Internet Sales Tax Would be Wrong for Texas

Internet Sales Tax Would be Wrong for Texas

Months after passing sweeping income tax legislation lowering the national personal and corporate income tax rates for millions of Americans, members of Congress, even those in the party that voted for this legislation, are now trying to impose an internet sales tax across the states. As outlined in the Wall Street Journal, a large group of Congressmen in both the House and Senate are trying to tie legislation to the omnibus spending bill that would allow states to collect sales tax from remote online retailers. Aside from being bad policy to sneak in policies like this into a spending bill, an online sales tax on remote retailers would be bad economic policy, infringe on liberty, and would be wrong for Texas.

Does Texas need more sales tax revenue?

 The short answer is no. Texas already has the 12th highest combined state and local sales tax in the country at 8.12%. The state of Texas collected nearly $29 Billion in sales tax revenue in Fiscal Year 2017 – a 2.3% increase from 2016. Even more recently, Texas has seen nearly a 10% jump in sales tax collections in January 2018 compared to the previous year and over a 12% increase in December 2017 compared to the same month in 2016. Regardless of revenue impact, Texas does not need another source of tax revenue as our state already collects more revenue than it needs to fund the core functions of state government.

Impact on your wallet

Texans are already burned by taxes in a variety of ways – by the chunk of money taken out of their pay checks every pay cycle to the federal government, taxes paid at the gas pump and grocery store, and even the additional cost of buying or renting a home as our state has the 14th highest property tax collections per capita. Needless to say, Texans don’t need an additional hole in their pocket books in the name of the state legislature needing more money to spend. Online purchases are made by those all across the economic spectrum – not just the middle and upper class who legislators may argue can afford the additional tax. There is no reason to make it more difficult for Texas’s more economically vulnerable citizens to purchase products in the modern day online marketplace.

Fairness to Local Retailers

 Proponents of an online tax for interstate purchases argue the current lack of tax is unfair to local brick and mortar retailers who are forced to comply with local sales taxes. While it may be fair to argue that these retailers are taxed too much already, it isn’t fair to taxpayers to put an additional burden on them by taxing remote online purchases. As explained in the recent Wall Street Journal article, online purchases make up less than 10% of all retail sales – most of which is already taxed. All but one of the largest 18 online retailers in the country are already collecting taxes on purchases. Texas’s smaller online retailers would be put at even a greater disadvantage in their competition with the larger corporations as an additional tax would be a large burden on a small business while the larger companies may be able to afford it (just as large companies are many times proponents of increased regulation in their industry as they’re given an advantage over smaller companies who can’t afford the additional costs of these regulations).

The Big Picture

 Tax and revenue statistics aside, the government should not infringe on the economic liberty of its citizens. While this legislation wouldn’t necessarily force states to impose this new tax, it stands to reason that state legislatures, even those in “red” states such as Texas, would find a way to impose the tax eventually in the name of “fairness” or additional revenue. Texans work hard for their income and already have enough of it taken by federal, state, and local government through income tax, sales tax, excise tax, property tax, and the list goes on. Given the tax burden already put on our residents, we should be working to reduce the number of ways governments can collect our money – not giving them another avenue to do so.

Dillon Jones, Senior Policy Analyst | Lone Star Policy Institute

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