A Bizarre New Package Tax Starts to Emerge
With the ongoing pandemic and accompanying economic uncertainty, many Americans are hanging on by a thread mentally or financially. The last thing struggling Americans need is anything that makes life more inconvenient or expensive. Yet state and local governments across the country are poised to do both through new taxes on delivery boxes. A commission formed by Pennsylvania Gov. Tom Wolf, a Democrat, “is considering recommending a new source of revenue by charging a package delivery fee of 25 cents to $1 paid for every package delivered in the state by e-commerce giants Amazon, FedEx and UPS as well as local grocery stores and restaurants,” the Pittsburgh Post-Gazette reported last month. The idea is that delivery vehicles create additional wear and tear on the roads and thus e-commerce prices ought to reflect that. It is expected that several other states and municipalities will follow close behind. It’s a tenet of public policy that if you want less of something, tax it. If we want Americans to continue to do as many things as they can from the safety of their own homes, then taxing deliveries is an absurdly counterproductive public health idea. While the vaccines are a welcome miracle, there remains enough community spread of the virus to give pause to older Americans and those who cannot take the vaccine, such as the immunocompromised, before they venture out to stores and restaurants. The idea that these most vulnerable among us, many on fixed budgets, ought to pay a new tax is outrageous. Undoubtedly some are pushing for delivery taxes to support brick-and-mortar retailers and restaurants once the pandemic is behind us. But the answer to today’s temporarily uneven playing field should not be to permanently tilt it the other way.
Even beyond the context of Covid, the justification for a new package tax just doesn’t hold water. States and localities are looking for new sources of revenue to fund roads as gas tax revenues continue their relative dwindle spurred by Americans purchasing more fuel-efficient and alternate fuel vehicles. Yet, as fiscally reckless as it is, Washington has infused states and local governments with a record amount of cash over the last year for all sorts of projects with relatively few and lenient strings attached. For example, West Virginia is using CARES Act funding to make improvements to roadways despite the fact the funds aren’t specifically appropriated for that purpose.
There’s also a more fundamental problem with package tax plans. The key justification for these proposals, that delivery vehicles are creating unacceptable wear and tear on the roads, doesn’t pass the smell test. For starters, there’s no difference in this respect between a family going to a restaurant and a meal delivery. In fact, most drivers make multiple stops. While some additional heavier delivery vehicles may be on local roads, every single package in one delivery vehicle represents an entire additional vehicle that is not on the road. One Amazon, UPS, FedEx, or Postal Service van usually means hundreds of cars not on the road. Widespread private deliveries result in untold environmental and safety benefits that more than offset marginal road wear and tear (if there are any). No matter how it’s delivered, the logic behind a package tax just doesn’t add up. All that is adding up for taxpayers is the cost of Covid-19 and the recent spending explosion from Washington. Don’t ding taxpayers at the doorbell too.
A Lesson in Back to School Sales Tax Holidays
Students across the country are heading back to school. That means it’s also the time when politicians tout sales tax holidays as a gift from government to consumers and parents. In reality, sales tax holidays are just a showy ruse that doesn’t lead to real savings. If lawmakers truly wanted to give a gift to taxpayers, they would reform complicated tax systems, or better yet, eliminate sales taxes. In 1999, Texas became the first state to offer back-to-school shoppers a tax-free holiday to buy “clothing, footwear, school supplies and backpacks (sold for less than $100).” To date, 17 states offer periodic sales tax holidays on numerous items, from school supplies to clothing to generators. Some states, like Mississippi, offer sales tax holidays that exempt firearms, while Tennessee is currently exempting gun safes and safety devices until 2022. The Tax Foundation has extensively studied the effects of sales tax holidays and concludes that such tax policy is “ineffective and inefficient.” Proponents of the holidays purport that exempting the sales tax on certain purchases promotes economic growth and provides relief to lower income persons. Unfortunately, of the available evidence, sales tax holidays have had the opposite effect. For example, a 2017 report by the Federal Reserve System found that while spending always increases during the sales tax holiday, it is not new spending. Consumers simply shift the dates from when they would have purchased.
Rather than tout gimmicks like Democratic and Republican state lawmakers in Massachusetts have recently done, lawmakers should reform complicated sales tax systems and offer year-round tax relief. Five states, including Alaska, Delaware, Montana, New Hampshire, and Oregon, have no sales tax. According to the National Association of State Budget Officers, in 2020, of the five states with no state sales tax, only Alaska was running a deficit; the other four had budget surpluses. Sales taxes are fundamentally regressive as lower-income folks spend a larger share of their income on retail purchases. This is reflected in sales tax holidays, which tend to favor higher-income households. A study by the Federal Reserve Bank of Chicago found that the “wealthiest households . . . have the largest, statistically significant response” to sales tax holidays. Further, eliminating the sales tax is a bipartisan issue. The progressive Center of Budget and Policy Priorities has called on states to reduce or eliminate sales taxes on groceries. Similarly, the Tax Foundation has urged policymakers to “reduce the sales tax rate year-round.”
As the old adage goes, nothing in life is free. Consumer buyer beware, sales tax holidays are just a feel-good policy that saves consumers’ pocketbooks very little, if anything at all. Reducing sales taxes would be a better policy if lawmakers truly cared about reducing the tax burden among their constituents, especially the poorest ones.
BLOGS:
MEDIA:
August 20, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Can expensive reports & consultants help turn around Baltimore's water system?”
August 20, 2021:
The Federalist ran TPA’s op-ed, “Higher Taxes On Home Deliveries Are The Last Thing Americans Need Right Now.”
August 20, 2021:
The American Spectator ran TPA’s op-ed, “Sales Tax Holidays Are Just a Bait and Switch Gimmick.”
August 23, 2021: WBFF Fox45 (Baltimore, Md.) interviewed me about taxpayer money wasted in Afganistan.
August 24, 2021: I appeared on 93.1 WACV (Montgomery, Ala.) to talk about the $3.5 trillion budget and Department of Labor nominee David Weil.
August 24, 2021:
Townhall.com ran TPA’s op-ed, “Who Should Government Trust on Health, a Lawyer or a Public Health Professor?”
August 24, 2021:
The Center Square ran TPA’s op-ed, “Afghanistan war led to billions in wasted taxpayer dollars.”
August 25, 2021: WBFF Fox45 (Baltimore, Md.) interviewed me about the Baltimore City Inspector General Advisory Board meeting.
August 25, 2021:
National Review Online ran TPA’s op-ed, “Booker’s Bank-Breaking ‘Baby Bonds’ Won’t Close the Wealth Gap.”
August 25, 2021: The Carolina Journal (Raleigh, North Carolina) ran TPA’s op-ed, “Utility pole regulations hurt broadband growth in North Carolina, report warns.”
August 25, 2021: The Center Square ran TPA’s op-ed, “Louisiana lawmakers push policy to expand broadband access in state
August 25, 2021: NeighborNewsOnline.com ran TPA’s op-ed, “Louisiana lawmakers push policy to expand broadband access in state.”
August 25, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “Full Baltimore COVID-19 money spending office yet to be seated, priorities remain murky.”
August 26, 2021: WBFF Fox45 (Baltimore, Md.) quoted TPA in their story, “City admits breakdown in Teleworking Program.”
August 26, 2021: I appeared on WBOB 600 AM (Jacksonville, Fla.) to talk about the $3.5 trillion budget bill.
Have a great weekend!
