What the pols can do to help RI small business

Dec 19, 2013

The hours are dwindling to Christmas and the annual shopping frenzy is on. RIPR political analyst Scott MacKay says we should shop local to support the Rhode Island economy and details what Congress can do to help.

The twinkle of  seasonal  lights on new fallen snow are everywhere,  Christmas shopping is in full blush and youngsters are readying for the annual reading of Clement Clarke Moore’s classic `Twas the Night Before Christmas.’

While it may be better to give than receive, the provenance of all the gifts under all those lit up evergreens   matters much to the Rhode Island economy. Rhode Islanders would do well to buy gifts from small businesses because this would give a nice end of the year lift to a local economy that is sorely in need of a boost.

Politicians from the North Pole to North Kingstown pay lip service to the virtues of shopping local. Yet they don’t do nearly enough to help these fledgling businesses. On the local level, the only small proprietors the General Assembly has helped in recent years are a few liquor stores along the Massachusetts border.

At the urging of one of those package store owners - Jan Mailk of Warren – who just happens to be a Democratic state representative – the Assembly abolished sales taxes on wine and spirits to make these establishments competitive with Massachusetts, which charges no sales taxes on these alcohol products.

And Rhode Island lawmakers have skirted attempts, including one by Governor Lincoln Chafee in 2011, to lower the state’s 7 percent sales tax by increasing taxes on items that are not taxed at all under Rhode Island’s antiquated laws.

The biggest thorn in the side of local merchants is the stunning, sad, unfairness of national tax policies on Internet shopping, which is now a multi-billion dollar business.

With the click of a computer mouse, consumers can order gifts from Amazon.com  and avoid the Rhode Island sales tax and sales taxes in the other 44 states that levy them. This gives national Internet retailers an obvious advantage over local stores, particularly in such markets as books and gifts.

The worst part of this is that in our state, a consumer can visit one of our dwindling number of fine independent book stores, spend the afternoon browsing and getting help from the staff. Then with a click on a computer keyboard or mobile phone app, order the book online from Amazon and pay no sales tax.

This puts local businesses at a blatant disadvantage. And who do you think hires Rhode Islanders, pays local property taxes and contributes to our charities, economy and children? Next time you want money for your hospital, Little League or Pop Warner team, try asking Amazon or Overstock.com.

It has been more than 20 years since the U.S. Supreme Court ruled in a North Dakota case that a state’s efforts to require tax collections from out-of-state  retail companies was unconstitutional. The court said states can only collect taxes from out-of-state retailers who have a ``physical presence’’ in that state.

Recently, the U.S. Supreme Court refused to get involved  in state efforts to force Web retailers to remit taxes to states. As is usually the case when it declines an appeal, the high court did not give a rationale for the decision.

The U.S. Senate has approved a measure called the Marketplace Fairness Act, which would require companies that exceed $1 million in Internet sales outside the states where they are located to collect every state’s sales tax. Both Rhode Island senators, Democrats Jack Reed and Sheldon Whitehouse,  supported it.

Rhode Island tax officials say the state could harvest as much as $70 million in Internet taxes. Nationally, the estimate is that cash-strapped states would get about $23 billion in total.

But the legislation has been snarled in the Republican-controlled House, where some members view it as an additional tax on constituents.  

In this season of giving, isn’t it about time that our lawmakers give our local David-like retailers a break and level the playing field with their Goliath online competitors.

Scott MacKay’s commentary can be heard at 6:35 and 8:35 every Monday on Morning Edition and at 5:50 on All Things Considered. You can also follow his political reporting and analysis at our `On Politics’ blog at RIPR.org