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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, April 18, 2013

Laffer: Tax Internet Sales, Stimulate Growth

Wall Street Journal op-ed:  Tax Internet Sales, Stimulate Growth, by Arthur B. Laffer:

Reinvigorating the economy should be priority No. 1 for federal and state leaders. After enjoying an average growth rate above 3.5% per year between 1960 and 1999, Americans have had to make do with less than one-half that pace since 2000.

The consequences are already dramatic and will become even more so over time. Overall we are 20% poorer today than we would be had the pre-2000 growth rate persisted. All other things being equal, less national income also means federal and state fiscal problems are more intractable.

At the state level, there are reforms that can alleviate the problems associated with declining sales-tax bases and, at the same time, allow the states to move closer to a pro-growth tax system. One such reform would be to have Internet sellers collect the sales taxes that are owed by in-state consumers when they purchase goods over the Web. ... Therefore—as with any pro-growth tax reform—the sales tax base in the states should be broadened by treating Internet retailers similarly to in-state retailers, and the marginal income-tax rate should be reduced such that the total static revenue collected by the state government is held constant.

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How could "total static revenue" be anything other than "constant?"

Posted by: Publius Novus | Apr 19, 2013 6:44:55 AM

Why should internet sales be taxed based on the location of the buyer instead of the location of the seller? If I drive to a store in another city or state, I pay the local tax rate that applies for that store. Seems to me that collecting taxes at the rate that applies based on the location of the internet store would have lower compliance costs.

Posted by: George B | Apr 23, 2013 2:06:22 AM