No Tax Increases, But We Will Pay More

Today’s Courier Herald Column:

Georgians who now make purchases online have started to notice something new.  Some websites are now collecting sales tax on their purchases that previously did not.  Politicians are quick to remind us that this is not a new tax, and they are correct.  Georgia law has long since required purchasers to remit taxes on all purchases made from out of state vendors.  It’s just there has been almost no way for the state to monitor these purchases nor a mechanism for the state to collect them from retailers.

Georgia’s tax reform package passed late last session after little public debate changed all of that.  The measure was opposed by online retail giants like Amazon, but favored by big box retailers such as Wal-Mart and Home Depot.  The big box retailers won for a variety of reasons, among them of course is the state’s desire for additional revenue.

There is also the conceptual argument that the old tax policy gave an advantage to retailers who were based out of state over those who invest locally, hire Georgians, and pay local taxes in addition to the sales taxes they generate.  The once mighty chain “Best Buy” is perhaps the best example of this competitive disadvantage, as consumers now use the chain for “showrooming” – the practice of going to a store to view the product, get educated by the store’s employees, then return home to purchase the desired product online.  In Georgia, the price advantage for the online retailer was as much as 8%.

Closing the internet tax gets the state out of the position of helping pick winners and losers in the retail industry.  Coming soon another loophole will be closed, leveling the playing field with licensed car dealers who sell used cars and private individuals who sell cars on their own.  A new “fee” to title cars will be placed on the sale of all automobiles, new and used, as a replacement for the current sales tax structure. 

Legislators decided to level this playing field by extending the new tax, though they would very much prefer you use their term of “fee”, to private sales instead of exempting the licensed dealers from collecting taxes on used car sales.  This one is harder to pass off as closing a loophole, and should be considered a new tax on consumers.  When the state choses to get out of the business of picking winners and losers, one should always remember the state will certainly not come out the loser.

The battle here in the Georgia is foreshadowing what will soon be part of the battle to avert the “fiscal cliff” in Washington.  Lawmakers on both sides of the aisle are quite reluctant to raise taxes, but also realize that there is an immediate need for more revenue in federal coffers.  “Closing loopholes” is now part of the debate at the state and federal level.

Republicans are still quite sure they are “taxed enough already” and will not support increased tax rates to reduce the national deficit.  Democrats, while campaigning on the need for “the 1%” to pay more, get a bit more quiet when reminded they had the opportunity to do so in 2009 and 2010 when they held both sides of Congress and the White House, as they too knew the political risks of voting to raise taxes.

Closing loopholes, right now, is somewhat of a tricky no-man’s land.  It is something that is often supported in polls because the term has negative connotations associated with someone else getting a special perk to avoid paying their proper amount of taxes.  When actual loopholes are closed, however, such as the one allowing for collection of internet sales tax purchases, many voters fail to distinguish between “closing loopholes” and “raising taxes”.

In short, closing loopholes are generally fine so long as they’re closed on someone else.  Reality is sometimes cruel in that it doesn’t always allow us to have our rhetoric and enact it too.

At the state and local levels, there will likely not be tax increases after the next round of elections.  Yet we can all watch the “loopholes” begin to disappear.  And we can all expect to pay more.

12 comments

  1. elfiii says:

    I wonder how it is the playing field is being “leveled” by charging either a “fee” or sales tax to title your used vehicle purchased in a private sale?

    I can only speculate as to when the G.A. discovers other types of private sales that need to have their playing field “leveled” too.

    • Charlie says:

      The playing field is being leveled with licensed car dealers, who have to charge a tax, and thus collect up to 7% more for their cars, than do private individuals. The dealer lobby has been pushing for this for decades, and briefly accomplished it during the administration of Zell Miller. They want to be able to sell cars at the same price of their non-licensed competition.

      That said, it would have leveled the playing field if all used car transfers went untaxed. But that’s a lot of revenue the state isn’t going to give up just to make things “fair”.

      • gtmatt says:

        If you are talking about car dealers selling vehicles at the same price as a private individual, that’s quite a crock. By default car dealers are going to sell at higher prices than private individuals trying to do something with their old vehicles. The dealer has overhead costs and needs to make a profit. The individual usually just wants to get a fair price for a vehicle they no longer need/want.

        If this “leveling the playing field” was supposed to help car dealers in their competition against people who are actually in the business of selling vehicles but don’t get licensed for doing so, they cast way too wide a net. Sure, now licensed car dealers will be able to say “no sales tax! buy now!”. But everyone who buys used from a private individual now gets hit with the non-sales-tax sales tax. That’s not a loophole getting closed, that’s the government seeing an opportunity to get more money. They already control titling and tags, so they have an avenue to extract more money from everyone.

        Like elfiii said above, just wait until the government sees something else where they’ve just got to “help” business by regulating more private sales…

      • elfiii says:

        @Charlie – The playing field is being leveled with licensed car dealers, who have to charge a tax, and thus collect up to 7% more for their cars, than do private individuals.

        Sorry Charlie but that plow won’t scour. (A little Abe Lincoln lingo)

        There is one big difference between a business sale and a casual sale between individuals. The business has the profit motive at the heart of it’s transaction. The individuals don’t. Not to mention, at some point that used vehicle was a new vehicle and when it got sold the first time sales tax was assessed, collected and paid in on it. Voila’! The G.A. has found a new way to “rinse and repeat” on the people who can afford it least.

        The law accomplishes one new and novel thing. It is an artificial government induced price support for used cars sold by used car sales weasels and nothing more. Used car sales weasels? Really?

        No law is completely useless and neither is this one. It gives all prostitutes and used care sales weasels in Georgia reason for hope. They are no longer the bottom of the genetic code ladder. The G.A. has wrenched control of last place away from them in a garish display of government power. I doubt a single prostitute or used car sales weasel objects. Being in last place means you are a loser and Americans all hate losers.

        The prostitutes and used car sales weasels will have to fight it out for next to last on the genetic code ladder. My money sez the used car sales weasels win. They are considerably more rapacious than prostitutes, and prostitutes are somebody’s daughter so they automatically win the sympathy vote. Used car sales weasels are Satan spawn and everybody knows it, including the atheists.

        Georgians will figure out soon enough who is being “leveled” here. Now there is a “title fee” to be added on top of your ad valorem tax. $ to doughnuts sez this one don’t last long. You’ll see. 😉

          • elfiii says:

            Close but no seegar C. Never owned a Yugo. The motor vehicle I currently operate is 2010 ‘Yota Tundra. Bought it new.

  2. jiminga says:

    The internet tax is simply a thinly veiled tax increase. The unintended consequence will be online shoppers will buy from those vendors that don’t charge the tax, hurting those sellers in the state that supported the tax. An example is when NYC increased the cigarette tax the revenues actually decreased because so many bought their cigarettes in NJ and CT.

    The true test of a “level playing field” is determined by the marketplace, and the government has no business playing in the game at all.

    • Charlie says:

      The “government has no business playing in that game” goes out the window as soon as any tax is leveled. Once the decision to level a tax is made, it should be as broad based and narrow as possible to limit market distortions.

      Too many conservatives equate the status quo as “no government intervention” and any change as government picking winners and losers.

      If the status quo enables some to get around the current tax, as has happened with the acceptance of new technologies, the government has not only the right but the duty to recalibrate the tax to limit the distortions it causes.

  3. Three Jack says:

    What the Georgia legislature did regarding taxes cannot be called ‘tax reform’. It was a bow to special interests that are well represented by many lobbyists spending unlimited money on elected reps.

    Georgia and the U.S. Congress both need to seriously reform tax policy. If either or both will do so with a balance of rate decreases offset by elimination of deductions and loopholes, the general public will go along willingly. If either or both continue pandering to special interests while calling it ‘reform’, they should be voted out of office.

  4. gcp says:

    “Loopholes” How about if the legislature puts a sales tax on everything and either reduces or eliminates the state income tax thus eliminating all “loopholes.”

  5. seekingtounderstand says:

    Do dealers with special tags pay those taxes?

    Higher fees coming from our local and state collection offices and public and private utilities thru charges of 2 to 3 percent for paying online or charging to a credit card. Jackson EMC charges $3.50 if you pay anyway but drop off your check at one of their offices……………….there are soon going to raise fees and add fees to everything. Look at all the extra charges parents are paying at public schools……………its only getting worse and the republicans are very keen on adding fees instead of raising taxes.
    Watch federal government use the value added tax very soon……………….they will have to do it to pay our debt. Especially with no growth economy.

  6. elehew says:

    Automobile and taxes, I am surprised you didn’t mention the change in the ad valorem tax that new car purchasers will only pay one time (upon purchase) and exempt from the tax when tags are renewed and slightly reduced with depreciation over the years.

    I see no leveling of the field with this change. I do see the the intent to stimulate the sale of new cars; however it seems to place the tax burden on people such as I that may purchase a new automobile once or twice in a lifetime. Meanwhile I am paying $300 (+ or – ) annually on a 8 year old vehicle.

    Forgive me if you have written about this previously as I am new to this website.

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