Taming the Amazon with taxes

States look to Internet taxes to close budget gaps

Internet retailers cite a 1992 U.S. Supreme Court decision involving catalog sales, Quill Corp. v. North Dakota, which ruled that states could require only companies that had a physical presence within the state to act as tax collector.

To get around the ruling, some states are expanding what it means to be physically present. For example, an online retailer hiring a marketing firm or owning a subsidiary inside the state would qualify under definitions adopted in some states.

In February, the Texas comptroller demanded that Amazon.com pay $269 million in back sales taxes because a subsidiary operated a warehouse near Dallas. Amazon is appealing the order.

Last year, New York enacted a law that said Internet retailers' practice of paying commissions to marketing agents based within the state constituted a presence. Arkansas, Colorado, Illinois, Rhode Island and North Carolina quickly followed with similar laws.

Bills are pending in Arizona, California, Florida, Hawaii, Massachusetts, Minnesota and Pennsylvania. Texas lawmakers passed such a measure, but Gov. Rick Perry vetoed it. Now legislators are trying to resurrect the bill by attaching it to a larger budget measure. The matter is now before a conference committee.

California estimates it loses at least $200 million a year in uncollected tax from online sales, $83 million from Amazon.com alone. A bill that has passed the state Legislature would force Seattle-based Amazon and others to collect that tax from California residents.

Amazon, Overstock.com and other big Internet retailers cite the Quill decision as their primary defense against collecting sales taxes, but they also argue that collecting tax in the District of Columbia and the 45 states where a sales tax exists would be extremely complex and expensive.

"There are over 8,000 taxing jurisdictions in the United States," said Jonathan Johnson, president of Overstock.com, which has offices only in Utah. "We think it's wrong that states are trying to cause out-of-state retailers to be their tax collectors."

Paul Bachman talks up BHI's recent study on education spending on Patriot Games Radio

Director of Research, Paul Bachman discusses BHI's recent study on education spending and student performance with D.R. Tucker and Stephanie Davis of Patriot Games Radio.

Listen to internet radio with Patriot Games Radio on Blog Talk Radio

Has the optimal gas tax been identified?

Mass High Tech's Kyle Alspach

In 2007, a study in the Journal of Economic Literature found that the ideal average gas tax for the U.S. would be $2.10 a gallonhttp://www.blogger.com/img/blank.gif. At the time, the average tax was 40 cents a gallon — 18.4 cents for federal and 22 cents for state (it’s currently 23.5 cents in Massachusetts).

The $2.10 figure takes into account greenhouse gas emissions, local pollution and oil dependency, along with the costs of congestion and accidents.

To make the tax palatable, economists say the government could cut taxes in other areas — say, the income tax for consumers or corporate taxes for businesses.

The tax trade-off seems like a reasonable idea but revenue-hungry politicians would never take up the offer.

In the rush to move toward a Pigouvian tax model, supporters of higher taxes tend to forget that such excise taxes are regressive. More than they did in the past, low-income workers rely more heavily on jobs in the suburbs and most use cars to get there.

BHI releases study on education spending in Massachusetts

The Commonwealth of Massachusetts could cut more than a billion dollars from education spending without measurably affecting the performance of public schools. This is a finding of a study released today by the Beacon Hill Institute and entitled, Why Massachusetts Should Spend Less on Education. Read more.

Complete study is available at beaconhill.org.

Video: David Tuerck testifies on H.R. 735

Testimony from BHI Executive Director David G. Tuerck begins at approximately 22:00 into this recording.

Text of BHI testimony in PDF is here.

Beacon Hill Institute testifies before U.S. Congress

Full testimony is available at BHI's website

David G. Tuerck
Department of Economics and Beacon Hill Institute
Suffolk University, Boston
June 3, 2011

Testimony Relating to the Government Neutrality in Contracting Act (H.R. 735) Before the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform, Committee on Oversight and Government Reform, U.S. House of Representatives


Chairman Lankford, Members of the Subcommittee, I am Professor and Chairman of Economics and Executive Director of the Beacon Hill Institute at Suffolk University in Boston. I appreciate the opportunity to submit this testimony.

I will direct my comments at “H.R.735, and Project Labor Agreements: Restoring Neutrality to Government Construction Projects.” H.R. 735 effectively nullifies a February 2009 executive order from the Obama Administration “encouraging” federal agencies to consider using PLAs on construction projects costing $25 million or more.

My comments are my own and do not represent the sentiments my employer, Suffolk University. Nor do they represent my support for any organization or private interest that might stand to benefit from the passage of H.R. 735.

I would like to offer my strong support of this measure, subject to just one caveat. The caveat is that “neutrality” falls short of what is called for. What would be better is an outright ban on PLAs of the kind that was in force during the Administration of President George W. Bush, who forbade the use of PLAs on federal construction projects.

This subcommittee already knows how PLAs work. The adoption of a PLA amounts, in effect, to the conferral of monopoly power over the supply of construction labor on a select group of construction unions. The putative reason for adopting a PLA is to assure labor “stability.” But the real reason is to confer monopoly power on a select group of unions and to discourage bids from contractors who use other unions or nonunion labor.

The construction unions use the word “stability” as a euphemism for promising not to cause trouble. But the threat of trouble is mostly an empty one. A genuine worry arises only when an owner uses nonunion labor, in retaliation for which it has to put with antics of the kind for which Boston’s International Brotherhood of Electrical Workers is famous. But Boston building owners are on to the IBEW and are showing increasing willingness to say no to intimidation.

In my written testimony I provide the core argument against PLAs: PLAs are supposed to correct for a problem for which the best correction is simply not to adopt a PLA. The problem is that certain contractors – the PLA-union contractors – are so burdened with collective bargaining agreements that they would have a hard time performing a job on time and on budget, but for the PLA. The adoption of a PLA, however, amounts to a needless rescue operation for the PLA unions and their contractors. The best way to avoid cost overruns and delays is to encourage, not discourage, bids from contractors, whether unionized or not, who are able simply to bypass the collective bargaining agreements that hobble the competitiveness of the PLA-union workers and their contractors.

That’s the crux of it. A ban on PLAs is not an anti-labor measure. I am personally involved in a New York case in which the plaintiff contractor is suing because its union has been excluded from PLAs that are being foisted on the City of New York by a different union organization and a complicit mayor. And, anyway, there is nothing pro-labor about a practice that is aimed at protecting the jobs and wages of 13% of the construction workforce at the expense of the other 87%.

The research entity I direct at Suffolk found that PLAs increase school construction costs in two states by 12% to 18%. Reliable hard estimates of this kind are rare because the disparity between construction projects makes it difficult to get statistically significant results from sample data. Fortunately for policy makers grappling with this question, however, it is possible to dispel the case for PLAs merely by pointing out the fatuous reasoning on which that case is predicated.

Adopting a PLA serves no purpose other than to put the PLA-union fox in charge of the project chicken coop. Fortunately, and as I observe in my written testimony, there is growing recognition even on the part of union-friendly observers that the argument for PLAs, and to mix my metaphors, never held water in the first place.

Kevin Williamson explains socialism's appeal

NABE revises GDP estimates downward

Economy will grow more slowly than expected.

NEW YORK Economists are dialing back their expectations for U.S. economic growth this year.

A survey from the National Association for Business Economics predicts GDP will grow 2.8 percent this year - down from the group's February prediction that it would grow 3.3 percent. Their outlook for consumer spending and the housing market also weakened, in part because they expect oil prices to remain above $100 a barrel through 2012.

In a survey that the NABE releases Monday, a panel of 41 economists also said they "remain highly concerned" about the growing federal deficit, and said that growth in the first three months of the year had been weaker than expected.

The predictions of the economists reflect the jitteriness of a public that is still recovering from the financial crisis and now getting squeezed by rising prices for gas, groceries and other household items. Retailers of all stripes are paying more for the raw materials they need to make and transport their products, such as fuel, cotton and wood pulp, and saying they have no choice but to pass along the price increases to customers.

Read more: http://www.charlotteobserver.com/2011/05/16/2300372/economists-lower-growth-higher.html#ixzz1MY5t0GHH

State tax collections surge

DOR: "Total tax collections of $16.860 billion are up $1.927 billion or 12.9 percent, $732 million over benchmark" for April.

It's all about the entitlements

Jeffrey Miron explains the very big elephant in the room.

"Taxachusetts Minus"

Jon Keller interviews BHI's David Tuerck on taxes in Massachusetts

Major takeaway: "Our competitiveness is a fragile thing."

Google to NE: No Google broadband for you!

Boston won't be getting the Next Big Google Thing, super-fast broadband. Kansas City, Kansas is the search engine giant's pick to deploy the new service. Boston's high-tech savvy wasn't enough apparently.

MASS HIGH TECH:

Bill Oates, the chief information officer for Boston, said last year that Boston would be a strong contender because of the variety of types of use it could offer - from large-scale government housing projects to wealthy townhouses to very tech-savvy businesses. “We think we provide a really good mix for what Google wants,” Oates said at the time.

Google said in its blog that it would be able to begin offering the 1 gigabit-per-second broadband to Kansas City sometime in 2012. By comparison, the average broadband speed in 2009 in United States was 4.8 megabits per second. No details were released on pricing plans or how much of Kansas City would be covered.

That's a big upgrade. Good luck to Kansas City, Kansas. With all that speed they probably won't even see us in the rear view mirror!

Massachusetts 10th in the nation in Tax Freedom Day

Massachusetts ranks tenth in the nation in terms of how long its residents must work to pay off the federal, state and local tax man according to the Tax Foundation. Mass taxpayers toil to raise the taxes to pay all governments through April 14, one day before the official federal income tax filing deadline. (Thanks to the holiday Massachusetts taxpayers have until April 19 to file this year).

Overall, American taxpayers will recognize their freedom on April 12.

High-income Connecticut finished first. Its taxpayers will see the light of day on May 2. Mississippi ranked last with a Tax Freedom Day of March 26.

To learn how Tax Freedom Day is calculated visit the Tax Foundation.

It seemed like a good idea at the time

A stunning conclusion from the Kauffman Foundation by way of Mass High Tech:

The financial industry’s dizzying growth prior to 2008’s credit crisis may have stifled entrepreneurship by stealing talent that otherwise would have gone to innovative new companies.

That’s the conclusion of a new Kauffman Foundation report, which found that the financial industry recruited scientists, mathematicians, and engineers from graduate schools to create new financial instruments, such as the collateralized debt obligations that led to the financial crisis.

"Their talents have made them well-suited to the design of these complex instruments, in return for which they often make starting salaries five times or more what their salaries would have been had they stayed in their own fields and pursued employment with more tangible societal benefits," the study stated.

"Because these new hires are often the very individuals who otherwise would have comprised the most robust pool of prospective founders of high-growth companies, the financial-services industry’s steady rise has had a cannibalizing effect on entrepreneurship in the U.S. economy," said Paul Kedrosky, the study’s co-author and a Kauffman senior fellow.

At MIT, for example, nearly 25 percent of all graduates went to work in the financial sector in 2006, up from 18 percent in 2003.

File under: "Engineers blow things up."

Full report available at the Kauffman Foundation.

Small steps toward progress

Lost the apocalyptic news cycle, a little progress little noticed. "U.S. life expectancy has hit another all-time high, rising to about 78 years and 2 months."

Kotkin: "Why North Dakota Is Booming"

Joel Kotkin on North Dakota:

Oil also is the principal reason North Dakota enjoys arguably the best fiscal situation in all the states. With a severance tax on locally produced oil, there's a growing state surplus. Recent estimates put an extra $1 billion in the state's coffers this year, and that's based on a now-low price of $70 a barrel.

North Dakota, however, is no one-note Prairie sheikdom. The state enjoys prodigious coal supplies and has—yes—even moved heavily into wind-generated electricity, now ranking ninth in the country. Thanks to global demand, North Dakota's crop sales are strong, but they are no longer the dominant economic driver—agriculture employs only 7.2% of the state's work force.

Perhaps more surprising, North Dakota is also attracting high-tech. For years many of the state's talented graduates left home, but that brain drain is beginning to reverse. This has been critical to the success of many companies, such as Great Plains Software, which was founded in the 1980s and sold to Microsoft in 2001 for $1.1 billion. The firm has well over 1,000 employees.

The corridor between Grand Forks and Fargo along the Red River (the border between North Dakota and Minnesota) has grown rapidly in the past decade. It now boasts the headquarters of Microsoft Business Systems and firms such as PacketDigital, which makes microelectronics for portable electronic devices and systems. There are also biotech firms such as Aldevron, which manufactures proteins for biomedical research. Between 2002 and 2009, state employment in science, technology, engineering and math-related professions grew over 30%, according to EMSI, an economic modeling firm. This is five times the national average.

While the overall numbers are still small compared to those of bigger states, North Dakota now outperforms the nation in everything from the percentage of college graduates under the age of 45 to per-capita numbers of engineering and science graduates. Median household income in 2009 was $49,450, up from $42,235 in 2000. That 17% increase over the last decade was three times the rate of Massachusetts and more than 10 times that of California.

Here's a case of great minds thinking alike: Last year, North Dakota topped the BHI's Annual State Competitiveness Index with its strong showing in our Government and Fiscal Policy, Infrastructure and Environmental Policy measures.

The complete 2010 State Competitiveness Report is available here.

More than a quarter decline in MA construction since 2007

The Boston Business Journal reports:

The Bay State’s construction sector has shed 34,200 jobs on a seasonally adjusted basis since January 2007, with some of the commonwealth’s largest metropolitan areas having lost more than a quarter of their jobs in that span.

Nationally, 317 of the country’s 337 largest metros shed construction jobs since the downturn commenced, with some markets, particularly in the southwestern portion of the country, contracting by as much as 65 percent.

In Massachusetts, construction firms employed 92,500 people on a seasonally adjusted basis at the end of January, off 27 percent from the 126,700 workers in the sector four years earlier, according to The Associated General Contractors of America.

The Boston-Cambridge-Quincy region reported the state’s largest decline in total jobs lost, falling by 15,100 positions during the period studied. That brought the area’s total construction employment to 43,100 jobs at the end of January, off 26 percent over four years.

On a percentage basis, New Bedford and Peabody tied for the state’s largest decline, sliding 30 percent. New Bedford’s drop included 800 jobs, while Peabody’s affected 1,100 positions.

What will it take to get the industry moving again?

The elusive quest for green jobs

Edward L. Glaeser: picks apart the green jobs myth. Key takeaway:

Failed public investments, like the money spent in Devens, reflect the fact that public officials are rarely skilled venture capitalists and that governments pursue many objectives that lead them away from solid investments. It’s easy to see why any governor would be excited about a green-energy manufacturing plant in a less prosperous area of his or her state. But the same forces that made Devens political catnip meant that it was unlikely to be a long-term success.

The BHI record on estimating state tax revenues in Massachusetts

At the December 14 revenue hearing, the Institute was asked by the Joint Ways and Means Committee to provide an accounting of the comparative success of the Beacon Hill Institute (BHI) in predicting tax revenues. This memo is our response to that request.

BHI releases revenue estimates for FY 2011, FY 2012

At a Joint Ways and Means Committee hearing on Tuesday, December 14, the institute presented its annual revenue estimates. BHI estimates that Massachusetts state tax revenues will come in at $20.363 billion for Fiscal Year 2011, a growth of 9.8% over FY 2010. Revenues will be $21.265 billion for FY 2012, 4.4% above 2011.

Read more about Tuesday's revenue hearing here.