AP's Error-Riddled Report on Taxing Internet Sales Taxes Patience (See Updates)

Update, June 20, 12:30 p.m.: Revised to reflect another AP math error not caught the first time around.

Update 2, June 20, 3:20 p.m.: The AP has issued a correction indicating that lost sales taxes are $23 billion and teachers' salaries which could be paid are 460,000. The contradiction explained below about California's claim that it is failing to collect only $200 million (less than 1% of the total, in a state with 12% of the nation's population) is unexplained. The post's text has been revised to reflect AP's correction. AP has NOT corrected its original story here or here.

What is it with Associated Press reporters and basic math?

Earlier this evening, I noted how the wire service's Scott Bauer failed to correctly state the nature of the pension costs many of Wisconsin's unionized workers will have to pay; he said they would have to pay "5.8% of their pension costs," when it's really "5.8% of the gross pay into the state's retirement fund.

Yesterday, the AP's Chris Tomlinson, in reporting on states' desperate attempt to force online vendors to collect sales tax on their behalf, contributed a couple more math and conceptual errors of his own:

State governments across the country are laying off teachers, closing public libraries and parks, and reducing health care services, but there is one place they could get $23 billion if they could only agree how to do it: Internet retailers such as Amazon.com.

 

That's enough to pay for the salaries of more than 46,000 teachers, according to the U.S. Bureau of Labor Statistics. In California, the amount of uncollected taxes from Amazon sales alone is roughly the same amount cut from child welfare services in the current state budget.

 

But collecting those taxes from major online retailers is difficult.

 

... California estimates it loses at least $200 million a year in uncollected tax from online sales, $83 million from Amazon.com alone. A bill that has passed the state Legislature would force Seattle-based Amazon and others to collect that tax from California residents.

Busts, busts, everywhere:

  • AP has acknowledged in Update 2 that 460,000 teachers could have their salaries paid with the $23 billion which allegedly can be raised through taxation of Internet sales (thanks to a commenter for catching this. Zheesh).
  • The Bureau of Labor Statistics actually says that "Median annual wages of kindergarten, elementary, middle, and secondary school teachers ranged from $47,100 to $51,180 in May 2008." That's the median, it's not the average, and it's three years old. This source indicates that the current average is $50,304. Chris Tomlinson's salary estimate of $50,000 is essentially correct, but only through luck.
  • Far more important, the $23 billion would pay for 460,000 teachers' wages and not a dime of their benefits. Factor benefits at a conservative 50% of earnings into the equation (in Wisconsin, it was found to be much higher than that), and the real potential is about 307,000 fully-funded teachers.
  • The 307,000 teachers in the previous point would represent less than 9% of the roughly 3.5 million kindergarten, elementary, middle, and secondary school teachers in the U.S.
  • The $23 billion in potential online revenues doesn't square with another statistic Tomlinson cited. He noted that California says its estimated annual revenue pickup would be about 200 million, or less than 1% of $23 billion. But the Golden State has 12% of the nation's people. That does not project. AP's correction (see Update 2 above) indicates that $23 billion is the correct annual figure. It's not my job to do all the research to fix all of his math problems and contradictions. It's his job to get it right. He clearly didn't.

Tomlinson also failed to address the excruciating burden Internet sales collection and remission would impose on start-up and early-stage online businesses who, unlike Amazon and others, don't have the infrastructure to be able to handle determining which of the "over 8,000 taxing jurisdictions in the United States" gets the money collected. There is talk of having "a national standard using the Streamlined Sales and Use Tax Agreement," but as long as rates between jurisdictions differ, it's difficult to see how such an agreement would be of much help. It's not unreasonable to believe that you can kiss a few tenths of a percent of annual GDP growth good-bye if a national Internet sales tax regime ever becomes a reality.

Cross-posted at BizzyBlog.com.

Tom Blumer
Tom Blumer
Tom Blumer is a contributing editor for NewsBusters.