Here’s the headline of a USA Today op-ed in Thursday’s paper:
Arthur B. Laffer: Collect more sales taxes
Say what? A legendary conservative economist issued a study that advocates raising taxes? Tell me more!
Use e-commerce revenue to cut income taxes.
Oh. Sales taxes hit poor people harder than rich people. Income taxes hit rich people harder than poor people.
The study was funded by a business group called the Marketplace Fairness Coalition, which backs the legislation.
Point being, it’s always worth a second look when a prominent conservative think-tank type comes out for higher taxes (or, let’s face it, just about anything). Arthur Laffer, need I remind you, was the intellectual brainpower behind Reagan’s voodoo economics.
So it is with Laffer’s op-ed, which is laughable on its face (no pun intended), but not apparently to wide swaths of the media. It’s a case study in how powerful interests move their message through a lazy and compliant press.
Here’s the lede from The Hill, which will apparently print any old thing and which passes on Laffer’s numbers without so much as a sideways glance.
Allowing states to tax online purchases could produce about 1.5 million new jobs and a $563 billion boost in gross domestic product, according to a report from famed conservative economist Arthur B. Laffer.
This transparent nonsense is regurgitated by several other papers too, including the Harrisburg Patriot-News, which goes all in on the PR line:
“Dr. Laffer’s study proves that closing the online loophole and cutting taxes is the right prescription for economic growth in Pennsylvania,” said Greg Rozman, owner of Rozman Brothers Appliances-TV-Furniture in Harrisburg, where the Pennsylvania chapter of the Alliance for Main Street Fairness held a press conference timed to today’s release of the study.
As does the Knoxville Daily Sun:
“Dr. Laffer has been viewed as a national expert for years,” said Scott Schimmel, co-owner of Bliss and Bliss Home on Market Square and in West Knoxville. “His analysis of the Marketplace Fairness Act should leave no doubt among conservatives that it does not impose a tax increase, and in fact could be used to lower taxes.”
The PR blitz made The Dallas Morning News, Politico, Chattanooga TV (which at least didn’t quote the Laffer “study”), the Knoxville News Sentinel, The Chattanoogan, The Roanoke Times, and my hometown Tulsa World and the paper 15 miles north, The Collinsville News, which at least has the decency to give a byline to the flack that wrote its story and comes from Pearson Public Affairs, which says on its website that it is “turning advocacy into activity.” The Laffer nonsense hit my inbox in an email from the Retail Industry Leaders Association, which lobbies for Walmart, Target, and other big chain retailers. Perhaps least excusable is Reuters’s credulous coverage.
The Tampa Bay Times never gives the Laffer numbers that second look I mentioned above, writing, “Arthur Laffer has been hailed as a key player in the tax-cutting movement of the 1980s… So it might come as a surprise to some conservatives that he’s on a mission to collect more sales taxes.”
Let’s sit here and think about this for, oh, half a second. The Marketplace Fairness Act would raise between $10 billion and $25 billion a year for states and cities by taxing online sales. Laffer would use that money to lower income taxes. So he’s saying that by switching that money around, the economy will grow by more than half a trillion dollars by 2022 while creating a million and a half jobs because. Sure, boss!
None of these outlets bring a sliver of analysis to these numbers, much less pick up the phone and call somebody who would know what they’re talking about. When you see giant numbers bandied about by some study funded by a powerful lobby, always be skeptical. When a conservative economist tells you, as Laffer does the Tampa Bay Times, that “This is not a conservative or a liberal paper,” while advocating moving from progressive to regressive taxation, call him on the lie.
The thing is: It’s nuts that we’ve let Internet retailers go untaxed for as long as we have, as I’ve written for years. It’s a simple fairness issue: Bricks and mortar retailers shouldn’t face a 7 to 10 percent price handicap to retailers selling online.
You don’t need outlandish numbers from a discredited economist paid for by a vested interest to make the case for taxing online retail.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum. Tags: Arthur Laffer, Laffer Curve, lobbyists, Marketplace Fairness Act, public relations