State Net Capitol Journal – December 3, 2012

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Budget & Taxes

'CYBER MONDAY' SPURS PUSH FOR ONLINE SALES TAX: By most accounts, "Cyber Monday," was a good day for online retailers. Adobe Systems Inc. said Cyber Monday sales, based on data from retailers like Best Buy Co. and Wal-Mart Stores Inc., jumped 17 percent to almost $2 billion, while International Business Machines Corp's Smarter Commerce arm said online sales among some of the nation's largest retailers shot up 30 percent.

But a coalition of small business leaders hopes this year's Cyber Monday will be the last with online purchases not subject to sales taxes. The Alliance for Main Street Fairness is pressing Congress for that change( See "With Congress stalled, states work their own 'Amazon Tax' deals" in the May 7, SNCJ).

"Cyber Monday is just another opportunity for out-of-state, online-only retailers to exploit a government-sanctioned loophole that puts local businesses at a significant disadvantage," Alison Joseph, spokesperson for the group said in a press release. "This should be the last holiday shopping season that Main Street businesses have to compete on a playing field that is not level."

Legislation has been introduced in the U.S. Senate that would allow states to collect sales taxes on most online purchases. Although the so-called Marketplace Fairness Act is likely to face strong resistance in the Republican-controlled U.S. House, it does have the backing of several Republican governors, including Iowa's Terry Branstad, Michigan's Rick Snyder, New Jersey's Chris Christie and Tennessee's Bill Haslam. Their states are among the 24 that have signed the Streamlined Sales and Use Tax Agreement, allowing retailers to voluntarily collect state sales taxes. The congressional online sales tax bill also has the support of online giant Amazon.com, which already collects sales taxes in seven states - California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas and Washington - and will do so in at least five more by 2016.

Amazon rival eBay, however, opposes the bill, saying it would hinder the growth of online retailers. And the bill also has foes in the U.S. Senate, including Sen. Jim DeMint (R-SC) who, in a blog post last month, called online sales taxes "a federal decree disadvantaging internet companies by forcing them to collect sales taxes not only according to their state and locality, but across all 50 states and thousands of local tax jurisdictions." (STATELINE.ORG)

Cyber Monday

STATE AND LOCAL GOVERNMENTS OVER $7T IN DEBT: Although there's been a lot of talk lately about the "fiscal cliff" and the national debt underlying that looming crisis, it isn't just the federal government that's been living beyond its means. According to a report by The States Project, a joint venture of Harvard University's Institute of Politics, the University of Pennsylvania's Fels Institute of Government, and the American Education Foundation, state and local governments are trillions in debt too, $7.3 trillion to be precise. That total estimate includes $3.4 trillion in unfunded pension liabilities; $1.2 trillion in unfunded health care benefits; and $2.7 trillion in state and local borrowing, including bonds and notes payable.

"Total state and local debt is now almost half of what the national debt is," said Alex Palmer, a Harvard senior who worked on the "State of the States" report. "But nobody talks about that." (THESTATESPROJECT.ORG, IOP.HARVARD.EDU, REALCLEARPOLITICS.COM)

BUDGETS IN BRIEF: State Medicaid spending will increase $76 billion, or nearly 3 percent, over the next decade if all 50 states expand Medicaid eligibility in 2014 under the federal health law, but state Medicaid costs will increase $68 billion even if no state opts for expansion, according to a study released last week by the Kaiser Family Foundation. The report says even states that don't expand eligibility will see a surge of people signing up for the program who were previously eligible but not enrolled (KAISER HEALTH NEWS). • A MICHIGAN House committee debated legislation last week (HB 5684 AND HB 5685) that would allow a fetus at least 12 weeks old to be claimed as a dependent by its parents on their state tax return. If approved the state would become the first to adopt such a policy (MLIVE.COM, STATE NET). • Several U.S. states, led by CONNECTICUT and NEW YORK, have joined the investigations into the illegal manipulation of the bank-to-bank interest rate known as the "Libor" - shorthand for London Interbank Offered Rate - used to set the interest rate on financial instruments around the world. State officials believe the rate-rigging may have cost U.S. municipal debt issuers and taxpayers up to $6 billion (STATELINE.ORG). • After nearly five years of decline, CALIFORNIA's economy is showing signs of a rebound. The state reported a 10.1 percent unemployment rate last month, down from 11.5 percent in October 2011, and home sales in Southern California were up 25 percent in October compared to a year earlier (NEW YORK TIMES). • Support is growing in NEW YORK's financial community for federal government approval of tax-exempt "Sandy Bonds." Like the Gulf Opportunity or "GO Zone" bonds sold after Hurricane Katrina, Sandy Bonds would provide private investors such as real estate developers and manufacturers with a way to finance the reconstruction of houses, apartment buildings and businesses destroyed by the storm (ALBANY TIMES-UNION). • CONNECTICUT Gov. Dannel Malloy (D) ordered $170 million in spending cuts last week, including a $63 million reduction in funding for social service programs, such as mental health and addiction services, and assistance to families (CONNECTICUT POST, STATE NET). • UK-based Camelot Global Services PA LLC promised PENNSYLVANIA $34 billion in profits over the next 20 years if it is allowed to take over operation of the state's lottery. The Corbett administration has been exploring privatization of the lottery since April to increase profits and the predictability of funding for programs benefitting the state's growing senior population (PENNLIVE.COM). • The Christie administration has agreed to make purchases of marijuana from an approved dispensary by pre-screened patients subject to NEW JERSEY's 7 percent sales tax, potentially removing the final roadblock to launching the state's medical marijuana program. Implementation of the program, which was approved by Gov. Jon Corzine (D) nearly three years ago, has been held up by battles between Gov. Christie (R) and the Legislature over how it should be run, among other things (NJ.COM).

- Compiled by KOREY CLARK

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