Tag Archive

(breakingviews.com) — A battle is brewing over U.S. state sales taxes on online purchases. Internet retailers Amazon.com and Overstock.com are scaling back their operations in states that demand they collect these taxes. While this won’t dent their revenues much, it foreshadows a larger clash over the taxation of internet commerce. Cash-strapped states are firing the first shots.Most online sales escape being taxed because internet firms only collect them in states where they have a physical presence. (Buyers are legally bound to pay them, but many do not.) However, Amazon (AMZN, Fortune 500) and Overstock (OSTK) allow independent companies to sell merchandise through their systems for a fee. This means the online giants have to collect taxes in any state where their independent partners have operations.New York passed a law last year implementing this rule. Amazon and Overstock both challenged it in court and lost. Now Hawaii, North Carolina and Rhode Island have passed similar measures. In response, both companies have cancelled their so-called associate programs in those states.That’s not too painful; only about 10% of Amazon’s sales come from associate sales, according to Forrester Research. And these indirect sales generate lower margins than the company’s main business.But it could become a bigger problem over time. The amount of business done online has grown rapidly — it is expected to hit nearly 160 billion this year, says Forrester. That has led bricks and mortar retailers — which feel at a disadvantage because they must collect sales taxes — to call for online retailers to be required to do so also. States desperate for more revenues are beginning to agree.Indeed, there’s no reason why online retailers shouldn’t be forced to collect sales taxes like other businesses. They once argued that doing so would inhibit the growth of online businesses. But that’s clearly an out-of-date position. Tax codes should be updated to reflect the growing importance of internet commerce.

Source:CNN

NEW YORK: Every state has committed at least half its highway stimulus funds so none will lose any of its allocation, the Obama administration said Thursday.States had until June 29 to obligate the funds or risk losing half the leftover money. Only a month ago, some 14 states had yet to satisfy that goal. Hawaii was the last to meet the mark, hitting it on June 19. Maine has secured 100% of its funds and 15 states have more than 80% of their money committed.”By delivering on these projects ahead of schedule and under-budget, we have been able to do even more than we expected,” said Vice President Joe Biden.The Federal Highway Administration has approved a total of 15.8 billion for more than 4,800 projects, as of June 25. States, however, have spent less than 190 million, as of June 19, according to federal data.To commit the funds, states had to gain approval for their projects from the Federal Highway Administration, an agency of the Department of Transportation. The money doesn’t actually have to be spent, which can take months as projects go through the contracting and construction process. Some states — Florida, Georgia, Hawaii, Arizona, Virginia and New Mexico — have yet to claim any funds. Illinois has spent the most, claiming more than 47.6 million of the 664 million allocated so far.0:00
/3:00States’ budget bummersRepublicans in Congress said they were concerned by the slow pace of spending.”This is pitiful that we can’t get people working, we can’t get the stimulus money out,” said Rep. John Mica, (R-Fla.), the top Republican on the House Committee on Transportation and Infrastructure. “People want jobs and they want them now.”The administration did not report how many jobs have been created or saved thanks to the infrastructure funding. The issue has become a source of controversy, with Republicans on Capitol Hill questioning the the recovery act’s effectiveness in stemming the unemployment tidal wave.States are sharing 26.6 billion for highway infrastructure projects, though only 18.6 billion is subject to the June deadline. The road allocations are among the earliest of the 280 billion in funds going to states and municipalities as part of the 787 billion recovery act.Including transit and airport construction, the federal Department of Transportation is making 48.1 billion available, of which 19 billion has already been committed to more than 5,300 projects, according to the administration. Currently, more than 1,900 projects are underway.A total of 369 million has been spent, Mica said. Only 11 million has flowed to the 10 states with the highest unemployment rates, he said.

Source:CNN

NEW YORK (Reuters) – — Eleven states on Friday called for a deeper probe into the 165 million of bonuses that American International Group Inc. awarded employees in a unit whose losses led to a federal bailout of the insurer.In a letter to Neil Barofsky, the special inspector general of the Troubled Asset Relief Program, the attorneys general expressed concern about how much taxpayer money is going toward compensation.They pointed to AIG having said in May that it paid 454 million of bonuses companywide, nearly four times the amount Congress had been told two months earlier.”AIG claims the discrepancy is explained by Congress’s failure to pose the March compensation question with sufficient precision,” New Jersey Attorney General Anne Milgram wrote in the letter. “Such half-truths, which investors may have relied upon, obviously raise serious questions about the completeness of AIG’s characterization of its financial condition.”Milgram asked for a meeting with Barofsky to discuss how regulators can better work to protect investors’ interests. Arizona, Delaware, Illinois, Kentucky, Maine, Michigan, Mississippi, New Mexico, Ohio and Texas joined the request.The bonuses were awarded in AIG’s (AIG, Fortune 500) financial products unit, where losses tied to credit default swaps led to a 99.3 billion loss for AIG in 2008. A series of bailouts totaling 180 billion left the government owning an 80% stake in what was once the world’s largest insurer by market value.Barofsky was not immediately available for comment.

Source:CNN

NEW YORK: States are poised to pass as much as 24 billion in tax and fee hikes in coming weeks, as they struggle to balance their budgets amid the worst economic downturn since the Great Depression, a report released Thursday found.The spike blows away the 726 million in recommended increases for fiscal 2009.At the same time, state budgets are set to shrink for a record second year in a row. The recession has caused tax collections to plummet and the need for social services to soar.State officials are scrambling to close last-minute budget gaps that opened after April tax revenues came in below already-lowered estimates. States may be forced to tap rainy day funds or impose even more stringent spending cuts to balance their budgets before their fiscal years end on June 30.Governors’ proposed budgets for fiscal year 2010 show a 2.5% decrease in general fund spending, which comes after an estimated 2.2% decline in the current fiscal year,This is the largest pullback in the survey’s 30-year history and the first time state spending would decline for two years in a row, according to the National Governors Association and the National Association of State Budget Officers. General fund spending, which is not earmarked for specific uses, covers mainly education, Medicaid, corrections, public assistance and transportation.Tax hikes aboundSome 29 states are recommending tax and fee increases for the coming fiscal year. California, which is struggling to close a 21.3 billion budget gap, accounts for 11.3 billion of the hike. Illinois makes up another 4.4 billion, while New York is proposing 4 billion in additional levies.Hikes in personal income taxes account for 8.8 billion, while sales taxes are set to rise 6.5 billion. Higher cigarette taxes would bring in 1.5 billion, while corporate taxes would rise 539 million.States also are dipping into their rainy day funds to pay the bills. The funds’ balances totaled 9.1% of expenditures in fiscal 2008, but have declined to 5.5% in the current year. However, excluding Texas and Alaska, the funds’ balances dip to 3.6% of expenditures. A balance of 5% of expenditures is considered a relatively adequate cushion.Spending slowdownThough demand for state services is up, officials are slashing spending on a wide range of government programs.Some 28 states have proposed cutting spending on higher education and personnel, while 27 want to reduce funding for K-12 education. Another 25 states have proposed cuts to Medicaid and corrections, while 23 are reducing funds for public assistance.State officials predict tight times through fiscal 2011 and possibly 2012 since state fiscal recovery historically lags a national economic rebound.They are currently facing an estimated 230 billion in budget gaps between fiscal 2009 and fiscal 2011.