A conservative economist best known for his policy initiatives during the 1980s is spearheading a movement to tax online purchases in the United States. Athur Laffer, who was the chief economist of the White House during the Reagan Administration, is championing the Marketplace Fairness Act – a bill to tax online shopping.
Several states already tax online retail, charging value-added taxes on top of the cost of goods purchased online. Laffer, while claiming that ‘all taxes are bad,’ suggests the tax will increase competitiveness from offline retailers, many of which are failing to keep up as online retailers cut their prices and benefit from low sales taxes.
The measure has already passed the Senate and is currently being reviewed by the House of Representatives, where it has caught heat due to its increase in costs for many consumers. Despite this, many states are supportive of the bill and welcome its implementation.
Despite the support from state governments, online retailers are opposed to the bill due to its effects on their sales strategy. eBay Inc. has publicly denounced the bill as a tax increase that will raise costs for consumers. Laffer’s statistics, however, show that the bill will increase gross state products where people are shopping online.
American law currently states that online businesses can only be taxed on products sold to consumers within the borders of their state. The bill is written to restrict the tax only to large businesses with annual sales of $1 million or more, while ignoring smaller businesses with limited out-of-state business.
The measure, which is being debated in the House of Representatives, is not the first bill to catch the ire of online businesses. ‘Do Not Track’ legislation, which has been a popular talking point amongst privacy advocates, was also criticised by technology firms for reducing their ability to conduct business online.
