Amazon is practically the only place I shop. That is not meant as a boast. It is actually pretty embarrassing, not to mention, hypocritical and kind of immoral with all the sweatshop warehouses they’re running. But I get free shipping (yes, even to Guatemala but that is because I’m taking advantage of a loophole, again, not very ethical). It is easy to forget that Amazon’s competitive edge doesn’t really come from exploiting its workers. That is hardly unique. It comes from their ability to avoid paying state income taxes.
Now that a few states have enacted online sales taxes, some academics at Ohio State crunched the numbers to see if Amazon sales were hurt by the tax. The paper was highlighted by Chris Blattman at his blog but I wanted to draw some attention to it. Five states started taxing Amazon in 2012 and 2013—New Jersey, California, Pennsylvania, Texas and Virginia. The authors found that the tax did change people’s choices. Amazon purchases (by dollar value) dropped by almost 10%. The decline was steeper for bigger purchases, suggesting that people were making the choice based on taxes. At the same time, purchases to local, physical stores increased by 2% and purchases at non-Amazon online stores increased by 20%.
Congress is currently debating the Marketplace Fairness Act that would make it possible for all states to collect sales tax on internet purchases. States are especially in need of revenue and since regressive taxing is all the rage, this seems like a good bet. Raise the sales tax. Legalize casinos. But don’t ever raise taxes on the wealthy or close some corporate tax loopholes. Spain did it. And look how great it worked for them. In the height of the crisis (26% unemployment) they nearly tripled their sales tax on a lot of staple goods (school supplies went from 4% sales tax to 21%) while lowering the taxes on yachts. But again, that little rant aside, they should at least make Amazon play by the same rules as everybody else.
So an Amazon tax is good. If for nothing else than to try to put a small dent in their monopoly power. Then again, now that you can watch Game of Thrones on Amazon Prime, it might be too late.