Missouri Gov. Mike Parson is right to push for an online sales tax earmarked for a much-needed rainy-day fund. But his fellow Republicans in the Legislature want to derail that good idea and replace it with a terrible one: offsetting the online sales tax with income tax reductions.
This would, in effect, use the online tax not to help the entire state, but to provide a tax cut that’s top-loaded toward the rich. Parson should demonstrate his leadership qualities and persuade lawmakers to support his better idea.
The advent of internet commerce created a problem for the states that levy sales taxes, which is most of them: Internet purchases by state residents couldn’t be taxed when the sellers were from outside the state, where the state sales tax was unenforceable. The situation put in-state brick-and-mortar retailers at a disadvantage because they still had to pay the sales tax, allowing online retailers to undercut them on price.
The landscape changed last summer with a U.S. Supreme Court ruling giving states authority to tax out-of-state sellers. Most states immediately passed laws to allow for such collection. As of the start of this year, 43 states had put such tax laws in place, including Illinois.
But when Parson tried to put Missouri on that course late last year, Republican lawmakers balked, making the knee-jerk argument that this would constitute a new tax. But it’s not a new tax. It’s the uniform, fair application of the existing sales tax. Currently, that tax is being unfairly applied only to brick-and-mortar sales.
The debate put Republicans in a philosophical bind between their anti-tax instincts and their support for Missouri businesses. Now they seem to think they’ve found a way out while serving that other conservative imperative of coddling the rich.
As the Post-Dispatch’s Kurt Erickson reports, some Republicans are coming around to Parson’s online sales tax idea — which would keep the Missouri business community happy — but they want to reduce state income taxes by the amount the new money the sales tax would bring in, making it revenue-neutral for the state.
Such a trade-off would work out well for high-income Missourians, who pay more in income tax and so would benefit more from income tax cuts. It would work out less well for low-income residents, whose extra spending on internet sales taxes would go toward paying for income tax cuts that don’t generally benefit them. And the state budget would get nothing.
Why overcomplicate things? Missouri has a state sales tax. That tax today is unevenly enforced, favoring out-of-state retailers who sell their goods here. Extending the tax to online purchases would end the inequity and offer the side benefit of bolstering the state budget. Everyone benefits.
This is an opportunity for fairness in taxation. Parson needs to marshal the best arguments and rally his troops to the cause.
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