It’s disappointing when someone you believe in lets you down. It’s frustrating when things turn out differently than you thought.
During the campaign for Governor, Mayor Haslam often said that people suggest government be run like a business until someone actually tries to. Then hard choices have to be made.
I took that to mean Haslam would do what was needed to make and keep Tennessee competitive and vibrant; that he would control costs, spend wisely, lower taxes and do the myriad other proven things that increase productivity and profitability in both business and government.
Since the election, though, I’ve found reasons to reconsider my optimism.
The Governor has handed out hefty raises to his Cabinet in the midst of economic challenges for government and taxpayer alike. The Governor strongly supported addressing the issue of teacher tenure in the area of education reform but politely distanced himself from meaningfully addressing collective bargaining for teachers in the area of fiscal responsibility. Now the Governor has said that he is “… willing to take a leadership role among governors in urging Congress to pass a national approach to collecting sales taxes on goods sold over the Internet.”
Governor Haslam says Tennessee is losing $300 to $500 million annually in untaxed sales on the Internet. He wants that money in Tennessee’s account, not in Tennesseans’ accounts. That might be a win for Tennessee’s budget but it hardly seems so for the budgets of Tennesseans.
Tennessee’s 2012 budget is $30.8 billion. Haslam’s estimate of revenue loss works out to just 1% to 2% of the current budget. Based on Haslam’s figures and Tennessee’s base state sales tax rate of 7%, Tennessee businesses sell between $4.3 and $7.15 billion annually via the internet. That is just 2%-3% of Tennessee’s 2010 GDP of $250 billion. I don’t see the same upside the Governor sees in risking so much for so little.
Because there certainly is a downside.
Goods and services will get more expensive for Tennesseans. Actually, as Haslam’s Sales Tax is a Federal tax, he’ll make life more expensive for all Americans! I wonder how the rest of America feels about Tennessee’s Governor working for their taxation from an arena in which they have no representation.
Haslam’s figures assume Internet sales will remain steady or grow. Yet taxes suppress the production of whatever is being taxed. Sales taxes slow sales as income taxes slow productivity and “sin” taxes curb behavior. Revenue projections from increased taxes never seem to work out quite like their champions promise.
Haslam’s Sales Tax has no clarity on rates or rules. Anything could happen. Tennessee has one of the nation’s highest base sales tax rates. If Haslam’s Sales Tax is collected based on the seller’s location, Tennessee businesses just got a lot less competitive. If it’s collected based on the buyer’s location, Tennesseans just saw their buying power sucker punched.
If buyers buy less it means lost sales and lost sales taxes. This includes purchases made by businesses.
Businesses sell less or grow more slowly if at all when forced to increase costs. That means less sales tax revenue. Flat sales and growth mean cuts in labor. Tax increases reduce employment. The unemployed spend less meaning additional losses in revenue. It means increased unemployment insurance costs for businesses, enhancing the downward spiral in employment and revenue.
Just as businesses are fleeing Illinois in the wake of increased taxes, businesses will leave Tennessee or never come in the first place. This means lost sales tax, lost jobs, lost employee and business spending, lost property taxes and more. Implementing Haslam’s Sales Tax could end up costing us more than what the Governor hopes to capture in the first place.
Candidate Haslam promised to work to make Tennessee’s economics sound. Governor Haslam should listen to him. This is not the way to move Tennessee forward. It is not the way to economic growth. It is not the way to solve budget challenges and it is surely not where we want our Governor to lead us.
Comments are open … What say you??
FOR MORE TENNESSEE COMMENTARY ON THIS – SEE ALSO:
Stealing Haslam’s Money by Lesley Swann @ The Tennessee 10th Amendment Center;
Uncollected Internet Sales Tax Unfair by Roger Harris @ Knoxville News Sentinel;
#1 by Down or Just Me on 07/27/2011 - 08:14
This is absolute nonsense to me! The internet is not an owned property… it is a socially constructed thing that the leaders of this country are fooling people into believing so that they can make a buck.
#2 by Toni on 07/27/2011 - 11:07
We talked about Haslam Ken, I always figured he'd be Sundquist redux and he is! Nothing this big government faux 'conservative' does will surprise me. I didn't vote for him and never will, he's no different than Sundquist, Alexander, Corker, Harwell ( and the rest of the TN GOP Mafia) and we're stuck with him. Sweet. Yet, Amazon establishes a brick and mortar in TN and they get a sales tax break. No corporate welfare there, not at all. No different than TN Investco, more corporate welfare of picking winners overs losers. All anyone had to do was read about Haslam's history and people would have know how he would govern. Big government and limp wristed.
#3 by lady4liberty on 07/27/2011 - 13:39
I agree with you Toni. Those of us who pay attention (because our future and our children's future is at stake) were well-aware of Haslam's being a RINO and a limp-wristed RINO at that. Haslam IS every RINO in Congress. I believe they are all being promised power in perpetuity and God only knows what else. It seems the harder some of us work to get rid of these types, the more of these show up. I think they are being funded by the same guys who fund Obama-types – COMMINUISTS.
#4 by Matt Collins on 07/27/2011 - 13:58
Ken,
Not to say "I told you so", but "I told you so".
And trust me I wish it weren't true.
But anyone who was paying attention knew what Haslam was about when he bought his way into the Governor's Mansion. Getting to meet him a few times, hearing him speak, and looking at his track record in Knoxville (the most telling indicator) showed that he was going to be a go-along, get-along kind of guy doing whatever sounded good to him. In other words, he has essentially NO philosophical foundation because he is willing to do whatever he thinks will best work, regardless of it's consequences, implications, or affect on the liberty of the individuals in Tennessee.
Sadly rumors are floating that he will be aiming for Senator Alexander's seat in the near future. If the legislature doesn't play hardball with Governor Haslam, and they won't, then he will be able to waltz right on into the US Senate too. The Party's unwillingness to hold it's own accountable is what results in these types of big-government policies.
And also the Tea Party needs to begin to go after ALL Republicans who have a track record of big-government, even if they are right only "80%" of the time. Reagan's "11th Commandment" is the height of nonsense perpetuated by the establishment to attempt to keep conservatives from countering the establishment vote.
#5 by Mark Rogers on 07/27/2011 - 14:56
Ken,
Looked at from another perspective, this is making internet retailers compete on a level playing field with Tennessee businesses. As I remember, the idea of exempting internet sales from state sales tax was designed to incentivize a fledgling industry. I would think that Conservatives would appreciate the government actually taking away a government-granted preference for one industry over another.
How many Tennessee jobs have been lost because local businesses cannot compete with internet businesses that are 10% less expensive? And that lost revenue could go a long way to providing tax relief in some other direction. For example, $300 to $500 million in revenue annually could allow Tennessee to reduce the sales tax on food to a level that would bring in shoppers from our border states instead of the current situation where the reverse is true.
Along the same lines, Conservatives ought to be encouraging the state to end some, if not all, the sales tax exemptions that have been packed into law by the former governing party. Each year the state loses hundreds of millions, if not billions, of dollars thanks to laws that were bought by special interests. Where is the fairness or the good public policy in taxing some businesses 9.75% and some 0?
Governor Haslam is being far more conservative than some of his critics who seem to believe that everything is so simple that it can be seen as one issue or one idea. Life is far more complex than that.
Matt, are you suggesting that you are more of an authority on conservatism than Ronald Reagan? I am still waiting for you to show me your official documentation as the Grand High Inquisitor of all things Right Wing.
Nothing will more surely destroy the conservative movement than it being ripped apart by tiny Napoleons who want to make themselves more important than the Ideas that compose Conservatism.
What you see as a tax increase can also be seen as
#6 by Eric Holcombe on 08/02/2011 - 04:51
"As I remember, the idea of exempting internet sales from state sales tax was designed to incentivize a fledgling industry."
States cannot legally regulate interstate commerce (despite Reagan Farr's Kentucky convenience store search and seizure gestapo). These were, once upon a time, sovereign, independent states. Tennessee provides no services out of state, so there is no logical reason to tax a sale to the out-of-state buyer. Why should 45% of the tax he would pay go to schools in another state?
The Federal gov't can (and does) regulate interstate commerce. Don't know why anyone would expect the feds to enact an internet sales tax and share some of the booty with the states.
#7 by Chuck Rylant on 08/09/2011 - 20:42
It's only worse out here in California. You talk about a state where businesses are fleeing, CA is the model for that.
#8 by Dave DuBrucq on 08/10/2011 - 02:16
There are many things about Haslam that are disappointing, as I knew there would be. Haslam is a lot of things, conservative is not one of them.