Undoubtedly, our most important public policy priority at the present time should be the economy. That’s why I was intrigued by the conclusions of a new study, “Pro-growth Tax Reform and E-fairness,” by legendary conservative economist Dr. Arthur B. Laffer and state budget expert Donna Arduin.
Their study demonstrates how passing “e-fairness” legislation — such as the Marketplace Fairness Act currently being considered in Congress—could provide states with opportunities to lower taxes and jumpstart economic development, which interests me both as an Arizonan, a small businessman, and a public servant.
- Counterpoint: Mesa business owner: Cash-grab ‘Marketplace Fairness Act’ fails to live up to its name, hurts small biz
As the name suggests, the goal of the MFA is to create the fairest tax system possible for the retail marketplace.
Laffer and Arduin found that closing what they refer to as the online sales tax loophole—a circumstance that allows for remote internet-based retailers to avoid having to collect and remit sales taxes, as their local, brick-and-mortar counterparts, including those who also sell online, are required to do—would be one of the most effective means of increasing state prosperity and employment on a dollar-for-dollar basis.
Moreover, they say that doing so will give states the chance to lower tax rates by ensuring the efficient collection of a tax that is already due, since customers owe the sales tax whether the online retailer collects it or not.
In that sense, the MFA could be a means of fixing and updating our sales tax laws to better align with today’s technology and consumer habits. It would also remove the burden placed on consumers to individually remit the tax.
While creating a more efficient system to collect an already due tax is not the same thing as introducing a new tax, I am extremely sensitive to the concerns of anti-tax advocates in the U.S. House of Representatives.
I count myself as a common-sense conservative ally. The MFA should not be used by states as a revenue grab. Arizonans should not be stuck paying more taxes as a result of the MFA. Rather, any new revenue that results should be used to offset the tax burden elsewhere.
In fact, the MFA could provide state leaders with an incredible opportunity to ease other individual tax burdens and lower marginal tax rates, thereby spurring real economic growth.
This isn’t just a myth; all one has to do is look to Wisconsin and Ohio to see how this would work in the real world. Both states have passed budgets that utilize the MFA to lower income taxes for their residents.
Personally, I would love to add Arizona to the list of states that plan on using the MFA to help cut more harmful tax rates. Finding ways to lower the tax burden is something that I have always been passionate about, which is why I personally authored the largest tax cuts signed into law the past two legislative sessions—tax cuts that promote economic investment by allowing greater write-offs of capital gains by individuals and equipment purchases by small businesses.
If passed in Congress, I pledge to work with my colleagues in the Arizona State Legislature to leverage the MFA as a vehicle to cut other taxes in our state, such as the personal income tax.
For Arizona, Laffer and Arduin say passing legislation like the MFA and implementing pro-growth tax reforms could mean a 3.38 percent increase in state GDP over the next decade, and the creation of more than 39,000 jobs over the same time period.
Nationwide, the job creation could surpass 1.5 million jobs. That’s an economic stimulus plan that we should all be able to agree with!
Our policies, especially tax policies, should empower Arizona’s small businesses, not be titled against them. State and local tax treatment should be fair, simple and efficient, and most importantly, keep government out of the free marketplace.
Sound tax policy shouldn’t have loopholes that can be exploited, especially to the detriment of our local, homegrown retailers. These days nearly every company sells online, but only those that have a local store have to collect sales taxes.
Our local economy relies on these small businesses — from standalone shops in Sun Lakes to shopping plazas in Gilbert to the boutiques along E. Boston Street in Downtown Chandler and the Chandler Fashion Center.
The MFA holds promise to protect our state’s ability to provide a level playing field for all businesses, treating local entrepreneurs and their online competitors equally. That is a goal I strongly support!
Regardless of the legislative vehicle, Dr. Laffer and Ms. Arduin make a compelling argument that closing the online sales tax loophole will restore much-needed fairness to the retail marketplace and strengthen our economy. E-fairness and pro-growth tax reform can go hand-in-hand.
As Laffer and Arduin point out, sales taxes are much less damaging to the economy than other types of taxes.
If the Marketplace Fairness Act passes, I look forward to working with my colleagues in the State Legislature to ensure its impact benefits all Arizonans through prudent tax reforms that cultivate a healthy economy for our state.
State Rep. J.D. Mesnard is a second-term Arizona legislator. Mesnard represents District 17, representing Chandler and Sun Lakes.