KINGSOLVER: College students need tax holiday for books

Jan. 9 is the first day of classes at Indiana University in Bloomington.

In recent weeks, 43,000 graduate and undergraduate students from our state’s largest college campus each have purchased hundreds of dollars of textbooks to prepare for their intellectual journeys.

In years past, these students would have gone to the official university bookstore—or a local competitor, like TIS—to make these large purchases, Yet today, most students at Indiana University locate their books on online retailers—places like Amazon.com or Chegg.com.

Assuming an average of $500 spent per student on books (and many students, especially those in the Kelley School of Business, the Jacobs School of Music, or students majoring in the hard sciences, spend up to $1,000 per semester), the IU community will spend over $21 million on textbooks during the spring semester. Those sales on Amazon.com or other online textbook sales and rental websites escape taxation from the state of Indiana, creating further incentive—other than convenience or wider selections—to turn to digital options.

This diversification of the textbook market has dramatically outpaced policies governing it. A clear disparity exists between Indiana’s brick-and-mortar textbook retailers and their online counterparts. College bookstores in Bloomington, West Lafayette, Terre Haute, Evansville, South Bend and Indianapolis collect a 7-percent levy on all textbooks sold in their stores, while online retailers pay little to none.

Most Indiana politicos believe that the Indiana General Assembly will likely enact new tax collection mechanisms for online retailers during its 2012 legislative session. While those advocating for this policy shift are attempting to level the playing field between retailers, as a strict fiscal conservative, my philosophy on government dictates that taxes should be both fair and limited.

Tax discrepancies cannot—and should not—be solved solely by increasing the undertaxed party’s bill. In this case, the solution cannot simply lie in erecting new tax barriers for online retailers. Instead, wouldn’t eliminating taxes on in-state brick-and-mortar textbook sales accomplish the same tax equalization?

Deficit hawks in both houses of the Legislature likely would raise a few issues with such a policy—including that eliminating such taxes would drain already-limited state coffers. However, applying simple macroeconomic principles, rational actors are more likely to purchase a specific good when it costs less, and thus, a tax holiday for textbooks likely would encourage Indiana students to purchase their textbooks from in-state retailers.

The perpetuation of such purchases would obviously increase the incomes—and thus, the corporate income tax contributions—of Indiana’s bookstores, assuaging the fiscal hawks’ budgetary concerns. In addition, this additional income allows Hoosier textbook retailers to hire more employees, pay higher wages and invest in their business infrastructure—all of which increase holistic tax revenue.

During the last four legislative sessions, a bill was introduced to provide a back-to-school tax holiday for college textbooks. This session, with its assured magnification of sales tax issues, provides the perfect opportunity to finally enact this needed legislation, and several state legislators are examining legislative options to ensure our students (and their parents) receive tax relief they so desperately need.

Any tax increase for online textbook retailers must be tempered to prevent students from bearing the brunt of the blow—and a two-day sales tax holiday seems to be the perfect solution for both Hoosier businesses and Hoosier students.

Simply raising taxes for purchases made on Amazon.com does not punish Amazon.com. It punishes those young Hoosiers who seek out all options to save any money possible.

College students have shouldered much of the burden of decreased state funding of institutions of higher education, which has been offset through tuition increases quadrupling the rate of inflation. Our policymakers must act to ensure further financial harm does not befall students pursuing the self-improvement embodied in our American dream.•

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Kingsolver, a Fishers native, is a senior at Indiana University majoring in political science, international studies and business management. He also is student body president and the former state chairman of the Indiana Federation of College Republicans. Send comments on this column to ibjedit@ibj.com.