Comptroller Peter Franchot recently stepped into the fray on the issue of collecting sales taxes on online purchases. A study (PDF) released by his office reported that if Maryland passed legislation requiring online retailers to collect such taxes, the revenue stream might prove to be significantly smaller than expected. In an editorial, The Baltimore Sun literally replied “poppycock,” apparently forgetting some of the state’s recent experiences with smaller-than-anticipated revenue streams (e.g., cigarette tax increases, slot machine revenues).

But setting aside the worthy debate regarding whether and how such sales taxes should be collected, I want to briefly consider some of the political rhetoric being thrown around. Let’s take a look at this statement made by William Fox, a researcher and joint author of a widely-cited report on Internet sales tax policy:

“To put a sharper focus on it, Fox told lawmakers Walmart hires five workers for every million dollars in sales. Amazon hires one. ‘As we move from people who buy on Main Street, and they move to buy from Amazon because of the tax subsidy that is implicit in the way we pay, we cost the economy four jobs,’ Fox said.”

Where to begin?

First, we shouldn’t forget that Amazon generates additional economic activity for other businesses like shippers, delivery services, and customer service contractors. Second, it’s also worth asking about the nature of the jobs created at Wal-Mart: are five part-time, low-wage, low- or no-benefits positions equivalent to the one job created at Amazon? But in reality, Fox is probably right: Amazon likely eliminated more jobs in the economy than it created. This brings us to the real target of such rhetoric: competitiveness.

No one can argue that not being required to collect sales taxes drives some customers to Amazon. However, the effect will vary considerably depending on how high the sales tax ordinarily is. Furthermore, there are plenty of other reasons people shop at Amazon: the convenience of shopping from home, the vast selection, the rewards programs and return policies, and most of all, the often lower-than-retail prices. Without the overhead of retail stores and significantly fewer required employees, Amazon is in many ways simply more competitive. A fraction of their competitiveness may be due to the sales tax issue, but certainly not all, or even most. In contrast, Fox seems to assume that political inaction surrounding the sales tax is the only pertinent reason people shop at Amazon.

The ultimate extension of Fox’s logic is that we should simply ban online shopping, because it costs too many brick-and-mortar retail jobs.* It’s too competitive. While we’re at it, maybe we can eliminate self-checkout machines and ATMs as well—they’re costing us untold numbers of jobs. If you think this is the right approach, I have just two words for you: consumer surplus.

* In fact, this is hardly a stretch if you watch the video clip on the page reporting his statement. He continues: “The growth in e-commerce just from 2002 to 2008… cost the U.S. economy 260,000 jobs in the retail industry.”