Death and taxes are inevitable, but that doesn’t mean they can’t change along the way. People are living longer, which is a good thing. And taxes are adaptable, which also is a good thing. Actually, it’s absolutely necessary.
The commerce of the world is different — immensely different — than it was decades ago, when many tax laws were written. Online shopping is the new department store. Online streaming is the new neighborhood movie theater. Online music is the new record store. Online advertising is the new magazine. And YouTube appliance repair videos are the new handyman who always is on call.
All that is good, I suppose. Businesses provide accessible goods and services; consumers benefit from fast, 24-hour-a-day access to what they want; no need to build a warehouse or factory or server farm in every town.
Digital technology can bring a better life — at least a more consumer-accessible life — to people far away from company headquarters.
It’s good for businesses that expand and reach around the world. It’s good for their employees and their stockholders who share in the profits.
But not so good for the countries and states that can’t tax the profits of digital providers doing business in their communities.
This isn’t about the sales tax that Amazon, Walmart and other online merchants collect from their customers. The issue is corporate income taxes on company profits. Digital businesses should pay a fair share the same as companies that have a local office.
The world of commerce changed, and taxes need to change to keep pace.
That is what the Alaska Legislature did this past session.
Lawmakers by a more than 2-to-1 margin approved a measure to modernize the state’s corporate income tax laws to address the realities of the digital economy. The measure changes the tax-calculation formula for highly digitized businesses that make money selling to Alaskans.
The legislation doesn’t charge digital businesses a higher rate than brick-and-mortar companies; it merely changes the law so that they pay corporate taxes the same as everyone else. It says that if a company sells goods or services to Alaskans, it should pay taxes on the calculated Alaska portion of its U.S. sales.
Senate Bill 113 is awaiting action by Gov. Mike Dunleavy. Though the governor dislikes taxes more than most anything else in his political life, this is not a new tax, it’s a fairness tax.
Hopefully, Dunleavy will look at the 42-18 vote in the state House and Senate and follow the lead of legislators, rather than following President Donald Trump. The president has been extra vocal this month, attacking Europe and Canada in particular for wanting to extend their tax collections to U.S. digital businesses that sell to customers in their countries.
Trump has called Canada’s proposed digital services tax a “blatant attack” on U.S. businesses. Of course, he threatened Canada with tariffs on its exports to the U.S.
But it’s not an attack. It’s countries amending their tax laws to accurately reflect the digital world, to ensure that businesses profiting from sales in a country should be responsible for sharing the cost of that country’s public services — services that are essential to the very customers who send money to the company.
Trump is wrong, the Alaska Legislature is right. Let’s hope Dunleavy makes the right choice for Alaskans and does not veto the bill.
Larry Persily is a longtime Alaska journalist, with breaks for federal, state and municipal public policy work in Alaska and Washington, D.C. He lives in Anchorage and is publisher of the Wrangell Sentinel weekly newspaper.
