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Opinion

Supreme Court rules for tax fairness

Thomas Clatterbuck

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FreeImages.com/Stephen Stacey

The free market won a major victory at the Supreme Court today. In a 5-4 ruling, the court gave South Dakota the right to impose a sales tax on online businesses that did not have a physical presence in the state. The decision focused on what constituted a “substantial nexus” of activity. Previously, it had been determined that mail order catalogs and online stores did not meet this requirement. Having a physical presence in the state was the real test for whether a sales tax could be imposed. However, citing changing economic realities, the court found a “pervasive online presence” did constitute a nexus and so could be taxed.

Obviously, this ruling is going to provide a huge financial boon for states and local governments. Both the decision and the dissent noted the many millions of dollars that governments lose in sales tax due to the old rules. In areas that rely heavily on sales tax, like South Dakota and Springfield, bringing more of that money back will help shore up their budgets.

Yet the real importance of this ruling is one of fairness. Justice Kennedy pointed out that some online retailers, like Wayfair, assist tax evasion by not collecting it themselves, and used their non-collection as an advertising point. Yet these same stores rely on the local services supported by sales taxes to actually engage in commerce. Local governments thus have to shift the tax burden to other businesses, further disadvantaging brick-and-mortar stores.

States are still not allowed to discriminate against interstate commerce. Constitutionally, businesses in other states cannot be penalized for being out-of-state. But that standard had been applied in such a way that, in the era of near-universal e-commerce, forced states to subsidize out of state businesses at the expense of their local retailers. Kennedy spoke of a lack of “storefronts, distribu­tion points, and employment centers that otherwise would be efficient or desirable” as a result. Instead, virtual stores that could provide far more shopping options are shielded from taxes that much smaller stores are forced to pay. He rightly noted that the “physical location” standard which led to this unequal situation was itself arbitrary and poorly justified even when it was written.

In his dissent, Justice Roberts noted that complying with sales tax laws from around the nations could prove excessively burdensome. He listed numerous examples of complex rules in individual states, as well as the differences between states. Although theoretically the software to manage these rules would be easy to create, it does not currently exist, and may or may not ever exist. Forcing these regulations onto online businesses could prove damaging to smaller retailers. The complexity of the tax code is a serious issue, and one worth addressing. But it is a different issue from deciding if a whole class of businesses should be exempt from them. If the rules are too complex for online businesses to manage, they are probably also too complex for brick-and-mortar businesses.

The complexity of the tax code unfortunately overshadows what would otherwise be a solid free-market ruling. Sales taxes are regressive. There are too many rates and rules around the nation.  But exempting some businesses from dealing with the regulatory burden is the wrong way to deal with it. Favoring some businesses over others is antithetical to the free market. Eliminating an artificial advantage online stores had over their local counterparts is a step towards a freer market, even if other problems still need to be fixed.

You can read the full decision here.

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Senior strategist, statehouse reporter and political correspondent for Springfield Daily. Graduate of District 117 and UIS. Thomas covers stories in both Morgan and Sangamon Counties, as well as statewide politics.

2019 Election

Opinion: Gregory wins by two

Thomas Clatterbuck

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Springfield Daily does not endorse candidates. We have always held that it is our job to make information available to the public, and for voters to make up their own minds. But the situation in Ward 2 is no longer an election. All of the votes were cast months ago. Now, it is a question over procedure, and deciding which votes should be counted.

It is an unenviable decision. One of best elements of voting is the final decision is clear-cut. All of the ballots are counted, and whoever has the most wins. No one wants to overrule the will of the voters and declare one candidate the winner. Yet that is the decision that is now before the city council.

There are two sets of ballots still in question, and they will determine the final outcome. The first are two ballots where the election judge’s initials is not on the line. Because ballots must be properly initialed to be valid, two votes for Shawn Gregory were thrown out.

The other set is more complicated. Voters at The Mary Bryant Home, a home for blind and visually impaired individuals, and other areas used assistants to fill out their ballots. These ballots needed to be supported by affidavits that affirm the individuals helping fill out the ballots are doing so solely to help individuals who are unable to vote without assistance. There are serious shortcomings in how the affidavits were filled out, resulting in 13 ballots being invalidated. After calculating the relative vote totals in each precinct, Simpson lost 4.3 votes and Gregory lost 2.6 votes.

Based on the recommendation of John Mehlick, the hearing officer for the recount, Simpson should be declared the winner by a margin of 0.361 of a vote. This final count of 459.7219 to 459.3609 does not include the two votes with the misplaced initials, or those with bad affidavits. Mehlick argued that we must demand excellence from our election officials, and that both errors are invalidating.

Apples to apples?

Treating both situations as equivalent would be a mistake. Based on the arguments presented both in writing and before the city council Tuesday night, it is clear there are significant difference between the two situations.

The ballots that were initialed by the judge have every element necessary for the ballot to be considered valid. Many ballots were invalidated because they lacked any initials. But for these two, the only element in question was the placement of the judge’s initials. No one is disputing that the initials are those of a legitimate election judge. Although it makes intuitive sense that the initials be on the provided line, and the County Clerk teaches its election judges to initial on the line, there is no statutory requirement that the initials be on that line. And for both ballots in question, the initials are only a few inches away from the line.

The ballots with affidavits, however, are missing many key elements that make a ballot valid. Signatures are not only on the wrong lines, there are required signatures that are totally absent. There is no question that these ballots would be invalid under any circumstances due to these deficiencies.

Failing to properly fill these documents out is made worse by the fact these ballots were filled out by assistants. People with disabilities should be allowed to vote, even if they need assistance. But because the right to vote is so precious, and the impact of a single vote is so great, these assistants must be held to an even higher standard than the average election official. How can we trust a person filled out the ballot correctly if they did not fill out the accompanying affidavit correctly?

It’s about the voters

I have great respect for all four candidates who ran in Ward 2, but that is not relevant to this discussion. In the end, this cannot be about who should be the alderman for Ward 2. It is regrettable that anyone besides the voters in Ward 2 will decide the outcome. And no one wants to invalidate any votes, especially votes from people with disabilities. But there are still rules, and the rules need to be enforced.

People make mistakes in filling out their ballots, and that has consequences. Some people vote for too many candidates. Some people fail to get their ballots initialed by an election judge at all. And tragically, 13 people trusted the wrong person to assist them in filling out their ballots and affidavits. None of those votes can or should be counted.

When all of the evidence is looked at, and all the arguments are heard, Shawn Gregory is entitled to those two additional votes, and to become Ward 2 alderman.

You can watch the discussion from Tuesday in the video at the top of this article, and read all of the documents from the recount here.

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Local

Golf revenue continues to fall in Jacksonville

Thomas Clatterbuck

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2018 was another bad year for the Jacksonville’s Links golf courses. Like most municipal golf courses, the Links loses money every year. It was clear as early as August that 2018 was going to be a particularly bad year for the courses. The recently released 2018 audit shows just how dire the situation is becoming for the courses.

Total operating losses totaled $198,000. This is nearly triple the losses suffered in 2012. Expenses were up eight percent since ’12. The real driver is that revenue is down 24 percent, from $377,000 in ’12 to just $288,000 last year. This is why the cash infusion from the city came much earlier in the year; the Links was struggling to cover payroll expenses due to low revenue. And unlike in years past when the bailout is needed in the winter months, last year the Links needed help during the fall.

Fixing the root problems at the course will not be easy. Golf participation is declining nationally, and Jacksonville has not been spared from these trends. But the first step is admitting there is a problem. A golf advisory committee was created in February 2018 and they did provide some good recommendations for improvements. But their last meeting was more than a year ago. In full council meetings, council members are reluctant to even acknowledge that revenue is down substantially from years past.

Six-figure losses are the new normal for the Links. It is up to the council to decide if they want to continue to write these losses off, or come up with a more sustainable plan for the courses.

You can read the full audit here.

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Opinion

How to collect a fuel tax for electric vehicles

Thomas Clatterbuck

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Tax fairness and capital improvements are the hot topics in Springfield at the close of the legislative session. However, new technologies have added complications to one of the most common taxes, the motor fuel tax. This tax, levied on the sale of gas and other liquid fuels, helps pay for road repairs and improvements. In an era when every vehicle bought gas or diesel at the pump, it was easy to collect and reasonably fair for everyone who used the roads.

Electric vehicles are an exciting new technology, but they disrupt this system. Electric vehicles refuel at charging stations, and thus do not buy gas. But they still use the roads, even though they are not paying to maintain them the way other drivers do. Many people rightfully consider this unfair.

One proposal to correct this is a higher registration fee for electric vehicles. State Senator Marty Sandoval has put forward a $1,000 a year regulation fee to offset the gas tax that is no longer being collected. While many balk at the high price tag, the real issue with the $1,000 price tag is the arbitrariness of the figure. Unlike the motor fuel tax which is based on use, $1,000 is just a nice round number.

Levying a electric fuel tax

There is, however, a way to make electrical vehicles pay the normal fuel tax. The local utility in Springfield, CWLP, has a program which allows customers to pay a lower rate for charging their electric vehicles at off-peak times. The high draw these chargers need can be a problem for neighborhood transformers, and CWLP wanted to encourage customers to spread out the load. Although the logistics of such a program sound complicated, it is easily operated off of new meters installed on the Level 2 chargers for electric vehicles. Currently, the CWLP program applies to home stations, but there is no reason it couldn’t also be implemented on public and commercial charging stations as well.

If usage can be tracked so the rate is lower, usage can also be tracked to allow a tax to be levied. Since there is already a fuel tax on gas, the tax on electricity can be set to match the average number of miles equivalent vehicles would get from gas. Light vehicles average 22 miles per gallon, and currently pay a 19 cents per gallon state fuel tax. This gives a starting point for calculating what the tax should end up being on a kilowatt hour of charging. And since the power used by a Level 2 charger can be tracked separately from a customer’s total usage, the tax could be applied only to electricity that fuels an electric vehicle. This type of tracking is already being done by CWLP.

The number of electric vehicles in Illinois is still small, and the fuel taxes they are no longer paying is only a drop in the bucket for Illinois’ infrastructure needs. But they are currently enjoying a free ride in a time when everyone else is being asked to pay more. By levying a tax on the power electric vehicles use to operate, they can pay the same fuel tax as everyone else. This will only become more important as the number of electric vehicles rises. The technology exists to make collecting this tax is already in use, so it is possible to make sure all the users are paying their fair share.

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