The Great Debate

An online sales tax would kill small businesses jobs

Harlowton, Montana (population 984), is home to TicketPrinting.com, where we create tens of thousands of tickets a day for hundreds of customers across America. Like millions of small businesses around the country, our company leverages the power of the Internet to transcend location and do business on a national level. But our small business, like millions of others, is threatened by the Internet sales tax bill under consideration by Congress.

The legislation, which passed the Senate and now awaits action in the House of Representatives, claims to eliminate an unfair advantage for those who do business online. Instead, its effect will be to reduce e-commerce overall.

Currently, every person in America has the opportunity to do business on the Web. If the current Internet sales tax bill passes, this opportunity will be denied to many entrepreneurs and small business owners.

Small business accounts for more than half of all sales and jobs in the United States. While big business slashed employee rosters, small business created 66 percent of all net new jobs since the 1970s and more than 8 million new jobs since 1990, according to the Small Business Administration, a federal agency. Small businesses keep our economy growing, and Internet opportunities encourage small business, allowing almost anyone to pursue the American dream by reaching beyond a local market to do business on a national level and in the process create jobs.

An Internet sales tax that isn’t one rate, with one filing, accountable to one government agency, will kill this dream.

Subsidizing people instead of corporations

Reaganomics is so well established that state officials, both Republican and Democratic, don’t call it that anymore. They simply call it smart policy.

Even so, the idea of boosting supply to raise demand, instead of the other way around, is hardly uncontroversial. States spend billions annually on economic development subsidies to try and create jobs. But recent evidence suggests tax breaks, “forgivable loans,” and the like don’t work as well as hoped.

Up to now the thinking went like this: Devoting public funds to pull companies into the state will eventually yield returns, which is to say, yield jobs. Those jobs stimulate spending, which raises demand for the very products and services of the corporation that brought the jobs in the first place. And thus the virtuous cycle is sent into overdrive. That, at least, has been the theory.