House Speaker Jimmy Naifeh's whiny op-ed published by Nashville City Paper Tuesday is Swiss Cheese-like in its truth content: full of holes. Too many to discuss. Here's one particularly bad section, loaded with half-truths, lies and conflicts of logic:
First, over the last 20 years, we have dramatically shifted our purchasing away from the purchase of goods, which are taxable, to the purchase of services, which are not taxed. Second, under federal law, most purchases made over the Internet are not subject to state sales tax; it is estimated that Internet sales are costing us over $300 million annually in tax growth. So why not tax services? The largest areas of services not taxed are for health care and construction spending. To most people, taxing health care services is morally objectionable. Taxing construction just adds to the cost of housing, making it more difficult for people to buy a new house or for businesses to expand.
Now, the facts: 1. Over the past several years, Naifeh and his compadres have failed to adjust the sales tax to reflect the modern economy's shift to the purchase of more services, and even outright passed big exemptions for special interests that cost the state more than $2 billion a year at the current state sales tax rate. The state could easily lower the tax rate and expand the sales tax base, creating a fairer and more eonomically appropriate tax code. But Naifeh and his pals get too much money from special-interest lobbyists for that to happen.
2. The claim that the state is losing $300 million a year in tax revenue due to online commerce is widely reported but its academic foundation is weak - a rush-job "study" by pro-income tax economist Dr. Bill Fox at the University of Tennessee-Knoxville based on wildly inflated predictions of the growth of ecommerce that were made before the Internet boom went bust. The $300 million is beyond dubious. It equals the state's annual tax take from about 20 or 21 major shopping malls. If the state is losing that much sales tax revenue to ecommerce, that means the equivalent of the annual sales volume of every mall in Nashville, Memphis, Knoxville, Chattanooga - plus a few more shifted from the malls to the Internet. Yet Tennessee has seen new malls opening in recent years, and none have closed. Fox's prediction of huge e-commerce sales tax losses for Tennessee and other states simply has not come true, but Naifeh peddles the lie like it is a fact. (For a more thorough debunking of the $300 million claim that Fox made and Naifeh is parroting.
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