Online sales taxes have positive and negative effects
April 11, 2011
Illinois’ implementation of an online sales tax has its benefits and drawbacks. When I initially heard about Gov. Pat Quinn’s plan, it frustrated me as someone who likes to occasionally shop online.
While there are several states that pay online taxes, Illinois residents have enjoyed the benefits of not having them. I still believe it may be unnecessary to force Illinois residents to pay a tax for online purchases, but there are some benefits to consider before protesting it.
First, it may help local businesses. Most people use online shopping as a convenient way to find things they don’t want to go store to store looking for. With the online sales tax added, some people may find it more appealing (and cheaper) to shop at local stores instead.
It may also contribute to the state’s effort to reduce the deficit in Illinois. Jeremy Groves, NIU assistant professor of economics, said the online sales tax will increase revenue to the state, which is probably the best argument for Quinn implementing the online sales tax.
According to a recent Chicago Tribune article, “the Illinois Department of Revenue estimates it misses out on $153 million to $170 million in uncollected sales taxes each year from online purchases.”
There are, however, still some negatives that may ultimately outweigh the benefits.
“An increase in the sales tax can result in lower consumption and a shift of consumption from higher tax areas to lower taxes areas,” Groves said.
This is an important point because the benefits of increased revenue for the state would not be seen if people chose to limit their purchases altogether instead of turning to local shops or paying the online sales tax.
Although many of the larger business, such as Target and Walmart, already implement similar sales taxes for online purchases, those that don’t may be opposed to it and could even decide to cut ties with Illinois.
Both Amazon.com and Overstock.com have already decided to eliminate their contracts with their Illinois affiliates to avoid implementing the tax, according to the Chicago Tribune article.
It also discourages the growing industry of online retailers from coming to Illinois, which may hurt the state more than it helps it in the long run.
While it is good that local businesses will be able to stay competitive, the customer’s interests should also be considered. If we are going to be asked to pay more in taxes, we need to see the rewards in some way or another. Whether the deficit is reduced or local businesses begin thriving, we cannot continue to be asked to pay more taxes without seeing the benefits.