I Learned Something New & I Don't Like It

I learned something new today, and I'm not at all sure I like it. Did you know that not all of the sales tax we pay goes to the state or local government? Businesses are allowed to keep a portion of the tax to reimburse them for the "expense" of collecting the tax and sending it to the state.

Now this may have made some sense at one time. Here in Texas, the sales tax was imposed many years ago, and it probably did entail some expense to track and transfer the tax. Many businesses probably had to hire a bookkeeper to do it. But today we exist in the age of computer cash registers and direct transfers. The tracking and transfer of the taxes is almost an automatic thing and no longer represents a big expense to a business.

As an example, Wal-Mart gets to keep $7.5 million of the sales tax it collects in Texas each year. Do you think it costs them even a tiny fraction of that to collect, track and transfer that tax money? Of course not! This is simply pure profit to the company, on top of the profit they earn from selling their merchandise. In the 26 states that have this sort of compensation program, the company gets to keep about $60 million.

As the above chart shows, Texas loses about $90 million dollars a year in sales tax money through this unnecessary program. This is more than enough money to completely fund the state's pre-kindergarten program.

Now I realize that a small business may need this program. But for the retailing giants like Wal-Mart, the program is just a way to collect windfall profits far above the actual expense of collecting the tax.

Our legislators need to re-think this program. At the very least, a cap should be put on the amount a retailer can keep. I have no problem with a retailer being reimbursed for actual expenses, but I have a big problem with my tax money creating millions of dollars of profit for the retail giants. It also gives these giants an unfair advantage over small retailers who's profit comes only from the merchandise they sell.

Something should be done about this, but I doubt it will be. Our Republican-controlled state government sold out to the large corporations long ago.