Pat Quinn's iTax | Bleader

Wednesday, April 21, 2010

Pat Quinn's iTax

Posted By on 04.21.10 at 10:48 AM

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The governor's proposal to tax digital downloads is already being mocked, and expect more to come. But it does present an interesting dilemma. On one hand, part of the justification for sales taxes is that brick-and-mortar stores benefit from state and local programs—in ways that online retailers don't. On the other, the loss of sales tax revenue to online shopping is nontrivial, and according to a 2000 paper by Austan Goolsbee (now famous as an economic adviser to the president), the lack of sales taxes on online purchases gives online retailers a competitive advantage—a distinct pricing advantage beyond the advantages of mere convenience—which theoretically discourages b&m shopping and depresses sales tax revenue even further.

I'm not so sure that Gov. Quinn's iTax is a dumb idea so much as an immediately unpopular one; then again, after pushing for years, Wisconsin's Jim Doyle got a similar tax passed last year to no great panic that I can recall, though he's not polling well these days.

Either way, Illinois politicians are going to have to do unpopular things to fix the budget deficit, and some of them are going to lose their jobs because of it. It'd be interesting to see if changes to the state's regressive flat income tax, which Progress Illinois has been writing about for awhile, would be a winner, or at least not a giant loser.

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