INDIANAPOLIS — Five years ago, the Indiana legislature thought it was a good idea to lure Amazon to the state with a nifty tax deal.
Here’s how it worked: In return for the online-retail giant’s pledge to bring warehouses and jobs to Indiana, the state would give Amazon a pass on having to collect and remit millions of dollars in sales taxes from its customers.
Amazon kept its end of the bargain; earlier this year it announced plans to build its fourth distribution center in Indiana — a 900,000-square-foot facility in Plainfield — and fill it with hundreds of Hoosier workers.
That’s no small thing given that Indiana’s unemployment rate rose for the third straight month in September; at 8.9 percent, it’s inching closer to the national employment rate of 9.1 percent.
But that old Amazon deal seems less appealing these days, in part because Indiana looks a little like a woman who’s been duped by a bad boyfriend. In early October, Tennessee announced the deal it just struck with Amazon: Two new distribution centers, 2,000 full-time jobs AND an agreement to start collecting the Tennessee sales tax.
The issue is bigger than Amazon. In a CNHI series, “Unpaid Billions,” which will run in upcoming issues of the News and Tribune, Indiana State Sen. Luke Kenley helps explain the larger issue: Most online retailers are exempt from having to collect and remit sales taxes — something their bricks-and-mortar competitors are compelled to do.
For Kenley, that seems both unfair and worrisome. Online sales are on the rise and so are the losses in sales tax revenues. To illustrate why that’s important, consider this: When Indiana capped property taxes in 2008, it raised the sales tax rate so it would have enough money to fund the state’s kindergarten through grade 12 schools.
Kenley has been pushing for a nationwide fix: Federal legislation that would give states the authority they need to make online retailers tack on the sales tax and turn that money over to the states.
Seems like a good solution. It’s not a new tax after all, just one that online retailers — and online buyers — have been able to skirt. But Kenley finds himself in an odd position. He’s a fiscally conservative Republican and one of the architects of property tax reform, but he’s having a tough time finding Republicans in Congress to stand up on the issue.
They may not have Kenley’s gumption.
Grover Norquist, the politically powerful head of Americans for Tax Reform, has come out against the bill that Kenley backs. He said it violates the anti-tax pledge that all but six Republicans in Congress have signed. And he’s called it a “massive” money grab orchestrated by leaders in high-tax states — an insult that negates itself once you take a look at how tight-fisted Kenley is with Hoosiers’ taxes.
Still, expect to see Kenley push forward on the issue. He’s an optimist, after all, convinced that sometimes reason trumps politics.
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