August 9, 2009
Arguments are made on both sides regarding who pays levied taxes, the buyer or the seller. In my opinion, the argument that seems most logical and true is that both pay the taxes regardless of who the government says it is taxing. The amount paid by the buyer or the seller will vary, however, the consumer as well as the seller eventually will both carry the tax burden.
The article by Steven Walkers, “State to start charging sales tax on online digital purchases Oct. 1,” specifically addresses how Wisconsin will collect taxes on Internet downloads. The article claims that this tax will cost consumers $6.7 a year. Though the article does not specifically address the cost to the sellers, it does mention that this tax should somewhat level the playing field. This will happen because the savings previously experienced by buyers without the tax, will no longer exist. These consumers may choose more often to do business locally instead.
The New York Times article, “Marijuana Supporters Welcome a Tax Increase” by Jesse McKinley, has a different twist on the subject. Instead of concerns about who is paying the increased 15% on Marijuana, it turns out that some Californians are just happy to learn of the overwhelming vote in favor of the increased tax. This means there is a greater approval of Marijuana not only for medicinal purposes, but, even perhaps eventually as a legalized entertainment drug.
Concerning the effect tax has on supply and demand, according to our text book reading “a tax on the market shrinks the size of the market.” For the new Wisconsin tax on digital purchase, the discussion did not address this possibility. It does seem possible that the increased cost might affect demand. Most digital purchases are not basic necessity; they are what is defined as elastic. Movies and photos are extras an individual purchase, not a necessity. The new tax could result in people purchasing...