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No Tax Increases, But We Will Pay More

By   /   October 10, 2012  /   Comments

Georgians who now make purchases online have started to notice something new. Some websites are now collecting sales tax on their purchases that previously did not. Politicians are quick to remind us that this is not a new tax, and they are correct. Georgia law has long since required purchasers to remit taxes on all purchases made from out of state vendors. It’s just there has been almost no way for the state to monitor these purchases nor a mechanism for the state to collect them from retailers.

Georgia’s tax reform package passed late last session after little public debate changed all of that. The measure was opposed by online retail giants like Amazon, but favored by big box retailers such as Wal-Mart and Home Depot. The big box retailers won for a variety of reasons, among them of course is the state’s desire for additional revenue.

There is also the conceptual argument that the old tax policy gave an advantage to retailers who were based out of state over those who invest locally, hire Georgians, and pay local taxes in addition to the sales taxes they generate. The once mighty chain “Best Buy” is perhaps the best example of this competitive disadvantage, as consumers now use the chain for “showrooming” – the practice of going to a store to view the product, get educated by the store’s employees, then return home to purchase the desired product online. In Georgia, the price advantage for the online retailer was as much as 8%.

Closing the internet tax gets the state out of the position of helping pick winners and losers in the retail industry. Coming soon another loophole will be closed, leveling the playing field with licensed car dealers who sell used cars and private individuals who sell cars on their own. A new “fee” to title cars will be placed on the sale of all automobiles, new and used, as a replacement for the current sales tax structure.

Legislators decided to level this playing field by extending the new tax, though they would very much prefer you use their term of “fee”, to private sales instead of exempting the licensed dealers from collecting taxes on used car sales. This one is harder to pass off as closing a loophole, and should be considered a new tax on consumers. When the state choses to get out of the business of picking winners and losers, one should always remember the state will certainly not come out the loser.

The battle here in the Georgia is foreshadowing what will soon be part of the battle to avert the “fiscal cliff” in Washington. Lawmakers on both sides of the aisle are quite reluctant to raise taxes, but also realize that there is an immediate need for more revenue in federal coffers. “Closing loopholes” is now part of the debate at the state and federal level.

Republicans are still quite sure they are “taxed enough already” and will not support increased tax rates to reduce the national deficit. Democrats, while campaigning on the need for “the 1%” to pay more, get a bit more quiet when reminded they had the opportunity to do so in 2009 and 2010 when they held both sides of Congress and the White House, as they too knew the political risks of voting to raise taxes.

Closing loopholes, right now, is somewhat of a tricky no-man’s land. It is something that is often supported in polls because the term has negative connotations associated with someone else getting a special perk to avoid paying their proper amount of taxes. When actual loopholes are closed, however, such as the one allowing for collection of internet sales tax purchases, many voters fail to distinguish between “closing loopholes” and “raising taxes”.

In short, closing loopholes are generally fine so long as they’re closed on someone else. Reality is sometimes cruel in that it doesn’t always allow us to have our rhetoric and enact it too.

At the state and local levels, there will likely not be tax increases after the next round of elections. Yet we can all watch the “loopholes” begin to disappear. And we can all expect to pay more.

Charlie Harper is the Atlanta based Editor of PeachPundit.com, a conservative-leaning political website. He is also a columnist for Dublin Georgia based Courier Herald Publishing.

 

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