Is It Time to Flog the Public…Again?

This year I’ll be celebrating something much bigger than a birthday, a pay raise, a marriage, my annual checkup and possible exam, the completion of my two latest novels, a syndicated column (probably not!), or my much anticipated scuba retreat to Australia; this is something so real—practically tangible—that it should come with a trophy or hero medal for demonstration of valor and perseverance of character while under extreme duress.

If there were a way to systematically compare my achievement to, say, that of an Everest expedition, the invention of Google, the wizardry of high finance, space travel, or the marvels of Houdini, well, without a doubt, my existence would be immortalized with song, dance, maybe an international holiday or two (one for my birthday and another for the date in question), a noble title from Juan Carlos I, an open invite to the White House, and above all a lifetime membership to the New York Public Library and a global metro-pass for good measure. The name Mario and all variations there of would be the number one name of infants born in the month of April for probably the rest of my natural life.

What have I done?

The better question is what have I refrained from doing? In this lies the accomplishment.

This month and year celebrates ten years in which I have not stepped foot inside of any corporate owned retail establishments the likes of Best Buy, Target, Walgreens, or the biggest social miscreant of them all—Wal-Mart. They say the first decade of any commitment is the hardest. But for me these last ten years have been about as rewarding and pleasurable as listening to rain tap dance on a tin roof while enjoying a Dickens novel. By my estimation nothing could sour this victory. Or at least, that’s what I thought. Until I picked up Yes! Magazine and read a little article titled, Is It Time to Tax the Internet? by Jay Walljasper.

Who would have suspected Yes! Magazine of being in cahoots with the aforementioned “biggest social miscreant?”

Not I, said the strong supporter of his favorite, “national, nonprofit media organization that fuses powerful ideas with practical action.” Not I.

Mr. Walljasper walks us through a very one-sided, fragmented argument for applying tariffs to internet goods. He calls it a “sales taxes” to resolve the “patently unfair—government-sanctioned bribe to buy from Amazon instead of your local book dealer, from e-Bay rather than that cool vintage store around the corner.”

According to him we should tack on 4 to 9 percent to everything we buy on the internet, as this would somehow make brick-and-mortar stores more appealing to customers. And if you’re raising an eyebrow to this, as I am, that’s probably because his argument sounds a lot like one of those “count the costs ignore the benefits” fallacies often purported by journalists, politicians and lobbyists who take us for idiots. And like any fallacy—an argument that takes you from true premises to a false conclusion—it sounds right when you first hear it. In some cases it requires considerable subtlety to see why a fallacious inference is, in fact, false. The field of economics, for instance, is filled with fallacies because most fail to appreciate its complexity.

We often forget that everything in our societies, and therefore in our economies, is interrelated, dependent on everything else. We propose simple solutions to deal with complex situations without taking into account that human behavior changes just as environments and needs do.

Mr. Walljasper’s lament is that he doesn’t want to see independent businesses—the kind that at one time occupied Main Streets all throughout the US—pushed out of business by internet competitors. Something or other to do with “the many shops that enliven our neighborhoods while meeting our needs.”

First of all, large chain stores like Wal-Mart have more to do with the dwindling away of independent retail than the internet. We consumers may have spent more than $35.3 billion online this past holiday season, but retailers brought in $44    billion in revenues in the week ending December 24th, a 14.8 percent increase from the year prior. We could go line by line and make comparisons and levy complaints against the “favoritism toward Internet sales” that consequentially empties storefronts and lowers property tax revenues. But making us pay sales tax for our Amazon purchases isn’t going to reverse this trend, no more than a fishing net is going to stop a wave.

What is being suggested is that we should level down the competitive advantages of eCommerce over retail to give Wal-Mart and a few dwindling independent retail locations a fighting chance. This makes me think of Kurt Vonnegut’s story “Harrison Bergeron.” A future society where people achieved perfect equality: “They were equal every which way. Nobody was smarter than anybody else. Nobody was stronger or quicker than anybody else.”

To achieve this outcome there was a Handicapper in charge of distracting the smart people, giving masks to the beautiful people, or burdening the athletic ones with weights to slow them down. Which sounds an awful lot like what Mr. Walljasper is suggesting that we do to eCommerce.

Benefit wise he points to an estimate by the National Conference of State Legislatures which says that “states could eliminate $23.3 billion of their combined budget gaps if the online retailers collected sales taxes in 2012.” An inverted example of “count the costs ignore the benefits.”

What is being ignored here is the “deadweight loss” of taxation. It costs the government, and therefore us, to collect money. Let’s say, for example, that it costs the government 15¢ to collect every dollar of this $23.3 billion. That comes to about $3.4 billion in cost just to funnel money from consumers to these “budget gaps.” A losing proposition financially (unless) the taxee (we the public) is somehow richer than the recipient (the states and their public needs), so that the welfare cost of us losing a dollar is less than the welfare gain to the state(s) of receiving 85¢. We might argue that collectively this would be the case, since private assets surpass public assets by about $196 trillion. (A misleading fact since the division of wealth in the United States is far from equal.) Another way of saying that the introduction of a new sales tax would be felt more by lower-income people who would have to pay a higher percentage of their earnings relative to their upper-income counterparts. It’s no wonder that Republican senators—Richard Durbin (IL); John Conyers (MI); and Peter Welch (VT)—would support something as blatantly irresponsible as the Main Street Fairness Act.

What we see here is a typical example of “treat the symptom instead of the disease.” If any one scapegoat is to be brought out for a public flogging it should be the Corporation, or maybe Global Commerce; each about as elusive to pinpoint as the source of the wind. And whether we indirectly flog the poor or not through Pigovian taxes on their e-Purchases, we’re still going to buy over the Internet—though it will be less—because it’s convenient and friendly to the environment to do so. Wal-Mart will be grateful for those added taxes to their competitors, and all the local bookstores and vintage dealers who compete for market share will still go out of business unless they find a way to adapt.

And as for my ten year anniversary and grand achievement…you can all congratulate me by buying an e-version of my current or upcoming fictional titles (preferably from Amazon).