Friday, June 26th, 2009
Offtopic Friday: time to re-think state sales taxes?
The topic of state sales taxes has been a sleeper issue over the last few years. Congress keeps passing moratoriums on out of state Internet sales, but states are trying to come up with clever ways of taxing the business. Amazon seems to be the target of many state legislators and understandably so.
I recently bought a Canon T1i for $950. I bought it online at Amazon.com with free shipping (took 3 days to arrive). The local camera shop had plenty of them in stock and I could have picked it up that day. However, at 8% local sales tax, that camera would have cost an extra $76 for no incremental benefit to me as I wasn’t in any rush to get it so the 3 day delay was fine. The camera shop also closes at 5pm promptly during the week which is an annoyance and nearly impossible for me to get to anyway.
Why would anyone buy from a local store? I bought a plasma HDTV for a few thousand dollars a couple years ago. I saved approximately $175 that would have gone to sales tax by again buying it online (at Amazon.com). I buy EVERYTHING online these days. I’m probably one of a few power users of the iPhone Amazon.com app.
State sales tax policies will kill local retailers, local businesses, and local jobs. It’s odd, but your states implicitly encourage you to buy things from other states rather than the shop down the street. The Internet, USPS, UPS and Fedex have made it infinitely easier today than say 10-15 years ago.
The state sales tax is antiquated and adversely impacting local businesses. State governments need to stop trying to chase down Amazon.com and the 1,000 other Internet retailers who will pop up next.
How should states fix this? Who knows – taxes and markets are a complicated and dynamic system. I haven’t researched which states may have found alternative approaches, but I personally think the state sales tax has to go away. Sure, “local items” like gas, alcohol, etc are easy targets to continue a sales tax, but that’s because they can’t be shipped across state lines by individuals. I can see some moron legislator coming up with a plan to ban importing HDTVs next…
The reality is states needs to create a new, modern tax policies that align local interests and provide the funding needed for the services residents expect. It won’t be easy, but it can be done.
Many cities still tax personal income – another nonsensical issue. They should tax people based on the property the occupy. There’s no reason I should have to contribute to a local city 3x more than the guy down the street does just because I work harder, invested for more higher education, and accepted a more work-intensive lifestyle. I get the same municipal benefit he does but I should pay 3x more? When my wife and I moved from Tarrytown NY last year (no municipal income tax), we moved into another municipality that has no income tax as well. Sure, we pay for these things in property taxes, but it’s a more “even” allocation of the tax burden.
Don’t get me wrong, I’m not an “anti-tax” person. I’ll pay my fair share and that’s fine. I think that many of these taxation systems are trying to patch a failing system that no longer makes sense in our modern economy where physical boundaries are no longer relevant.
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July 18th, 2009 at 2:25 pm
European guy said:
I don’t get why there is a state and federal tax in the US and Canada either. I don’t know about all the countries in Europe, as they are all very different beasts anyway, but e.g. in Germany, there is just one federal sales tax (ok untrue, because tax on food is only 7% instead of the current 19% sales tax).
All prices advertised include the tax already, so you know exactly what to pay, instead of having to add federal and state taxes yourself, which especially when you travel is a PITA.
Also, why can cities tax income? I didn’t know that was possible in the US. Never heard of that here in Canada. Having to do your tax report twice (once for Canada and once for Quebec in my case) is also a PITA. I don’t care who gets which percentage of my income tax, just distribute that behind the scenes and let me do my taxes _once_.