retailers leverage to compete with
Some states plan to use any revenue from the bill to offset
cuts in other taxes. Virginia intends to replace most of its
gasoline tax with potential revenue. Wisconsin Governor Scott
Walker, a Republican, would like to cut income taxes.
Ohio has joined an agreement among states and sellers where
retailers voluntarily collect the sales taxes. By 2015, Ohio
will collect $60 million a year through the agreement and could
collect more than $200 million if the bill passes, according to
its tax commissioner, Joe Testa. Extra revenue will be used to
drive down the personal income tax rate, he said.
Anti-tax activist Grover Norquist has decried the bill as a
tax hike, and for setting a precedent of states taxing people
beyond their borders. The online marketplace eBay Inc
strongly opposes the bill and, within Congress, members from the
five states that do not have sales taxes are against it.
Laffer estimated that Wisconsin's gross state product would
grow the most by 2022 if the legislation passed, by 4.63
percent, followed by Hawaii at 4.59 percent and Wyoming at 4.17
percent. Alaska would see the least impact, with growth of only
1.21 percent, followed by Virginia and Vermont, 1.43 percent.
Part of his calculations include using the tax "wisely" to
lower other taxes and not to expand spending.
"Governors and legislators will have to determine what to do
with the revenues. The beauty of the federalist system is
they're all going to make their own decisions," said David Quam,
director of federal relations for the National Governors
Association, which represents governors of both parties and
strongly supports the bill.
Quam does not expect the House's Judiciary Committee to pass
the bill before the August congressional recess, but state and
city groups it will move on the bill soon after the break.