Online Sales Tax Not So Simple or Wonderful
In the New Jersey Star Ledgers editorial, “A Level Field,” it is argued that it is time for online sellers to collect state sales tax. The principle concern is that New Jersey is losing out on tax revenue. But the issue is not that simple. There is the little matter of the interstate commerce clause in the US Constitution. In the case of Complete Auto Transit vs. Brady, U.S. Supreme Court said that collecting taxes on out-of-state sales is constitutional when:
1. The activity taxed has a substantial nexus with the taxing state
2. The tax is fairly apportioned
3. The tax does not discriminate against interstate commerce, and
4. The tax is fairly related to services the state provides the taxpayer
With this in mind, consider the example of a couple in New Jersey who goes online to the website of a California firm to buy a product made and shipped from New York State. Where is the point of sale? Which state can claim to have the most substantial nexus? In which state are the most taxpayer supported services provided as related to this sales ransaction?
These are questions for those drafting the Market Place Fairness Act to consider. If raising state revenue was the primary consideration, each state might decide to impose their own sales tax in the above example. This situation would discriminate against interstate commerce. More importantly, if raising state revenues is the issue then the obvious places to start would be the elimination of tax loop holes and sweetheart deals for businesses, elimination of the ridiculous tax loopholes for wealthy individuals, and maybe raising taxes on those who financially benefit the most in New Jersey. Sales taxes are already far too regressive and burdensome to the poor.
Ruppert Murdoch, Ayn Rand and A Sociopathic Economy
Rupert Murdoch, chairman and CEO of News Corp., and one of the richest men on the planet, recently claimed that free markets are morally superior to more social based ideas of morality and fairness. “We’ve won the efficiency argument,” he claimed. Now he hopes to persuade us that free markets are morally superior and that socialism fails because of its “denial of fundamental freedoms.” In Murdoch’s world the idea that market success is based on greed is a false characterization that creates confusion. He believe that markets succeeds where governments fail, not because of greed, but because people are given “… incentives to put their own wants and needs aside to address the wants and needs of others.”
It sounds great! But before you buy into this idea you should know he goes on to say, “To succeed, you have to produce something that other people are willing to pay for.”
Therein lies the rub. To succeed you must “produce.” For Murdoch, distributive justice is the natural outcome of these purely commercial transactions. He quotes Arthur Brooks at the American Enterprise Institute who defines fairness as, “… the universal opportunity to enjoy earned success”. The key words here being “earned success.” Accordingly, producers are entitled to all they earn because if their product wasn’t successful, consumers are free to not buy their product. This is a cruel argument to make in the face of an elderly person having to choose between buying food or medicine, of course. Nevertheless, in this view every sale in a free market system automatically results in a fair distribution of wealth. No other social factors should apply. In fact, to take from producers what they’ve earned to support the lives of less successful or non-producing human beings is immoral, in Murdoch’s view.
“What’s fair about taking money from people who’ve earned it and giving it to people who didn’t,” Murdoch asks.
But Murdoch’s whole notion, which closely mirrors that of Ayn Rand, ignores the whole complex social economy in which commerce and every other human activity actually takes place. It rejects the wisdom that markets only exist to serve societies needs. Markets are manmade entities and not a natural phenomenon, but Murdoch’s narrow view treats markets as natural entities that are morally superior to society. It limits the meaning of production to that which has a monetary exchange value. It assigns social value to the creators of products according to their market success, measured in material gain. It does not account for the material contributions of the public domain in making commerce and stable markets possible. Even though the monetary value of a product is co-dependent on a consumers’ willingness to pay, it does not assign any social value to the consumer. Only the source of a buyers money gives them any social status.
This leaves open the question of how, or even whether, to assign social value to those not immediately involved in commercial production. These folks include children, the disabled, the elderly, the unemployed, those who care for children, woman on maternity leave, all government employees, military personal, clergy, law enforcement, etc. Murdoch’s view begs the question; What is a person worth when their value to society cannot be directly measured by their market place success?
Murdoch’s views are shared by many of today’s corporate elite. It is the makers vs. takers mentality. It is a view that can only be described as anti-social at best, sociopathic at its extreme. It opposes all government interventions in the market place and opposes most government regulations. It is a philosophy designed to restricts the ability of ordinary citizens (i.e. government) to assure that our markets and commerce works for the good of society and not just for the benefit of the economically powerful. It implicitly confers ownership and control of the markets to the most powerful market makers while failing to acknowledge the corrupting effects of power on financially successful human beings. By denying the humanity of markets it denies the vulnerability of markets to human weaknesses. This puts society at risk and cripples humanity from solving some of the really big challenges we face as a species. How we chose to define distributive justice is arguably the most important economic question of our time. How we ultimately marshal our economic resources to solve our really big problems depends on how we ultimately organize our economy.
[Ruppert Murdoch’s views as expressed can be found at the following URL: http://nation.foxnews.com/rupert-murdoch/2013/04/22/rupert-murdoch-op-ed-case-market-s-morality?utm_source=feedly&utm_medium=feed&utm_campaign=Feed%3A+FoxNation+(Fox+Nation)]
Corporations Open New Push for Even More Favorable Tax Laws
Beware America! The push is on for yet another round of self-serving corporate tax reform. A press release from the Business Roundtable announced the release of a new report touting the economic benefits of “revenue neutral” corporate and individual tax reforms. Below is a summary of the findings from the press release and a link to the report. But before you read it, consider what the real trend is in corporate tax revenues compared with what individuals contribute.
HERE IS THE TRUTH! Corporate tax rates do not reflect what corporations actually pay in income taxes, and the effective corporate tax rates, as well as the percentage of tax revenues they contribute have been in decline for decades.
Decline in Corporate Tax Burden Over 40 Years
The table above (in millions of dollars) is based on statistics from the Office of Management and the Budget in the White House [www.whitehouse.gov/omb/budget/Historicals/].
The shift in the percentage of total taxes paid by individuals has grown substantially over the years. Individual income taxes raised 41% of the total income tax revenue in 1943 compared to 79% of total revenues today. And the shift in tax receipts from corporations to individuals cannot be explained by a shift away from C corporations (who pay the corporate income tax) to S corporations (who don’t). An analysis of that shift in corporation type is an insignificant contributor to the overall shift in the tax burden. [http://rdwolff.com/content/massive-shift-tax-burden-corporations-individuals-statistical-mirage ]
Shifting the tax burden from corporations to individuals over the past 40 years is yet another factor contributing to the current decline in domestic consumer spending. Wage suppression, the shifting of the tax burden from the rich to the middle class, coupled with the decline in the tax burden on corporations are all that is needed to explain the decline of America’s middle class, the rise in poverty and the growth of government spending in social support programs. The people are going broke, the government is going broke trying to prop us up and the rich are becoming richer and more powerful each year.
BUSINESS ROUNDTABLE RELEASES ECONOMIC CASE FOR CORPORATE TAX REFORM
Comprehensive Data Analysis Shows Tax Reform Would Ensure U.S. Competitiveness and Lead to U.S. Economic Growth
Corporate Tax Reform – The Time Is Now
Key components of the Roundtable’s analysis include: [also known as “talking points”]
- U.S. Companies’ Fiercest Competitors Enjoy Lower Home-Country Tax Rates: It is well known that the U.S. combined (federal and state) statutory tax rate is the highest of any developed nation, averaging 39.1 percent. As the analysis points out in detail, American companies now find that their closest foreign competitors are based in countries with lower corporate tax rates and international tax systems more favorable to their global operations than the U.S. rules. Since 2000, 30 of the 34 Organisation for Economic Co-operation and Development (OECD) countries have reduced their corporate tax rate.
- High Rates are a Drag on the U.S. Economy: Researchers at Cornell and the University of London report that a one-percentage-point decrease in the average corporate tax rate would result in an increase in real U.S. GDP of between 0.4 to 0.6 percent within one year of the tax cut.
- Double Tax on Foreign Earned Income Hurts American Companies and U.S. Competitiveness: Within the OECD, of companies headquartered outside the United States, 93 percent of the world’s top 500 companies (based on Fortune’s 2012 list) are headquartered in countries that use “territorial” tax systems, where income earned abroad is not taxed again when earnings are repatriated, unlike under the current U.S. system. This is up from only 27 percent of the same countries utilizing territorial systems in 1995 – signaling a significant trend towards the more competitive method of taxation.
- Under current law, foreign earnings are effectively “locked out” of the United States: An estimated $1.7 trillion in accumulated foreign earnings was held by the foreign subsidiaries of American companies in 2011. If only half of that amount came back to the United States in response to enactment of a market-based territorial tax system, the funds freed up for use at home would exceed the increased government spending and tax relief provided under the 2009 American Recovery and Reinvestment Act.
- Effective U.S. Corporate Tax Rate 12+ Percentage Points Higher than OECD Countries: Data in the new document disproves claims of low “effective” rates (amount of tax paid after deductions) paid by U.S. corporations, citing a new World Bank study of corporate income taxes in 185 countries for 2013 that finds that tax payments are higher for companies operating in the United States as a percentage of income than the average of other OECD and non-OECD countries. In fact, the U.S. effective tax rate (ETR) of 27.6 percent is more than 12 percentage points higher than the average of other OECD countries and 11 percentage points higher than the average of non-OECD countries. The analysis also explains why using the ratio of corporate income tax to GDP is an improper measure of effective rates.
- U.S. Workers Bear the Burden of the Outdated U.S. Corporate Tax System: Corporate Tax Reform – The Time Is Now also analyzes a number of recent studies that find that workers bear between half and three-quarters of the burden of the corporate income tax. These findings suggest reducing the corporate income tax rate would provide benefits to workers through higher wages.
CLASS WARFARE – OVERVIEW OF WAGES, TAXES and WEALTH IN AMERICA
Since Reagan in 1980’s Tax Rates for the wealth were cut in half and capital gains tax (where most make their money) was cut in half again. http://j.mp/ZFFQHB
Wages and GDP rose together until wages were suppressed in the 70’s, otherwise median income today would be greater than $100K instead of $51K http://j.mp/14MoT67
The combination of wage suppression and the collapse of the upper income tax brackets is the cause of our wealth and income inequality today. http://j.mp/102YbAk and http://j.mp/10DVrLn
A majority of American’s don’t make enough money to support a robust economy because a handful of us have more money than they can spend. http://j.mp/16E3zOT
Current US policy is creating permanent income inequality. Income mobility is shrinking as income caste system forms. http://t.co/nK5uFGyCaG
We know what victory looks like in Class Warfare. It’s the formation of an income caste system where birth determines your level of success. http://j.mp/Y1HwQP
Obama’s proposed raise in min. wage from $7.20 to $9/hr would mean a person working 40hr/week at min. wage would still be below poverty line. http://j.mp/10DwY7V
If the minimum wage was raised to $18/hour the Federal Government could eliminate almost all aid to the working poor, saving tons of money. http://j.mp/10DVrLn
Every tax dollar paid to assist the working poor is a tax subsidy providing their employer a federally funded labor discount. http://j.mp/16Bml7r
God! When are we going to wake up?