Whackamole Redux
The Internet sales tax story is back, and full of the usual spin, lies, errors and distortions. Argghh!

Tennessee is poised to join an elite group of states planning to simplify their tax codes and become part of a governing body that would create a national standard for collecting taxes on Internet and mail-order sales.

Elite? Well over half the states are involved. The "elite" is usually just a few of something, not most.

Legislation moved swiftly and unexpectedly through various state House and Senate committees yesterday. It is part of a national effort to persuade Congress to allow the states to impose such a tax. The full House and Senate are scheduled to take up the measure today.

They'll have to persuade the Supreme Court too, because the Supreme Court has ruled that states may not impose online sales taxes (or any other tax) across state lines unless the seller has a physical presence or "nexus" in the state. The federal constitution's "Commerce Clause" forbids it. The court said so most recently in the 1992 Quill decision.

State officials estimate Tennessee will lose $300 million this year in uncollected sales tax revenue because of Internet and catalog sales. That figure could balloon to $1 billion by 2007, said Sen. Bill Clabough, R-Maryville, the bill's sponsor. ''This is the most important bill I wanted to carry and pass,'' he said, noting that Tennessee depends heavily on the sales tax to fund government. ''I don't know if we can afford not to pass this bill.''

Clabough is either an uninformed idiot or just lying to you. The figures he cites come from a long-ago discredited study by economists at the University of Tennessee, one of whom - Bill Fox - spends a lot of his time at the state legislature lobbying for higher taxes and an income tax. As I reported here last week, and two months ago, a new study by the Direct Marketing Association refutes the UT study point by point. Short version: The UT study confused different types of online transactions and relied on fuzzy numbers and wildly-exaggerated estimates to arrive at its inflated figure.

In the interest of fairness and just plain ol' accuracy, The Tennessean owes its readers the inclusion of the DMA's study in its reportage on the Internet sales tax issue. As the DMA study conflicts with the paper's agenda of pushing for higher taxes, I doubt you'll get it.

If it becomes law, changes to the state's tax code would not be effective until two quarters after the national effort takes effect. That would be when states representing 20% of the country's population have signed on.

If it becomes law it will be immediately challenged as unconstitutional.

The legislation does not for the most part change how much taxpayers owe in sales taxes, [Revenue Commissioner Loren] Chumley said.

Excuse me, but that's gotta be a lie. After all, the legislation is being pushed to help the state recoup all those hundreds of millions in allegedly lost sales tax revenue, right? You can't raise taxes overall by $300 million to $1 billion (to use Clabough's discredited figures) and "not for the most part change how much taxpayers owe in sales taxes."

The sad part is, some editor at The Tennessean who knows nothing about the DMA study and is unaware of the constitutional issues at stake probably read the story and told the reporter she did a good job on it. Meanwhile, the people of Tennessee are once again being subjected to agenda-driven mis-reporting on an issue involving taxation, and the governor's administration is apparently again setting tax policy based on bad economic forecasts from the University of Tennessee.

It's like Gov. Don Sundquist never left.

UPDATE: The bill passed the House the bill passed 71-15-10 with 3 members not voting. That means a lot of supposedly anti-tax Republicans and moderate Democrats just voted to raise your taxes.

You'd think I would have found that out via news update on The Tennessean's web site, but you would be wrong. I learned it from an email from a legislative staffer who reads my blog. The Tennessean is posting more "news updates" on its website these days, but, weirdly, not posting updates to stories from the print edition that are carried on the site.