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  1. #1
    Atomic Punk
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    Default Ron Paul: Internet Sales Tax Could Crush Small Businesses

    Ron Paul:

    One unique aspect of my homeschool curriculum is that students can start and manage their own online business. Students will be responsible for deciding what products or services to offer, getting the business up and running, and marketing the business's products. Students and their families will get to keep the profits made from the business. Hopefully, participants in this program will develop a business that can either provide them with a full-time career or a way to supplement their income.

    Internet commerce is the most dynamic and rapidly growing sector of the American economy. Not surprisingly, the Internet is also relatively free of taxes and regulations, although many in Washington are working to change that. For example, earlier this year the Senate passed the Marketplace Fairness Act, more accurately referred to as the national Internet sales tax act. This bill, which passed the Senate earlier this year, would require Internet businesses to collect sales tax for all 10,000 American jurisdictions that assess sales taxes. Internet business would thus be subject to audits from 46 states, six territories, and over 500 Native American tribal nations.

    Proponents of the bill deny it will hurt small business because the bill only applies to Internet business that make over a million dollars in out-of-state revenue. However, many small Internet businesses with over a million dollars in out-of-state revenues operate on extremely thin profit margins, so even the slightest increase in expenses could put them out of businesses.

    Some businesses may even try to avoid increasing their sales so as to not have to comply with the Internet sales tax. It is amazing that some of the same conservatives who rightly worry over Obamacare’s effects on job creation and economic growth want to impose new taxes on the most dynamic sector of the economy.

    Proponents of the law claim that there is software that can automatically apply sales taxes. However, anyone who has ever dealt with business software knows that no program is foolproof. Any mistakes made by the software, or even errors in installing it, could result in a small business being subject to expensive and time-consuming audits.

    Some say that it is a legitimate exercise of Congress’s Commerce Clause power to give state governments the authority to force out-of-state businesses to collect sales taxes. But if that were the case, why shouldn’t state governments be able to force you to pay sales taxes where you physically cross state lines to make a purchase? The Commerce Clause was intended to facilitate the free flow of goods and services across state lines, not to help states impose new burdens on out of state businesses.

    The main proponents of this bill are large retailers and established Internet business. Big business can more easily afford to comply with a national Internet sales tax. In many cases, they are large enough that they already have a “physical presence" in most states and thus already have to collect state sales taxes. These businesses are seeking to manipulate the political process to disadvantage their existing and future small competitors. The Internet sales tax is a bad idea for consumers, small Internet business, and perhaps most importantly, the next generation of online entrepreneurs.

    For more information about the small business program well as all other aspects of the Homeschool curriculum please go here. And to purchase a copy of my new book, The School Revolution: A New Answer for Our Broken Education System please go here.

    Permission to reprint in whole or in part is gladly granted, provided full credit is given.
    http://www.the-free-foundation.org/tst9-23-2013.html
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  2. #2
    Atomic Punk Dave's Dreidel's Avatar
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    As someone who works in the tax industry, Mr. Paul is wrong in many ways here.

    I like Mr. Paul, and think highly of him as an independent thinker, but I respectfully disagree in many of his assumptions here.

    It is not a burden to collect taxes that you are already set up to collect, and sales tax audits work differently than income tax audits. I won't bore everyone with the details, but if anything, this might help the small businesses that are competing against Amazon and others in that now Amazon and other online retailers would also have to charge sales tax, just as the local mom and pop does.

    The non-tax of internet sales has been a huge loss of revenue for state and local jurisdictions. Twenty years ago, if you wanted to buy a book, you did so at your local bookstore, or when you bought a TV you did so at your local Sears. And in doing so paid sales tax to your state and local jurisdiction.

    Now, in many cases when you make these purchases online, no tax is being paid. Think of the amount of business that Amazon and other online retailers do that twenty years ago was taxes and now is not. That is a huge cut in revenues for state and local jurisdictions.

    I am usually against most new taxes, but in my humble opinion this is not a new tax, this is just the application of an existing tax to a new technology, to recapture a tax base that has been lost.

    Permission to reprint in whole or in part is gladly granted, provided full credit is given.
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  3. #3
    Atomic Punk edwardv's Avatar
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    Cut my income tax 2/3 or eliminate it than tax the shit out of the net.
    EVH 1979: Well, actually it's not much of a vacation, because we run everything ourselves. We design our own album cover, we have to be in the office every day to sign checks - the whole corporation revolves around us. Nothing can be done without our approval. We even have photo approval.

  4. #4
    Atomic Punk Dave's Dreidel's Avatar
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    Quote Originally Posted by edwardv View Post
    Cut my income tax 2/3 or eliminate it than tax the shit out of the net.
    The government is going bankrupt, our taxes are going to be going up, not down.
    Taylor Swift is nice to look at. Adele can sing.

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  5. #5
    Atomic Punk edwardv's Avatar
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    Well lets just fork over everything to them then. Nixon said we are all Keynesians now in 71. Just print more money sell more bonds.
    Last edited by edwardv; 09.23.13 at 06:41 AM.
    EVH 1979: Well, actually it's not much of a vacation, because we run everything ourselves. We design our own album cover, we have to be in the office every day to sign checks - the whole corporation revolves around us. Nothing can be done without our approval. We even have photo approval.

  6. #6
    Atomic Punk Dave's Dreidel's Avatar
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    I am not a fan of taxes either, but all those roads, hospitals, schools, and bombs have to be paid for somehow.

    Is a lot wasted? Sure. Could it be handled a helluva lot better? Sure.

    Cutting your taxes by 2/3rds? That is just insane. Ain't gonna happen, and it shouldn't happen.

    I have guys that over 50% of their income goes to taxes, now that is bullshit, but we can't cut that to less than 20% either.
    Taylor Swift is nice to look at. Adele can sing.

    Emperor Brett - "I can't believe you guys are analyzing song-by-song Van Halen III? What next, analyzing the script of Stroker Ace looking for some shred of Citizen Kane?"

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  7. #7
    Good Enough pickslide's Avatar
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    Quote Originally Posted by Dave's Dreidel View Post
    I am not a fan of taxes either, but all those roads, hospitals, schools, and bombs have to be paid for somehow.

    Is a lot wasted? Sure. Could it be handled a helluva lot better? Sure.

    Cutting your taxes by 2/3rds? That is just insane. Ain't gonna happen, and it shouldn't happen.

    I have guys that over 50% of their income goes to taxes, now that is bullshit, but we can't cut that to less than 20% either.
    The problem is that raising rates does not raise revenue. Tax revenue has gone up year after year after year, but we keep coming up short because we spend too much.

    Also, revenue as a percentage of GDP has remained at about 19% for eons, no matter what the rates were. So raising rates does not really raise money. It just further complicates an already messy tax system.

    What we really need is a flat tax with no deductions or a repeal of the income tax and a national retail sales tax, which would tax consumption and not income. But such things are inherently fair and not subject to manipulation by incumbent politicians. Therefore, it is doubtful they will ever pass...

    sigh...

    TK

  8. #8
    Atomic Punk bsbll4's Avatar
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    A national flat sales tax would tax consumption, but considering we're a consumption based economy, that might not be such a great idea. (although I agree that any flat tax is more fair than what we have)

    Of course, the current system of taxing hard work/success and not taxing consumption has created a large population of useless and lazy human beings hell bent on buying the latest thing whether they can afford it or not.

    I wonder how many people are buying an iPhone 5 while they still have things in collections?
    Last edited by bsbll4; 09.23.13 at 07:58 AM.
    CNN may think my opinion matters, but you shouldn't.

  9. #9
    Good Enough pickslide's Avatar
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    Quote Originally Posted by bsbll4 View Post
    A national flat sales tax would tax consumption, but considering we're a consumption based economy, that might not be such a great idea.

    Of course, the current system of taxing hard work/success and not taxing consumption has created a large population of useless and lazy human beings hell bent on buying the latest thing whether they can afford it or not.

    I wonder how many people are buying an iPhone 5 while they still have things in collections?
    It is actually a TERRIFIC idea, which is probably why it wouldn't pass. And it is a much better idea, even given possible revenue fluctuations, than the Gordian Knot of inerently unfair rates, credits, deductions and nonsense, all watched over by an unelected bureaucracy that routinely targets political speech, both left and right.

    TK

  10. #10
    Atomic Punk Dave's Dreidel's Avatar
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    Quote Originally Posted by pickslide View Post
    The problem is that raising rates does not raise revenue. Tax revenue has gone up year after year after year
    In my opinion that is not entirely true.

    Tax revenues as a percentage of GDP were highest in 2000, at 21% of GDP.

    In 2009 and 2010, they were less than 15% of GDP.

    Now, there are a LOT of other factors involved in those numbers, but you cannot make a blanket argument that higher taxes do not raise revenues.

    The government has to take into consideration elasticity at this point, as we have such a damn hole to dig out of. What is the maximum amount of tax that we can charge without changing spending habits to the point that it offsets the revenue gains.

    I would hope they have actuaries working the hell out of that problem. And obviously, our defense spending has to decrease enormously, and we have to make changes to Social Security, Medicare and the ACA.

    Obviously, my examples are overly simple as this is just a forum, but it is doable, we can fix it, but we have to start now.
    Taylor Swift is nice to look at. Adele can sing.

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  11. #11
    Forum Frontman It's Mike's Avatar
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    Raising taxes almost always raises overall tax revenue. Not really a sensible political strategy if it didn't.

  12. #12
    Atomic Punk lovemachine97(Version 2)'s Avatar
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    Quote Originally Posted by Dave's Dreidel View Post
    As someone who works in the tax industry, Mr. Paul is wrong in many ways here.

    I like Mr. Paul, and think highly of him as an independent thinker, but I respectfully disagree in many of his assumptions here.

    It is not a burden to collect taxes that you are already set up to collect, and sales tax audits work differently than income tax audits. I won't bore everyone with the details, but if anything, this might help the small businesses that are competing against Amazon and others in that now Amazon and other online retailers would also have to charge sales tax, just as the local mom and pop does.

    The non-tax of internet sales has been a huge loss of revenue for state and local jurisdictions. Twenty years ago, if you wanted to buy a book, you did so at your local bookstore, or when you bought a TV you did so at your local Sears. And in doing so paid sales tax to your state and local jurisdiction.

    Now, in many cases when you make these purchases online, no tax is being paid. Think of the amount of business that Amazon and other online retailers do that twenty years ago was taxes and now is not. That is a huge cut in revenues for state and local jurisdictions.

    I am usually against most new taxes, but in my humble opinion this is not a new tax, this is just the application of an existing tax to a new technology, to recapture a tax base that has been lost.

    Permission to reprint in whole or in part is gladly granted, provided full credit is given.
    I think there are a couple things to look at, though. Many states already had a mechanism to tax these sales. In CA, it was called the use tax. But businesses weren't responsible for collection and payment; customers were. We can argue the merits of that system, but CA didn't really have a mechanism to enforce the law, so people mostly just cheated. But that's not Amazon's (or other online retailers') fault, right?

    Amazon, for example, gave itself several advantages by choosing its online only business model. Not having to deal with charging, collecting, and paying taxes was one of them. OF course, this came with disadvantages. People couldn't look at things before they bought them, and once purchased people weren't able to take things home immediately. However, the model allowed them to be very competitive on price and it was able to outsource (for free) its tax collection.

    Perhaps many think that was an unfair advantage from the beginning. That's fine. But I think it is often portrayed that Amazon was somehow pulling a fast one on the people. They weren't.

    However, when the writing was on the wall, Amazon and the other major internet retailers came out for the law. The reason this happens is simple--it gives them an advantage over smaller businesses.

    From what I understand, one of the companies selling software to small businesses to comply with this law is Amazon.

    I think it makes much more sense for a business to charge their sales tax rate and not have to worry about the sales tax rate in every jurisdiction in the country.

  13. #13
    Good Enough pickslide's Avatar
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    Quote Originally Posted by Dave's Dreidel View Post
    In my opinion that is not entirely true.

    Tax revenues as a percentage of GDP were highest in 2000, at 21% of GDP.

    In 2009 and 2010, they were less than 15% of GDP.

    Now, there are a LOT of other factors involved in those numbers, but you cannot make a blanket argument that higher taxes do not raise revenues.

    The government has to take into consideration elasticity at this point, as we have such a damn hole to dig out of. What is the maximum amount of tax that we can charge without changing spending habits to the point that it offsets the revenue gains.

    I would hope they have actuaries working the hell out of that problem. And obviously, our defense spending has to decrease enormously, and we have to make changes to Social Security, Medicare and the ACA.

    Obviously, my examples are overly simple as this is just a forum, but it is doable, we can fix it, but we have to start now.
    It is entirely true. Look at revenue as a percentage of GDP over time. With rates as high 90%, it wasn't much higher. Yes, you can go back and cherry pick a year that is different. But in general the rates haven't changed much over time, even as the rates fluctuated wildly.

    The rates (and correspnding deductions and credits) are simply a method to reward or incent certain political groups or social practices (marriage, mortgages, adoption) and actually have little or nothing to do with revenue.

    Also, onerous tax rates can stifle growth, which is a much more important element of revenue. If you want more revenue, in fact, the BEST thing to do is create an environment in which companies and people can thrive, NOT raise rates through the roof.

    TK

  14. #14
    Atomic Punk Dave's Dreidel's Avatar
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    If your argument is that the Bush tax cuts didn't have a direct effect on lowering US tax revenues, I just don't agree.

    Since 1960, there have only been six years out of forty three in which tax revenues as a percentage of GDP were less than 17%. All six of those years were after the 2001 and 2003 Bush tax cuts.

    You don't think there is any correlation at all to that? Not saying it is the only factor, but saying it doesn't matter at all is like saying your hourly pay rate doesn't affect how much money you make by the end of the year.

    There is a certain elasticity of the tax rate in which raising them too much will have an adverse effect on the economy and lowering them too much will have an adverse effect on the amount of revenue going into the Treasury. There is a sweet spot for tax rates, and in my humble opinion we hit the rates just about right with the Reagan 1986 Tax Act and with the Clinton tax rates. I prefer the Reagan 1986 rates as it was much simpler, the closest we will probably ever be to a flat tax, but nonetheless it was a good tax code in both cases. At least as good as we are going to get. It's an absolute clusterf**k now, I hate working on it, it is beyond stupid what we are currently doing in our tax code.

    And I can't wait to tell people they owe thousands in tax penalties in 2015 for non-compliance with Obamacare. That is going to be awesome.
    Taylor Swift is nice to look at. Adele can sing.

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    Good Enough pickslide's Avatar
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    [QUOTE=Dave's Dreidel;1641068]If your argument is that the Bush tax cuts didn't have a direct effect on lowering US tax revenues, I just don't agree.

    Since 1960, there have only been six years out of forty three in which tax revenues as a percentage of GDP were less than 17%. All six of those years were after the 2001 and 2003 Bush tax cuts.

    You don't think there is any correlation at all to that? Not saying it is the only factor, but saying it doesn't matter at all is like saying your hourly pay rate doesn't affect how much money you make by the end of the year.

    There is a certain elasticity of the tax rate in which raising them too much will have an adverse effect on the economy and lowering them too much will have an adverse effect on the amount of revenue going into the Treasury. There is a sweet spot for tax rates, and in my humble opinion
    Last edited by pickslide; 09.23.13 at 11:29 AM.

 

 

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