The $360 million Deception
It's been said - often - that the state government of Tennessee loses $360 million a year in sales tax revenue because of people shopping on the Internet. It's been said so often that some people actually believe it. People like the editorial boards of most or all of the state's major newspapers, who repeat the figure (or something like it) like a mantra when ever they espouse the need for "tax reform" (a/k/a an income tax). People like Gov. Don Sundquist and his finance commissioner Warren Neel, who trumpet the "lost" revenue when they argue for an income tax. People like UT economics professor Bill Fox, an income tax cheerleader and Sundquist administration lackey who authored a "study" alleging such lost revenue - but whose track record on forecasting the state's economy and its revenue growth is laughably bad.

But $360 million in lost sales tax revenue due to online shopping is just not true. Do the math. Every 6 cents of sales tax revenue means someone somewhere spent a dollar on a taxed item. So $360 million in sales tax revenue equates to $6 billion in sales. There are 5.5 million people in Tennessee - so $6 billion in sales is $1,090.90 per capita. Since, we assume, children under the age of 18 aren't shopping online much - it, after all, takes a credit card to do so - we'll use the accepted measure of a "typical family of four." The typical family of four in Tennessee would have to be spending $4,363.60 per year on the Internet in order for the claim of $360 million in lost revenue to be true.

Do you spend that much online? If you do, I wouldn't mind if you spent some of it at my online store - where, incidentally, your purchases are exempt from the Tennessee's sales tax. (Profits from the store help support the ongoing operation of this site.)

But of course I know you don't spend $1,090 a year buying stuff over the Internet, and your family doesn't spend $4,363 over the 'Net - nor do Tennesseans as a whole spend $6 billion per year online, and the state doesn't lose $360 million in sales tax revenue because of online shopping. It's a bogus number - a scare tactic that is just another part of the Big Lie strategy that those who favor the income tax have used in their quest to pass an income tax. The bad thing is Jim Henry and Van Hilleary appear to have bought it.