Inside This Issue - News
Coalition seeks level playing field for sales taxes
November 21st, 2011
ALEXANDRIA, Va. – Seventy state and national trade associations and more than 60 companies have petitioned the “super committee” that is exploring ways to trim the federal deficit to clear the way for states to start collecting sales tax on Internet and catalog purchases.
The coalition, which includes such groups as the National Association of Chain Drug Stores, the National Retail Federation and 40 state retail associations, as well as such retailers as Safeway Inc., Sears Holdings Corp., Target Corp. and Walmart, says that the failure to collect an estimated $23 billion a year in taxes for online retailers and mail order merchants puts brick-and-mortar stores at a disadvantage and threatens their competitiveness.
“As you seek solutions to address the federal budget, any final product will undoubtedly have an impact on the states, which are likewise facing their own budget crises,” the retail groups and retailers said in a letter to the Joint Select Committee on Deficit Reduction this month.
“Congress has an opportunity to help the states resolve their own budget shortfalls by enhancing states’ rights over sales tax collection authority and in the process closing a loophole that will level the playing field for all merchants,” they stated.
The 12-member bipartisan super committee faces a November 23 deadline to reach an agreement to cut at least $1.2 trillion from the deficit over the next decade. Few details about the talks have leaked out, but there have been no public signs that the 12 lawmakers are getting closer to a deal.
Also this month, NACDS endorsed legislation designed to remedy the sales tax competitive disadvantage for brick-and-mortar retailers. The association sent a letter of support to Sen. Mike Enzi (R., Wyo.), sponsor of the Marketplace Fairness Act, which would enable states to collect sales taxes from out-of-state businesses instead of relying on consumers to pay those taxes, as in the current system.
“For too long, remote Internet retailers have enjoyed an unfair and competitive advantage over local brick-and-mortar retail establishments,” NACDS stated in the letter to Enzi. “Online-only companies can achieve as much as a 10% price advantage over brick-and-mortar retailers by not collecting state sales taxes. This not only hurts local businesses, it robs state governments of vital tax revenue.”
Meanwhile, partisan wrangling has continued amid the super committee’s efforts. Earlier this month Sen. Chuck Schumer, (D., N.Y.), who is not a member of the committee, predicted the group would fail to reach a deficit deal, triggering hundreds of billions of dollars in cuts to Medicare and the defense budget.
Schumer said it would be the GOP’s fault for insisting that no tax hikes be included with measures to cut spending and entitlements. “I don’t think the super committee is going to succeed because our Republican colleagues have said no net revenues,” Schumer, who handles messaging for Senate Democrats, told MSNBC. “The American people are beginning to sniff this. They’re beginning to sniff that the other side has dug in and is not compromising.”
Republicans, however, said Schumer’s assessment was off base. They noted that the six GOP lawmakers on the super committee have not opposed all new revenues.
“Despite Sen. Schumer’s ideological addiction to tax hikes, Republicans are working to find an agreement that works,” Michael Steel, press secretary for House Speaker John Boehner (R., Ohio), said in an e-mail to journalists. “While we oppose tax hikes, Republicans, including Speaker Boehner, have been clear that they are not opposed to increased revenue as a result of tax reforms that lead to economic growth.”
Boehner said pretty much the same thing during an appearance on ABC’s “This Week with Christian Amanpour” earlier in the week. “I believe that if we restructure our tax code, where on the corporate side and the personal side the target would be a top rate of 25%, it would make our economy more competitive with the rest of the world,” Boehner told Amanpour. “It would put Americans back to work. We’d have a broader base on the tax rules, and out of that there would be real economic growth and more revenues for the federal government.”
The White House has said that the super committee must not fail. Doing so would be calamitous for the nation’s economy, the administration stressed.
In testimony before the committee earlier this month, the cochairman of President Obama’s fiscal commission urged members of the panel to work out a deal for the good of the country.
Former Clinton White House chief of staff Erskine Bowles and former Wyoming senator Alan Simpson told the super committee that the only way to reduce the budget deficit was by adopting spending cuts and increases in tax revenues. Bowles, speaking for himself and Simpson, outlined a package that he said could slash deficits by $2.6 trillion over 10 years.
The package includes $800 billion of new revenue, $300 billion in savings from annual appropriations known as discretionary spending, $600 billion from health care programs such as Medicare and Medicaid, $300 billion from other entitlement programs, and $200 billion from the use of a less generous formula to calculate cost-of-living adjustments in Social Security and other benefits.
If Congress made these changes, Bowles said, the government would not need to borrow as much, so projected interest payments on the debt would be reduced by $400 billion.