If there is anything that gets demagogic politicians and pundits riled up, it’s the closing of tax loopholes, and the tax-hike demagogues might just be getting one of their wishes come December.
Bloomberg reports that most online consumers will pay sales taxes in some shape or form in the next few months.
Currently, consumers pay taxes on goods purchased straight from Amazon, but they can avoid paying taxes on goods if they purchase them through Amazon’s third-party merchants. By the start of December this could all change, as several merchants are expected to start collecting taxes in return for partial amnesty from alleged back taxes.
No stranger to inciting controversy, Donald Trump has even jumped into the fray by stating in an earlier tweet that Amazon has brought ‘great damage to tax paying retailers.’
Those in favor of closing sales-tax loopholes contend that retailers such as Amazon are supposedly responsible for tax-base erosion and other fiscal imbalances in the states that they operate in. Although well intentioned, calls for closing tax loopholes miss the mark. The underlying problems that are overlooked in this discussion are the burdensome tax policies and profligate spending programs already present in many states.
Unbeknownst to many pro-tax politicians, tax hikes not only hurt the businesses themselves through lagging production, they also hurt consumers as companies pass the costs onto consumers via higher prices on goods and services.
This post was published at Ludwig von Mises Institute on November 24, 2017.