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Charlotte Observer, Amazon sales tax, and fallacies

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On Jan. 21, the Charlotte Observer Editorial Board released an opinion piece in which they argue that online retailer Amazon's new policy of collecting North Carolina sales taxes on online purchases beginning in February is the right decision for North Carolina and its businesses. Several economic and moral fallacies are contained in the piece. Let us examine what is wrong with the reasoning behind such a stance.

First, we should consider the morality of collecting taxes. When agents of the state levy and collect taxes, they demand that people hand over their money on the threat of arrest and imprisonment. If a person resists arrest and imprisonment, they may be killed by agents of the state. If any person or group of people unaffiliated with the state were to act in the same manner, they would be charged with multiple crimes, and be fined an exorbitant amount and imprisoned for many years upon conviction. But because the state has a monopoly on the initiation of force, its agents are able to behave in the aforementioned manner with impunity. Morality must be objective and universal, otherwise it is not morality, but consequentialism, personal opinion, or some other form of subjectivity. The moral rule is that theft is universally wrong, for agents of the state and private citizens alike.

The Editorial Board argues that brick-and-mortar retailers are disadvantaged by having to collect state sales taxes when customers come into their stores, and that the solution is to make online retailers do likewise. But two wrongs do not make a right. The correct moral solution is to remove the requirement that brick-and-mortar retailers must collect state sales taxes, not to extend immorality to victimize more people.

Next, let us consider the economic impacts of the new policy. The Editorial Board argues that state and local governments in North Carolina have been losing $200 million per year in taxes. Presumably, this is to mean that communities have been losing funds that could have been used to improve schools, roads, and other public services. But such reasoning is an example of the broken window fallacy, as it ignores opportunity costs. When people are forced to pay sales taxes, each product is more expensive than it would be in a free market. This means that people have less money to spend elsewhere, which means that some goods and services which would have been purchased will now go unpurchased. This causes companies to lose revenue, which results in lost wages and benefits for employees, and perhaps a loss of existing jobs or a failure to create new jobs. This cost is hidden because there is no way to count a non-purchase of a good or service, but to ignore this factor is to commit the broken window fallacy. Note that Amazon is also shooting itself in the foot with respect to other online retailers by colluding with the government to collect sales taxes, as customers will be motivated to look elsewhere for cheaper goods.

In light of these moral and economic arguments, it is clear that the Editorial Board has taken the wrong position on this issue and should consider a more liberty-oriented and logically sound approach.

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