A newly
proposed bill that would extend Utah’s taxing authority to out-of-state
businesses is making its way through the Utah Senate. It comes as no surprise that the bill, which
is already being flagged as unconstitutional, is being sponsored by a Utah
Republican lawmaker, Sen. Wayne Harper.
Despite all the rhetoric about their desire to lower taxes and thus improve
living standards for Utahns, the data suggests Republicans are just as
willing to dip into your wallet to benefit certain privileged lobbyists or
special interests as Democrats. After
all, taxes and penalties on business are always passed on to consumers.
The bill, in
effect, would mandate that out-of-state businesses, using Utah companies to
advertise their products and services, collect a sales and use tax from Utah
customers. Aaron Schubach, owner of
Standard Optical, arguing for the bill (and his own special interest) notes
that the $180 million in anticipated tax revenue could be reinvested in
schools, government insurance expansion, “and some of those other things”. I’m sure he’s right. There’s always some pet program out there to
throw money at when you have as large a budget surplus as Utah does. Undoubtedly, Standard Optical, like brick and
mortar bookstores, pet stores, and pharmacies, is feeling the pressure of
competition from online retailers like 1-800-CONTACTS which figured out a more
cost-effective business model and is capitalizing on it.
The genius of
this bill is that it doesn’t directly affect Utah businesses (like
1-800-CONTACTS or Overstock.com), since it specifically targets out-of-state
businesses. Why then would in-state,
e-commerce companies take a position against a bill that would apparently give
them competitive advantage over out-of-state businesses? The answer is found in the classic
oversimplification of economic consequences used by special interests and
lawmakers to foist new taxes and legislation on the masses. By pointing only to the immediate consequence
our wise legislators look like advocates for local businesses, schools, and
citizens. However, the unintended
consequence of this bill surviving a vote and imminent Supreme Court challenge
would be that all states could then go after out-of-state businesses for sales
and use tax collection. The question
needs to be asked: If use tax collection
from Utah taxpayers is already the law, why then press private, out-of-state
businesses to collect it on behalf of the states? This creates a burden and cost on these
businesses that does not currently exist, which will eventually be passed on to
consumers in Utah and elsewhere. The
real reason for sponsoring a bill that makes an end run around Utah’s
unsuccessful collection of use taxes from its own citizenry, is that lawmakers
recognize that most Utahns don’t pay the use tax; hence the $180 million dollar
figure which was not randomly pulled out of thin air.
In some
respects, Mr. Schubach and other advocates like Scott Hymas of RC Willey are
sympathetic characters. They are paying
taxes that their competitors don’t have to.
That is unfair (unless they believe that those taxes benefit them or
their companies through improved local education, Medicaid, and “some of those
other things”; which out-of-state businesses don’t enjoy to the same degree). However, their proposed remedy for this
burden placed upon their respective businesses by the state is to encourage the
state to place the same burden upon others; much like a disgruntled sibling who
derives joy from the punishments of his brothers and sisters. Rather than adapting more fully to the
changing consumer model, Schubach and Hymas have chosen to support the
expansion of taxing authority beyond Utah’s constitutional limits; to get back
at those pesky online stores which save Utah consumers too much money.
A better
solution would be to advocate for lower taxes across the board. This solution puts more money in the hands of
Utah consumers directly, a good deal of which would be spent in-state. The more money people have, the less they
quibble about spending an extra $20 on a pair of corrective lenses or a
couchside lamp; especially when they can walk out of the store with them immediately,
rather than wait for shipping. In this
way Schubach, Hymas, and others could capitalize on one of the few advantages
they have over online stores, while making life better for all Utahns.
I recommend
reducing or eliminating sales tax altogether to boost consumer spending,
improve quality of life for individuals and families, and build upon Utah’s
reputation as a great place to live, work, and run a business.
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