Updated: The Senate voted 74-20 to take up the legislation for debate and amendment. It looks like its up to the House to stop it. Here are the Senators who voted no.
Fairness is such a fantastic word, isn’t it? It alludes positivity and happy feelings while stifling opposition and negativity. Many times, especially in recent years, its been glorified to promote new taxes. You may have heard it as making the rich “pay their fair share” or “leveling the playing field.” Vice Pres. Joe Biden stated that letting tax breaks expire on the rich wasn’t a tax raise but “fairness where I come from.” In fact, the concept is so popular that the words fair or fairness have been used in the titles of 905 U.S. Congressional bills since 1989. Now, the concept of fairness and taxation is up for a vote on the Senate floor.
It’s called the Marketplace Fairness Act (S.743), and it will raise everyone’s taxes across the board. How? By allowing states to cross into other states and start collecting sales taxes from companies that sell products online. You may have also heard it called the “Amazon tax.” For example, I can go online in Texas and purchase something from a company in Delaware. Since Delaware has no sales tax, I do not have to pay Delaware sales taxes, and, since its not physically based in Texas, they do not have to collect Texas sales taxes from me. How is this possible? The Supreme Court (Quill Corp. v N. Dakota, 1992) ruled that collecting sales taxes across state lines constituted interstate commerce and could only be regulated by Congress. A company actually had to have a physical presence in that state to be required to collect sales tax. So far (unless S.743 passes), there have been no passages of law that allowed sales tax collection across state lines.
How will this affect you? Living in a state like Texas, you pay sales taxes on clothes, cars, cell phones, light bulbs, etc. Right now, I pay 8.25% on everything I buy within the state of Texas (with the exception of certain perishable foods). If the Marketplace Fairness Act became law and the state of Texas started collecting taxes nationwide, my taxes would increase 8.25% on everything I buy online in the U.S. Does the law stand a chance? Possibly. It does have bi-partisan support. It was endorsed by Obama to “level the playing field for local small business retailers who are undercut every day by out-of-state on-line companies.” It was authored by a Republican, Sen. Michael B. Enzi (R-WY), and has 28 sponsors in the Senate. In Texas, it has the support of some legislators. Here is a video of current Texas State Rep. John Raney (R – Bryan) lobbying for such a law (and I might add, a former opponent of mine):
Is it really fair though? Fair to whom? The way it looks is that many are upset that they are being out competed by online companies. They say it isn’t fair that they have to collect sales tax and pay property taxes and utilities on an actual store while others do not. However, many “brick and mortar” stores have expanded to selling online in order to increase revenues and broaden their markets. I should know. I helped a local musical instrument and supply shop do that exact thing. Is it simply an uneven playing field or just some companies failing to modernize and stay competitive? Is it just another form of welfare for businesses? Is it welfare for states who have sales taxes and feel they are being out competed by other states?
Whichever answer you come up with to those questions, the fact remains that it infringes upon the right of a business to choose where it locates in order to be the most profitable. Businesses choose to set up in states like Delaware because the laws there are designed to attract more businesses. Should a business owner who sells online be punished for using technology (dare I say, being green?) and choosing the friendliest state for their online business?
Finally, in an economy like this when people are struggling to find ways to save money on expenditures, is it really the best time to raise taxes? Remember, this is not just an addition of taxes on the rich. This would affect everyone who buys online, rich or poor.
One of my friends said it pretty well,
“The Marketplace Fairness Act is similar to taxing the light bulb to support the candle industry.”
We need to stop propping up businesses purely because they are failing and/or are jealous of more modern and profitable companies. Its just another form of class warfare. The war between the past and the future.