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Unraveling Mary Landrieu and the Online Sales Tax Proponents

For a few years now, legislators in the United States have been worrying themselves over the fact that some people have been able to avoid paying sales taxes to them. The internet and competition between jurisdictions have enabled that, and the more the merrier, I say. Constituents already suffer from onerous taxation, and paths for them to get out from underneath the burden should be welcomed not condemned.

Of course, the politicians don’t see it that way, at least the ones who have sales taxes in their states. They’ve been flailing about with “Amazon” taxes which have failed terribly. In North Carolina, for example, their attempt to tax people buying online from out of state saw tax revenues decrease rather than increase. Surprise surprise, many people chose to relocate and terminate their relationships with the state altogether.

Now these legislators are pushing Congress for blanket legislation from the federal level, the Marketplace Fairness Act. The bill, which the Senate has already passed, is both economically shortsighted and dangerous, since it is one step closer to a national sales tax. If passed, retailers in all states, at least those with an online or mail-order presence, would have to begin collecting taxes — regardless of the laws in their particular state.

One federal legislator to support this bill is Louisiana’s Mary Landrieu, and she appeared on Jeff Crouere’s Ringside Politics of WGSO 990AM. Given that she offered the standard proponent justifications, let me address the two most important ones here.

Fairness: This online sales tax would actually create gross unfairness, since online retailers would then have to collect countless taxes based on the destination of the good. There happen to be at least 9,000 of them, and not even specialist organizations can keep up with all of the changing rates. Conventional stores, on the other hand, do not have to ask you where you live or where the good may be going. They only charge one tax rate or none at all.

Although not ideal, the National Taxpayers Union has recommended a superior alternative, an origin-based tax that would be fair. (See “Myth #8.”) They only support this as a least worst option, since it would still raise the tax burden. If the federal government must get involved, however, let businesses charge all customers one rate of tax, based on the jurisdiction in which the seller is located and not based on a maze of jurisdictions across the country.

Not a new tax: Does anyone, other than political peddlers, seriously believe this? Presently, state legislators have no legal authority to impose taxes on retailers in other states. This would give such authority and would plainly impose a new tax on those very retailers. Not only would it transfer more wealth to government bureaucrats and create a nightmare of paperwork and costly enforcement, it would be taxation without representation, since people with retail stores in other states cannot vote on the taxes they would have to collect.

That this has passed even one chamber indicates the desperation of legislators at both the state and federal levels. Their obstinate push to expand their taxing powers will only backfire, since it will be yet another deterrent against investment in the United States, and it will promote both the gray market and internet sales from across international borders.

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