A high-pressure push is on to add Pennsylvania to the list of states that agree to force consumers to pay more for all purchases they make online or from catalogues. House Bill 900 is the first and essential step in this anti-taxpayer effort being orchestrated by national organizations such as the National Governors’ Association. This legislation is not only bad for Pennsylvania consumers, it’s bad for Pennsylvania.
Advocates of expanded taxation claim that House Bill 900 is innocuous at worst and great for our state’s future at best. Neither is the case. Nonetheless, this bill could be voted out of the House Intergovernmental Affairs Committee as soon as this coming Monday.
Below are the facts surrounding some of the tax supporters’ central contentions:
Big Bucks From Consumers – The U.S. General Accounting Office estimates that, in the first year, consumers would pay an additional $102 million to $381 million to the state government. Taxpayers are guaranteed to pay more to the government under this plan, and they won’t like it.
Forfeiting Up To 94,000 Jobs – Tax supporters only talk about one side of the state ledger: how much more the state should be collecting from consumers. But this is a static approach to revenue that economists view as severely short-sighted. Transferring as much as $381 million from consumers to the state Treasury in the first year has a cost to the state’s economy. An econometric model developed for Pennsylvania by the Beacon Hill Institute in Boston shows that the Internet tax plan could result in our state forfeiting as many as 94,000 jobs over the next four years. A copy of this study can be found on our website at by clicking here.
Hiding Behind the “Use Tax” – Tax supporters are quite right that consumers are supposed to pay a “Use Tax.” Problem is, few have ever heard of it, even fewer pay it and the state Department of Revenue admits it’s too expensive to collect. Asserting to consumers that the expanded sales tax is merely a new way to pay a tax won’t be met with cheers at the grassroots.
Exploiting Retailers – Tax supporters have cynically used the significant concerns raised by retailers about the burden they shoulder as the state’s sales tax collectors. Tax supporters have admitted that no retailers have been put out of business because of competition from electronic commerce; indeed many retailers have made more money by expanding their businesses to the Internet.
Defining Fairness – Tax supporters falsely imply that online retailers don’t collect and remit sales taxes. Currently, all Pennsylvania retailers – whether online, catalogue or traditional “brick-and-mortar” stores – must collect sales taxes from Pennsylvania customers. This is the height of fairness because it develops a connection between the companies collecting the taxes and the ability to benefit from the services that those taxes fund.
High-Tech Companies Are Taxpayers – Tax supporters falsely imply that online retailers and other digital companies are tax scofflaws. In fact, the General Assembly and Gov. Ridge have properly focused on attracting more digital companies precisely because they produce high-quality jobs and inject dollars into state and local coffers. Pennsylvania is now home to a number of nationally prominent digital businesses. The Internet Tax plan contemplated in House Bill 900 would damage those very companies and the Pennsylvanians who work for them.
Rubber Stamp Legislation – Tax supporters claim that House Bill 900 allows Pennsylvania to have a voice in a grand national dialogue about sales taxes. Leaving aside the fact that Pennsylvania is already represented as an observer in the national tax project, the fact is that the scope and many of the details of the tax plan are already determined. Pennsylvania legislators are being asked to cede important control over aspects of the state’s sovereign tax system to a national cartel that has already designed the system it wants.
News organizations and national groups are beginning to take notice of Pennsylvania’s efforts to tax the Internet. Just yesterday, the nation’s most influential taxpayer group – Americans for Tax Reform – weighed in with a letter to legislators and a news release.
# # #
Sean Duffy is a former President of the Commonwealth Foundation, a non-partisan, non-profit public policy research and educational institute based in Harrisburg, Pa.