I did not vote for Donald Trump. I am 99.99% sure I will not vote for him in 2020. Whether it's trade or immigration, I disagree with both the substance and style of his approach to public policy. But when it comes to Amazon and its impact on local sales taxes and the communities that depend on that revenue, Trump has a point.
On March 29th Trump tweeted the following to his nearly 50 million followers:
"I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!"
The tweet, in keeping with Trump fashion, isn't wholly accurate. Amazon is collecting sales tax in the 45 states that have a statewide sales tax. However, the company is not collecting sales tax at the local level.
There are only so many ways local governments can collect revenue. Most cities, towns, and counties do not have an income tax, and since the 1978 passage of Prop 13 in California, some states and localities have placed caps on property taxes. Though usually considered a regressive tax (meaning a disproportionate burden of the tax falls on the poorest residents), retail sales taxes remain an important source of revenue for local governments.
(I know this in part because I work in local government in a community dependent on retail sales tax.)
While no one likes taxes, the services provided by your local government are essential to your daily life. In other words, while (depending on who you ask) federal programs like the National Endowment for the Arts are nice, the sewers, crosswalks, and snowplows provided by your local government are essential, and often funded at least in part by retail sales taxes.
There is a decent chance that Donald Trump truly does not care about the death of local retailers. His beef with Amazon may be more about the press coverage he receives from the Jeff Bezos-owned Washington Post than it is about a mom-and-pop shop's ability to compete with Amazon's drones.
But whether genuine or not, Trump's tweet speaks to a larger truth about Amazon. For years Walmart has been savaged by the media and politicians for the destruction that the Arkansas-based retailer has wrought on local businesses and communities. That story goes something like this:
- Walmart opens a store on the edge of town, selling cheaply made imported goods.
- Local retailers almost immediately begin closing up shop.
- Once-proud owners and managers of those local retailers are forced into menial, low-paying jobs at the very company that destroyed their business.
- Without good jobs and a strong local business sector, the community's socioeconomic struggles become a vicious, self-reinforcing cycle.
- These desperate people become willing to look to almost anyone for help in restoring their community to a happier time.
- Cue Donald Trump's call to Make America Great Again.
As devastating as the arrival of Walmart has been to many communities, there may be a time when we look upon Walmart with nostalgia (as hard as that is to imagine). Unlike Amazon, Walmart was still a source of some local jobs, and Walmart still paid local retail sales tax.
I recently wrote that communities need to be less dependent on low-wage retail jobs. I still believe that. However, I also believe that Amazon (or any other company) needs to play by the same rules as the local retailers who have helped build communities. Amazon's competitive advantage should never depend, even slightly, on an ability to undercut local businesses by not charging local sales taxes.
In other words, whether he genuinely believes what he wrote or not, Donald Trump has a point about Amazon and local sales taxes.