Economists Art Laffer and Donna Arduin found in their research, Pro-Growth Tax Reform and E-Fairness, that closing the online sales-tax loophole could lower overall tax rates and jumpstart economic growth.

The economists say the Marketplace Fairness Act pending in the U.S. Congress would give states the tools to level the playing field between local retailers and online-only retailers while simultaneously lowering tax rates for everyone. Laffler says fair taxation policies could generate about 1.5 million U.S. jobs in the next decade.

In the research’s forward, Colin Hanna, president of Let Freedom Ring, a conservative group, said, “We believe that one of the economic fairness issues of our day is the fundamental imbalance embedded in our tax system that benefits online retailers at the expense of small, brick-and-mortar store owners who serve our communities by creating jobs and supporting the local economy.”

Hanna said his organization is against taxation but said closing the punitive tax loophole – created by a Supreme Court decision handed down before Internet commerce became a part of everyday lives – is the right way to solve the problem. Laffler said closing the online sales-tax loophole is not only necessary to address a fundamental inequity in the free market, but also could help drive the country back to economic growth levels not seen since before 1999.

Laffler and Arduin say online sales are already subject to state and local sales and use taxes, but taxpayers fail to remit taxes owned with their income tax returns.

“Today’s system is confusing and ultimately amounts to government’s thumb on the free-market scale,” Hanna said.

The study finds that the loss of local tax revenues is forcing states to tax income or raise other taxes, which only further reduces individual economic buying power. In some states, such as Wisconsin, states are dedicating potential revenues from e-fairness legislation to state tax reductions to free up money to invest in business and job growth.

CBA President Curtis Riskey has said the tax loophole is putting Christian stores at a disadvantage because Internet-only retailers are not required to collect sales taxes. “This un-level playing field has resulted in staffing reductions and the closing of many of our independent Christian stores over the past few years,” he said.

To see the study and more information on fair taxation policies, visit the Alliance for Main Street Fairness.