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.
And:
The study was funded by a business group called the Marketplace Fairness Coalition, which backs the legislation.
I see.
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.
Congrats, Ryan (D), you totally missed the part about how more effective sales taxes are than an income taxes that involves a zillion pages. OweBama likes you, you do everything he wants.
#1 Posted by Clayton Bigsby, CJR on Fri 19 Jul 2013 at 09:42 PM
Income is an opinion, sales are a fact.
The problem with our taxation of income is not in its theoretical progressive nature, but rather the thousands of exceptions that have made it the domain of the Mandarins of our time. Our taxation cannot remain dependent on a system that has become so corrupt that we rival third world countries. The only difference between USA and our third world rivals is that we have enshrined these payments in law.
#2 Posted by John ODonnell, CJR on Sat 20 Jul 2013 at 04:16 PM
Ryan,
You bore me. Your writing style is neither engaging nor insightful. The one fact I received from this article is that sales taxes are regressive. Thanks for the insight and welcome to econ 101!
Maybe you should review the Canons of Taxation - please find it yourself. Equity, certainty, convenience and economy. What this means is, although regressive, we would be better off with a sales tax because: a) it cost less to implement and maintain (economy), b) it is fair with no loopholes (certainty), c) we don't waste hours/days and money trying to figure how much income tax we owe (convenience).
Please take your writing and reasoning skills to maybe a celebrity gossip column.
#3 Posted by Colin, CJR on Tue 23 Jul 2013 at 01:53 PM
I'm a left leaning person and support something along the lines of what Laffer is talking about. www.fairtax.org has all the details but essentially it replaces Income Tax with Sales Tax and lower income brackets are compensated with disbursements from the government to keep the system progressive. Eliminate loop holes, remove disincentives for business, reduce offshoring of work and profits, etc.
#4 Posted by Adam, CJR on Tue 23 Jul 2013 at 02:28 PM
Funny how capital gains and corporate tax cuts never enter into the discussion on issues of tax and fairness.
How about that small tax on trades to limit the high frequency microtrading done by computers and showing little social benefit.
We've got fair economic plans:
http://www.prosperityforamerica.org/
http://cpc.grijalva.house.gov/the-peoples-budget/
But rich people benefit more (relatively) from an unfair world. And just so you know, one of the reasons why states are suffering such fiscal problems in this recession is that they've shifted away from income taxes and towards sales taxes.
And what that does it make states float or sink based on the amount of sales conducted.
And that results in states being short of resources just when the people need state resources most - in a recession.
#5 Posted by Thimbles, CJR on Tue 30 Jul 2013 at 03:17 PM