Saturday, December 9, 2017

#TXLEGE: Questions about Unintended Consequences BEFORE we eliminate property taxes

"For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it—"
Luke 14:18

Last week, RPT announced the questions that have been placed on the March 2018 ballot; they include the following question related to property taxes:
Texas should replace the property tax system with an appropriate consumption tax equivalent. Yes/No
We've spoken favorably about this idea in the past. We'd still like to see it happen. But a personal experience from this past week gives us pause.

On Wednesday, this author made a small purchase on Amazon during we we remembered something obvious: STATE AND LOCAL GOVERNMENTS ARE PROHIBITED BY FEDERAL LAW FROM CHARGE SALES TAXES ON A SIGNIFICANT PORTION OF ONLINE PURCHASES.

That got us thinking:

  • Do we really want to move towards a tax system where the fastest growing part of the tax base is already carved out?!?

    One of the best arguments for moving to a consumption tax is that, at least in theory, it should broaden the tax base.  But the federal prohibition on online sales taxes is a pretty significant narrowing.  Furthermore, this narrowing is only going to grow over time.
  • Are we prepared to ask the Feds to allow online sales taxes?!?

    And, if so, for what are they going to ask in return?!?
  • If we carve out online sales, will the final result be a tax system that is overly reliant on rich people (with the attendant revenue swings)?!?

    The long term trend is that the middle class is moving their shopping online, while brick and mortar retail shopping is becoming a leisure activity for rich people.  Thus, any tax system that taxes brick and mortar purchases while carving out online sales will be reliant on purchases by rich people.  As we have learned from California, a system of taxation that is excessively reliant on rich people can lead to wild swings in revenue when the economy changes.
  • If we ask the Feds to permit online sales taxes, and they say yes, what shenanigans would such a move enable other states to pull?!?
  • Are the costs of permitting online sales taxes worth the benefits of eliminating property taxes?!?

    In the past, we've opposed online sales taxes.  The arguments against doing so remains strong.  Suffice to say, internet sales taxes would be a compliance nightmare for small and medium sized retailers.
  • Do we really want to make Amazon the largest tax collector in the state/country?!?

    Many people already think Amazon is too big and too powerful.  Indeed, this website has recently expressed significant misgivings about their proposed HQ2 in Austin.  If you think Amazon is too big and too powerful now, just wait until they're the largest tax collector in the country.

    Consider one example: Amazon very publicly opposed the Texas privacy act this past session; does anyone think they won't threaten to withhold tax revenue in the future?!?
Bottom Line: We're not saying no, but we are saying lets think this one through.

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