ATLANTA — Retailers across Georgia and in neighboring states are hopeful that a report issued by a well-known, conservative economist will bring needed support in Congress for legislation to tax all online sales.
For traditional “brick and mortar” retailers like Levy Jewelers in Savannah, it’s simply a matter of fairness that online merchants collect it like stores must. Otherwise, customers search for where they can avoid it.
“I think people understand you’re going to have sales tax added,” said Tony Boggs, the store’s chief operations officers. “For purchases below $200, people don’t worry about it, but if the price is more than $1,000, suddenly, it starts to come to their mind.”
The report’s lead author, Arthur Laffer, known by many as the Father of Supply Side Economics and an advisor to President Ronald Reagan, along with co-author Donna Arduin released the study earlier this month estimating that taxing all Internet sales would create jobs and boost economic activity.
In Georgia, they project a 31,000 job increase, 12,000 for South Carolina and a whopping 65,000 for Florida.
“Using additional sales-tax revenue resulting from federal e-fairness language to lower other taxes is a distinctly pro-growth policy. It’s a win/win for states,” they wrote.
The U.S. Senate passed legislation to subject the Internet purchases to state sales taxes with a bipartisan majority May 6, and the House is currently considering it. So far, 60 members of the House are cosponsoring the measure from both parties, including Rep. Hank Johnson, D-Ga., and Rep. Austin Scott, R-Ga.
Many conservatives in Congress oppose the bill and call it a boost in taxes that will weaken the economy and lead to more government spending.
Laffer and Arduin say the opposite is the case because a sales tax has the least negative effect on the economy while activity is indeed dragged down by the other taxes states have raised to make up for the lost sales tax.
“Many of our closest friends believe that treating all retail sales within a state-whether in-state or out-of-state, such as Internet based-as part of the appropriate sales-tax base constitutes an overall tax increase,” they wrote. “It is clear from the data that the declining state sales-tax base, some of which comes from Internet sales, has not been a means to control government spending or taxes.”
Interestingly, a group that has opposed Laffer’s past proposals for Georgia agrees with taxing online sales. The Georgia Budget and Policy Institute, an Atlanta think tank, fought Laffer’s recommendation to reduce or eliminate the state income tax by raising the sales tax, but the institute’s analyst Wesley Tharpe said Monday that the impact of taxing all Internet sales would be almost nothing for most people.
“Any economic impact would be an added bonus because it’s good tax policy,” he said.
Tharpe notes that state law already requires the tax - either collected at the time of the sale by the merchant or submitted by the buyer. Almost no buyers pay the tax on their own.
He also agrees with Laffer that online collections would reduce pressure on governments to raise other taxes.
For Boggs, the Savannah jeweler, it would also have the benefit of circulating money without the community.
“Keeping the dollars at home is important,” he said. “We would like for people who stay in Savannah to shop in Savannah.”