July 20, 2004

City Paper Misses The Real Story in Ecommerce Tax Study

A few days ago I wrote a post, titled The Myth That Won't Die ... Might, which reported that University of Tennessee economist Dr. Bill Fox had lowered by more than half his long-term forecast for the amount of revenue Tennessee and other states stand to "lose" from ecommerce due to sales taxes not being collected on a lot of online purchases.

I suggested that the Tennessee news media, which in the past has hyped the dire forecasts in Fox's studies, ought to take special care to report the new, lowered, forecast of "lost" revenue. I also suggested they should also balance their reporting by pointing out another good research study that was released a year ago that found several flaws in Fox's methodology and conclusions - he uses inaccurate consulting-firm forecasts of ecommerce instead of actual government data, for example, and tends to confuse different kinds of online sales that are not all taxed the same. As I wrote last Friday:

That Fox has admitted he was wrong is (or at least ought to be) major news in Tennessee, where Dr. Fox is a tireless cheerleader for the creation of a state income tax.

Of course not. They simply reported Fox's latest forecast without a trace of awareness or irony:

Tennessee lost between $436.3 million and $454.7 million in Internet sales taxes in 2003, an amount that University of Tennessee (UT) researchers estimate could grow up to close to $1 billion by 2008. In a report released Thursday, Dr. William Fox, director for the UT Center for Business and Economic Research, and research assistant professor Dr. Donald Bruce found that by 2008 Tennessee could lose between $612.5 million and $957.9 million in state and local revenue losses from e-commerce

The latest Fox report says sales tax losses due to ecommerce are not growing very fast – and, in fact, are likely to be less than previously forecast:

The experience of the last several years indicates that e-commerce has been a less robust channel for transacting goods and services than was anticipated when we prepared the earlier estimates. The findings provided here are based on lower estimates of e-commerce, and the result is a smaller revenue loss than we previously anticipated.

Here's what the City Paper didn't tell you: Three years ago, Fox and Bruce were forecasting $1.242 billion in lost revenue - and not in 2008, but in 2006.

You didn't see that information in the City Paper's report. You also didn't see a reference to the other study, the one that exposes the flaws in Fox's methodology and conclusions. Why don't you get the whole picture from the mainstream media? Why do you have to rely on HobbsOnline to get it? I dunno. Feel free to ask them.

UPDATE: Nathan Moore writes:

So much for intricate understanding of a two-level issue. It'd be nice to at least scratch the surface. The movement and direction of a story is as or more important than the raw facts, especially when those facts are not give the appropriate context.