Taxation without representation defines Internet Sales Tax Bill

March 28, 2013

The birth of our nation originated from the idea that citizens should not be taxed by governments in which they have no political voice.  “No taxation without representation” was the battle cry of colonists in 1773 when in Boston, whopping war chants, they marched two-by-two to the Boston wharf where they descended upon the three ships in the port and proceeded to throw the offending cargoes of tea into the waters.  The reason for the rebellion, known as the Boston Tea Party in response to the Townsend Acts imposed by Great Britain, has been etched over the years in the hearts and minds of school children as an event of critical and lasting importance in American History.

No-Taxation-Without-Representation

The Market Fairness Act of 2013, often referred to as the “Internet sales tax” bill, aims to change what had been a fundamental bedrock principle of our nation, even before she was able to throw off her shackles to Great Britain to become a stand alone, free and independent nation.

Although sales taxes are already collected for the vast majority of online sales, the Market Fairness Act, fashioned under pressure from retailers such as Amazon, Walmart, Macy’s and Best Buy, opens the way for states to collect sales taxes from each other.

During the weekend of March 23-24 — in what was dubbed a “Voterama” session — the Senate passed an amendment (75 to 24), assuring the bill’s survival as a stand alone bill empowering states to tax online sales (Procedurally, sixty votes are needed to schedule a full debate on a bill later on in the season.).

A favorable vote outcome could mean that states would have the blessing of the federal government to chase revenues outside their border.  Heretofore retailers were only required to collect sales taxes in states where they have a physical presence.  The Marketplace Fairness Act requires retailers to pay sales taxes to any state from which an Internet user placed an order, even if the company’s headquarter, warehouses and sales staff are located entirely in other states.

The process of subjecting online retailers (Internet entrepreneurs) to 10,000 local tax jurisdictions is by itself a terrible idea. It turns every out-of-state retailer into a sales tax collector in what amount to nationally mandated Internet sales tax on businesses.

Regarding individual states, it allows an extension of state power into other states by allowing states to impose taxes in a way that favors their local business over out-of-state firms having no representation in the taxing state.  This taxation without representation is also antithetical to our federalist system which promotes competition among states in creating the best economic policies.

It only makes sense that small businesses will be hurt more than larger firms when complying with individual state tax laws, which may be arcane and require costly accounting and technology teams to work through the laws.  An exemption for companies with less than $500,000 in annual sales represents but a low threshold to meet and will discourage businesses from growing.  The same might even encourage businesses to move overseas or be regulated out of business.

The Marketplace Fairness Act, like so many laws introduced in the Senate, are the product of tax-hungry politicians.  Why then do some Republican support the Act?  Might the dollar signs envisioned by legislators through an increased tax source for their financially-strapped state cloud the realities of what the bill purports?

Senator Mark Kirk of Illinois was one of twenty-six Republicans who supported the measure, as predictably did Illinois’s senior senator, Democrat Richard Durbin. The measure, if passed, will basically “grow government all over the country, hurt low-tax states, impose taxation without representation, saddle small businesses with collecting taxes for 10,000 distinct tax jurisdictions, and adulterate the freest most successful entity know to man.”

Although it is not known when the Marketplace Fairness Act will be scheduled for debate on the Senate floor, it is perceived that Republican opposition to the bill is soft.  Having Republicans on record for the bill — our own Mark Kirk here in Illinois — can provide accountability to them while showing ever watchful House members that they must have no part of the Internet sales tax, and that they shouldn’t even think about moving the bill in the House.

Granted, states do have the power to raise taxes which they do at their own risk, a notable example being Illinois, but these taxes should affect citizens and businesses within their own political jurisdictions.  States should be focusing on cutting spending, lowering taxes and creating good business environments to attract new companies and jobs.

Contact Senator Mark Kirk and let him know that voting for the Market Fairness Act bill when it reaches the Senate floor for debate would be unwise and foolish to do.  It would bring far more harm to Illinois than the monetary benefits realized from taxing the Internet.

Thursday, March 28, 2013 at 11:30 AM | Permalink

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