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This week’s edition of The Leaflet features research and commentary addressing digital goods taxes, national infrastructure bank, swipe fees, Illinois fracking, locals fight Common Core, and medical device taxes.
Each state has taken its own approach to digital goods taxes, which has created situations of double taxation: When a digital transaction involves multiple states, a consumer can end up paying multiple sales taxes. To create uniformity in digital sales taxes among states, Sens. Ron Wyden (D-OR) and John Thune (R-SD) and Reps. Lamar Smith (R-TX) and Steve Cohen (D- TN) introduced the Digital Goods and Services Tax Fairness Act.
The bill would establish a national framework with the goal of preventing consumers of digital goods from being hit with multiple and discriminatory taxes. It would provide a valuable roadmap for states imposing these taxes and designate clearly which jurisdictions have the right to tax digital transactions. The act also would work to prevent the multiple or discriminatory taxes currently being imposed on other services delivered over communications networks from being levied on digital goods and services.
In this Research & Commentary, Senior Policy Analyst Matthew Glans argues continued uncertainty over the taxation of digital goods will further slow the development of digital technology. Glans contends state legislators should avoid placing new, burdensome taxes on digital goods and abide by the physical presence (“nexus”) standard. He also argues a better approach to digital goods taxation would be to base tax rates only on the state where the consumer lives, a principle known as origin-based taxation.
Research & Commentary: National Infrastructure Bank
The Obama administration recently made the establishment of a National Infrastructure Bank part of its proposed budget. The project would allocate $10 billion to the National Infrastructure Bank with the goal of leveraging up to $20 billion in total infrastructure investment. Three major legislative proposals establishing a National Infrastructure Bank have been circulating since 2011.
In this Research & Commentary Senior Policy Analyst Matthew Glans critiques the proposal and examines the opinions of both critics and proponents. A real concern exists that the infrastructure bank may become a political slush fund for pork barrel spending. “Although the stated goal is to create an agency that bases its funding decisions on real-world technical factors, it is unlikely the bank and its board could avoid becoming involved in political wrangling and pork. The main effect would be to take more infrastructure decisions away from the states and shift them to the federal government.”
Retailers, Credit Card Companies Sue Each Other Over Swipe Fee Settlement
In this Heartlander digital magazine article, Heartland Research Fellow Steve Stank examines the legal battle among major retailers regarding “swipe fees,” the fees charged by credit card companies to retailers to process credit card transactions. The lawsuit revolves around a $7.2 billion settlement reached by both parties to resolve the issue; retailers argue in the new suit that the settlement was not sufficient and forcing them to give up possible future legal action against the credit card companies is unacceptable. The credit card companies responded with their own lawsuit, arguing the settlement is necessary to avoid “endless, wasteful litigation.”
The proposed agreement would have the credit card companies pay $6.05 billion to retailers, with another $1.2 billion paid in the form of a 10 basis-points reduction in credit interchange rates for eight months. It would also allow U.S. merchants to impose checkout fees on credit cards, subject to certain conditions, such as a cap limiting the surcharge to cost of acceptance.
Letter: Illinois Should Embrace Fracking
In an op-ed for the State Journal-Register, Illinois’ capital city newspaper, prominent environmental activist and Illinois native Sandra Steingraber writes that the proposed hydraulic fracturing regulations that Republicans, Democrats, industry representatives, and environmental groups have worked on for months are not enough to protect the public from the risks of shale development, and that a two-year moratorium is the only policy Illinois should consider. In a letter responding to Steingraber’s claims, Policy Analyst Taylor Smith says government data show there hasn’t been a single case of contaminated groundwater since hydraulic fracturing started in Illinois in the 1950s, and recent advancements in the technology have made it safer to use, not riskier.
More from Taylor’s letter: “Over the past 15 years, people have been leaving Illinois at a rate of one resident every 10 minutes, according to the Illinois Policy Institute, and Steingraber states in her column that she too, once made the decision to leave. With the latest labor statistics showing Illinois unemployment having recently jumped to the second highest in the nation, things aren’t likely to get better on their own.”
After her recent testimony to the Wisconsin Legislature on Common Core national education standards, Research Fellow Joy Pullmann was interviewed by EAG News and asked about some of the pitfalls concerning Common Core standards and why the public backlash against them has been growing.
Joy said, “Basically all the labels you hear about it are untrue. It’s not rigorous, it’s not internationally benchmarked, it’s not competitive, it’s not high-quality, so on and so forth. There’s a lot of really frightening data-tracking and monitoring initiatives being required of states in conjunction with Common Core. The tests that are coming out are illegally funded by the federal government, and we don’t have any indication of their quality or independent review of what’s going to be on the tests.”
Research & Commentary: Medical Device Tax
Proponents predicted the tax would raise approximately $3.2 billion each year on average for the next ten years and medical device companies would enjoy increased profits because of the expansion of health insurance. Critics of the new tax argue that, like all excise taxes, it increases the cost of medical devices and overall health care costs for consumers.
The tax also is likely to harm the medical device industry through cuts in employment, decreased product innovation, stunted competition, and an inordinate impact on smaller companies. In a recent study, Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, and Harold Furchtgott-Roth, president of Furchtgott-Roth Economic Enterprises, estimate as many as 45,000 jobs could be lost completely or shipped overseas as a result of the tax.