This Week in Your Wallet: A Tax on Online Purchases?
If you’re a fan of online shopping, you’re not going to like what I’m about to say: late Monday afternoon, the Senate passed a bill that would require online retailers to collect sales taxes. The bill — called the Marketplace Fairness Act — would not institute new taxes, but it would require shoppers to pay the same taxes on a purchase from, say, Walmart.com, as they would on a purchase from Walmart-down-the-street.
Now, before you start panicking, it’s worth noting a few things. For one, in order for this bill to become law, it has to pass in the House, too. Given the Republican majority, some experts are saying that this won’t be easy — or at the very least, the bill as it exists now will have to undergo major changes in order to pass in the House. For another, under current law, states already require online retailers to collect taxes if they have a brick-and-mortar store in the state. This means, as TIME explains, that sites like eBay and Amazon are already collecting sales taxes in states where they have distribution centers — which for Amazon alone, already covers 16 different states. If you live in one of those distribution states (which include CA, PA, VA and WA) or in a state that has no sales tax — here’s looking at you, Delaware, Montana, New Hampshire and Oregon — online shopping as you know it is unlikely to change.
My question to all of you is this: if you know you’re going to have to pay a sales tax either way, does online shopping retain its appeal for you? CNN cited a survey in which 30 percent of online shoppers said they’d return to brick-and-mortar stores if the internet sales tax became a reality.
At any rate, stay tuned for updates — it will be interesting to see how this story develops over the next few months.
Finally, before I get into the rest of our headlines, I want to remind you that I’ll be teaching The Debt Diet tonight as part of my Money School. The Debt Diet is the program that was featured on the Oprah Winfrey Show, and at that time, it helped millions of people get out of debt on just $10 a day. It can do the same for you, and there are a few spots left in tonight’s class if you haven’t yet signed up!
And now, here are the other headlines for the week:
Lies, Damned Lies and Statistics
If you’re a fan of online shopping, you’re not going to like what I’m about to say: late Monday afternoon, the Senate passed a bill that would require online retailers to collect sales taxes. The bill — called the Marketplace Fairness Act — would not institute new taxes, but it would require shoppers to pay the same taxes on a purchase from, say, Walmart.com, as they would on a purchase from Walmart-down-the-street.
Now, before you start panicking, it’s worth noting a few things. For one, in order for this bill to become law, it has to pass in the House, too. Given the Republican majority, some experts are saying that this won’t be easy — or at the very least, the bill as it exists now will have to undergo major changes in order to pass in the House. For another, under current law, states already require online retailers to collect taxes if they have a brick-and-mortar store in the state. This means, as TIME explains, that sites like eBay and Amazon are already collecting sales taxes in states where they have distribution centers — which for Amazon alone, already covers 16 different states. If you live in one of those distribution states (which include CA, PA, VA and WA) or in a state that has no sales tax — here’s looking at you, Delaware, Montana, New Hampshire and Oregon — online shopping as you know it is unlikely to change.
My question to all of you is this: if you know you’re going to have to pay a sales tax either way, does online shopping retain its appeal for you? CNN cited a survey in which 30 percent of online shoppers said they’d return to brick-and-mortar stores if the internet sales tax became a reality.
At any rate, stay tuned for updates — it will be interesting to see how this story develops over the next few months.
Finally, before I get into the rest of our headlines, I want to remind you that I’ll be teaching The Debt Diet tonight as part of my Money School. The Debt Diet is the program that was featured on the Oprah Winfrey Show, and at that time, it helped millions of people get out of debt on just $10 a day. It can do the same for you, and there are a few spots left in tonight’s class if you haven’t yet signed up!
And now, here are the other headlines for the week:
Lies, Damned Lies and Statistics
You’ve surely heard the above phrase before; it was made popular by Mark Twain and is frequently used as a warning about how numbers can lie. As a financial journalist, I know that a number-dump or data-dump in an article (or sales pitch) can be intimidating, and can often make a presentation sound more impressive — even if it’s not. However, not all numbers and statistics are created equal, which is why I loved this Bloomberg column by economists Justin Wolfers and Betsey Stevenson. In it, they provide six tips for assessing useful numbers from bad numbers. My favorite tip? If the researcher or author can’t explain what they’re doing in terms you can’t understand, don’t let the statistics sway you. (This sounds like one of my Money Rules: If you can’t explain it, don’t buy it!)
Reverse Mortgage Defaults on the Rise
In a bit of concerning news from the Wall Street Journal, older borrowers who use reverse mortgages to tap into the equity of their homes are becoming delinquent on those loans in growing numbers: of the nearly 600,000 outstanding reverse mortgages, 9.8 percent are delinquent, up from 8 percent two years ago. The Journal noted that delinquencies have increased as more borrowers have opted for lump-sum payouts, a choice that might seem good if you need the money but not so good if you’re not the best about making that money last. “For many homeowners, taking all eligible cash upfront results in insufficient cash flow in later years for property upkeep, taxes and insurance,” the Department of Housing and Urban Development (HUD) was quoted as telling Congress.
The good news is that help is available to those who need it. The National Council on Aging is a nonprofit that can provide free financial counseling, and they can help older borrowers negotiate repayment plans with lenders, find cheaper insurance and even set up automatic premium payments (as they did for one subject in the Journal article). If you or a loved one is thinking about taking out a reverse mortgage, read up at the AARP’s reverse mortgage tutorial. It’s the best I’ve seen.
A (More) Forgiving Credit Score
Over the past few years, in articles I’ve read and emails I’ve received from viewers, I’ve heard of countless examples of an otherwise-clean credit score being dinged by a medical billing error — a charge that, through a mixup with the doctor’s office, or insurance company or even just momentary oversight, goes unpaid and, eventually, into collection. These mistakes can sit on a credit report for up to seven years (even if the debt has been resolved) and can affect a person’s ability to get a top interest rate on a mortgage, car or credit card. Now, the New York Times reports, one credit score company is looking to forgive these sorts of errors. VantageScore Solutions has decided to ignore collection actions on credit reports, as long as the debt is paid. This change wasn’t made so much because VantageScore feels bad that a medical billing mix-up is affecting your mortgage application, but more because they find that these collections are less predictive of a consumer’s financial behavior than other items on a credit report.
Now, a VantageScore isn’t used as widely as the FICO score, so as the Times notes, it’s not immediately clear how many people this new change will help. However, it’s a step in the right direction — and one that, let’s hope, is the start of a larger trend.
Have a good week!
Jean
