Green Room

The Marketplace Fairness Act and the even playing field

posted at 6:51 pm on March 21, 2012 by

We’ve written before about the Marketplace Fairness Act, which proposes to make it easier for states to collect sales tax for online sales. A serious conservative voice weighed in on the subject this week when Maine Gov. Paul LePage (R) declared his support for it.

LePage, a confrontational conservative governor who rode a wave of Tea Party support to victory in 2010, said the Marketplace Fairness Act would boost his state’s economy by helping traditional stores compete with online retailers.

“Unfortunately, a damaging inequity exists in the retail marketplace because some online retailers are not required to collect Maine sales tax, but Maine retailers are,” LePage wrote. “Not only does this hurt Maine businesses, it hurts the state. If the handcuffs on these small retailers were removed, they could compete on equal terms. They would generate mores sales, pay more sales tax to the state treasury, hire more local retailers and pump more money into local economies throughout Maine.”

As I’ve stated before, I was on the fence about this one for a long time. Even leaving aside the “taxes are bad” thing, anything which could impede online commerce just strikes a sour note with many of us. I had also considered the possibility that maybe this could be worked out at the state level, but a recent attempt in Illinois to do just that produced… nothing. But after sifting through all of the pros and cons, I have to admit that it may be time to just get it over with and do this.

The reason? Like it or not, fiscal conservatives must, at a minimum, believe in a level playing field. Equality of opportunity, not results… remember? After looking over the new Ryan Plan Part 2, I’m reminded that as we tighten our belt at the federal level, more and more things will need to be pushed back down to the states. Each of them will have to manage their budgets as they see best, and for the majority of them a state sales tax is part of their revenue stream. While it may be depressing, the feds need to provide each of them a chance to compete evenly.

The commerce clause is probably the most abused aspect of the constitution, having been used to push through laws ranging from gun control to donkeys in bathtubs. But this may be one of those rare cases where it can be fairly implied. If Washington can regulate commerce between the states, each of them should surely be able to collect legally approved sales taxes when such commerce takes place. Plus, states with no sales tax won’t have to worry about it anyway.

It may be time to just bite the bullet and pass this legislation.

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Marketplace Fairness Act

You know what’s coming next with President 10-289….

The “Anti-Dog-Eat-Dog Rule”

And the “The Equalization of Opportunity Bill”

Followed by “Directive 10-289″

I’ve read this story before.

MichaelGabriel on March 21, 2012 at 7:23 PM

a damaging inequity exists in the retail marketplace because some online retailers are not required to collect Maine sales tax, but Maine retailers are

The inequity exists because people are tax cheats. I pay the “use tax” for things I bought online which were not taxed at the point of sale when I file my state tax return.

But then, I guess if nobody cheated on their taxes, Obama wouldn’t have anyone at all in his Cabinet, would he?

malclave on March 21, 2012 at 7:29 PM

The correct solution is to eliminate all sales taxes, not try to force them on internet sales.

Count to 10 on March 21, 2012 at 7:29 PM

Current practice, in effect, limits sales taxes to something close to freight costs. This legislation would allow sales taxes to grow without limit, forcing people to actually relocate in order to avoid a more onerous burden. Real estate prices in high tax states would take a further hit.

cthulhu on March 21, 2012 at 7:49 PM

If Governor LePage is concerned about Maine businesses competing on an uneven playing field with online retailers, then there is a very simple solution he could push for: eliminating the state sales tax in Maine.

Armin Tamzarian on March 21, 2012 at 8:48 PM

I dunno, I prefer sales taxes over income taxes. I would argue replacing the income tax with a small increase in the sales tax and extending it to online sales would be the best solution. Sales taxes are visible, visible is very good.

astonerii on March 21, 2012 at 8:52 PM

“Leveling the playing field” by making it more unfair than it already is should not the policy we follow. The proper — and most practical — policy would be to lower taxes to a state of equality for all businesses, rather than the nefarious policy of raising taxes. The correct level for a fair “playing field” would be ZERO taxes (for both sales and income).

The money is the people’s, not the government’s.

Steve Stoddard on March 21, 2012 at 9:21 PM

“The reason? Like it or not, fiscal conservatives must, at a minimum, believe in a level playing field.”

Oh, please.

Dante on March 21, 2012 at 9:37 PM

If they really want it to be fair, then postage to send the package should be subtracted from the tax payment so it would then be a true $$ to $$ comparison and cost. Frequently, when ordering on line,the postage is about the same as the tax, so this needs to be taken into account.

ILUVTX on March 21, 2012 at 9:49 PM

“Leveling the playing field” by making it more unfair than it already is should not the policy we follow. The proper — and most practical — policy would be to lower taxes to a state of equality for all businesses, rather than the nefarious policy of raising taxes. The correct level for a fair “playing field” would be ZERO taxes (for both sales and income).

The money is the people’s, not the government’s.

Steve Stoddard on March 21, 2012 at 9:21 PM

But, there are necessary functions performed on behalf of all citizens that can only be provided by the state (i.e. roads, police protection, fire departments, schools, etc.) and we, as citizens, must fund these essential government services. While I agree we should keep these expenditures to a minimum, there will always be a need for local, state and federal revenue to support these services. Zero sales tax and zero income taxes is just not practical.

HoosierStateofMind on March 21, 2012 at 10:14 PM

I’ll buy into a number of things if we’ll get rid of the income tax. This is certainly one of them.

J.E. Dyer on March 21, 2012 at 11:05 PM

But, there are necessary functions performed on behalf of all citizens that can only be provided by the state (i.e. roads, police protection, fire departments, schools, etc.) and we, as citizens, must fund these essential government services.

A properly limited government would cost less than you think. Consider, for instance, that of the four examples you listed, only one, police protection, is a legitmate governmental function.

Steve Stoddard on March 21, 2012 at 11:57 PM

I’ll buy into a number of things if we’ll get rid of the income tax. This is certainly one of them.

To get the ball rolling on tax elimination, a wider sales tax probably would be an excellent trade for getting rid of the income tax. But only for starters.

Steve Stoddard on March 22, 2012 at 12:00 AM

The reason? Like it or not, fiscal conservatives must, at a minimum, believe in a level playing field. Equality of opportunity, not results… remember?

How about complying with the law? It’s uncomfortable because it means that compliance will probably be compulsory in the future rather than based on an honor system. In the wider context we should pay for the government services we receive rather than running up the nations credit card…. that’s fiscally conservative. I think you will find when people actually have to pay the bill they will want less government.

lexhamfox on March 22, 2012 at 12:06 AM

Each of them will have to manage their budgets as they see best, and for the majority of them a state sales tax is part of their revenue stream. While it may be depressing, the feds need to provide each of them a chance to compete evenly.

Then those states may need to find a way to adapt. If some states get along fine without it, then others should be able to as well, or find an alternate route. There’s no reason why those states shouldn’t attract internet businesses to collect the income tax, except that they create unhealthy business environments that drive those internet companies away. Too bad for them; they’ll have to deal with that loss in revenue.

More taxes and federal regulation is a horrible solution to the issue. The states ought to adapt; some have, so it is not impossible. And the fact that other states, like Illinois, are already facing the consequences of poor fiscal decision-making should not be the problem of other states or businesses.

thirtyandseven on March 22, 2012 at 12:33 AM

Fine, then make it one flat tax rate of say 5% accross the country. This eliminates the burden on sellers to figure out the rate based on State/City. And the rate can only be raised by unanimous consent of every State’s Governor. Or lowered by a Supermajority.

In fact that’s how it should be for any tax initiative; unanimous raises, supermajority to lower.

AH_C on March 22, 2012 at 7:54 AM

Wow Jazz(whos not really a fiscal conservative) what a load.
Besides, Illinois has a much BETTER plan to extract taxes from internet sales. USE TAX.

http://tax.illinois.gov/Individuals/FAQs-Use-Tax.htm
from the page:

Why should I voluntarily pay use tax?
If you use goods in Illinois that were purchased tax free or at lower rates outside Illinois, you owe use tax to the department. If you do not pay, it is unfair to Illinois retailers, consumers, and taxpayers in the following ways:

* Illinois retailers, who must charge sales tax, are put at a competitive disadvantage as compared to out-of-state retailers, who charge no sales tax, or charge tax at rates less than Illinois rates.
* Illinois must make up these lost revenues or curtail state services provided to consumers and taxpayers.

Well go F*&& yourselves! Does no one EVER THINK to reduce the business taxes??? Ever?

I know I saw an article that said that Illinois was going to put this line on the Forms already loaded to some amount ($100?) and you have top PROVE you DID NOT PURCHASE stuff on the Internet.

This approach is better because you can:
Keep internet sales flowing.
Apply use tax “fairly” to poor people.
Create a TAX SWAT team to crush those poor people.

You know theres more than one way to reduce the size of governement right?

orbitalair on March 22, 2012 at 8:24 AM

I also meant to add, that between adding these taxes and the rate at which my CC is stolen over the internet…it will mean the death of my buying stuff over the net.

orbitalair on March 22, 2012 at 8:28 AM

Finally, in addition the Illinois USE Tax specifies this ominous clause:

The Illinois Department of Revenue can assess use tax owed by taxpayers who do not pay voluntarily. For taxpayers who do not have records to document their use tax liability, the department will estimate liability. Taxpayers have the right to refute the department’s estimates by following established protest procedures.

I’ll bet my states, Alabama, USE tax clause reads the same way.

I simply can’t WAIT UNTIL some tax f*&^er starts ‘estimated’ for me…

orbitalair on March 22, 2012 at 8:30 AM

End sales tax now. End Restaurant taxes, they are so crippling to the economy and the restaurant industry.

If things you bought on the internet didn’t have any tax on them, and that is what people like, why can’t you make the shops equal to the internet, instead of expanding taxes to internet goods.

End Cell phone taxes. Stop taking my money to give someone a free cell phone, we can hardly afford our own. End taxes on my Cable bill. And give parents a $ credit when they turn off MTV, and other age inappropriate shows. There are a lot of programs I would rather have, that are not on unless to upgrade, but I get a lot of useless programs. Consumer Fairness and Choice!

Fleuries on March 22, 2012 at 8:48 AM

If they really want it to be fair, then postage to send the package should be subtracted from the tax payment so it would then be a true $$ to $$ comparison and cost. Frequently, when ordering on line,the postage is about the same as the tax, so this needs to be taken into account.

ILUVTX on March 21, 2012 at 9:49 PM

So, should the local brick & mortar businesses get to subtract the cost of shipping from their sales tax computations, too? It doesn’t matter if it’s the same cost or not, they are separate costs.

For all of you arguing for the elimination of all sales taxes, I have one question: where is the state supposed to get its revenue? Before you make such a sweeping statement, try to not look like a total idiot by proposing something in its place. And, if you argue that nothing should take its place, then I posit that you are not a fiscal conservative, but someone with an economic IQ closer to your shoe size than to the century mark.

GWB on March 22, 2012 at 9:50 AM

IMO, sales tax should be applied in the locale in which the transaction takes place (the way it works with b&m businesses). So, for an internet retailer, it should be in the corporate HQ (or the location of their internet business unit), not the buyer’s shipping address. That *would* level the playing field. And, it would require no more onerous burden on the internet business than any other business.

GWB on March 22, 2012 at 9:54 AM

The inequity exists because people are tax cheats.

Theft: The taking of property by force.
Taxation: The taking of property by force.
There is no such thing as a tax cheat. You can’t cheat a thief.

The problem isn’t that there isn’t enough money extorted from us by government. The problem is that bureaucrats act as though it was their money and spend it foolishly on things that they have no constitutional authority to spend it on and spend way too much of it

single stack on March 22, 2012 at 9:54 AM

IMO, sales tax should be applied in the locale in which the transaction takes place (the way it works with b&m businesses). So, for an internet retailer, it should be in the corporate HQ (or the location of their internet business unit), not the buyer’s shipping address. That *would* level the playing field. And, it would require no more onerous burden on the internet business than any other business.

This makes sense to me. After all, we pay the local sales tax anytime we travel out of our state and make a purchase.

theblackcommenter on March 22, 2012 at 10:03 AM

Holy crap is there a lot of Constitutional and economic illiteracy in this comment thread.

First off, the federal government must collect taxes for armed defense, postal service, and other purposes as expressly outlined in the Constitution. Currently, this is via income tax. Originally, it was done via tariffs and duties on international trade. The validity of the federal model is not the subject of this thread, though. The federal role in this is their ability to regulate interstate commerce. I am speaking of the original meaning of this clause, here.

Whether or not a state can assess a sales or income tax, and the legitimate functions these taxes should support, depend entirely upon the constitution of that individual state. See the 10th Amendment. The feds have no legitimate role in education, but your state’s constitution might give them a legitimate role in education.

Therefore, states must assess some taxes in order to support their legitimate operations. The way I understand the issue, the problem is something like this:
State A is the online retailer’s corporate headquarters, and has no income tax.
State B is a state with no sales tax.
State C is the customer’s state.
The company can process the order in State B to avoid sales tax, then report their income in State A, thereby avoiding all state taxes.
A law that assigns, universally, the responsibility to pay all taxes in one of those states (either A or C would make the most sense) would result in equal opportunity, and allow businesses to live or die on their own merits, instead of favoring the businesses whose models allow them to dodge the most taxes.

Asurea on March 22, 2012 at 10:57 AM

Theft: The taking of property by force. Taxation: The taking of property by force. There is no such thing as a tax cheat. You can’t cheat a thief.

The problem isn’t that there isn’t enough money extorted from us by government. The problem is that bureaucrats act as though it was their money and spend it foolishly on things that they have no constitutional authority to spend it on and spend way too much of it

single stack on March 22, 2012 at 9:54 AM

The first part is a grossly hyperbolic oversimplification of taxes. Taxes are taking your money by force, in order to provide services (such as an army to defend the country) that are necessary in order to ensure liberties to all citizens of the country.

The problem is, the second half of your statement, about bureaucratic and political abuse of legitimate powers of government in order to involve themselves in activities government has no role in, is completely accurate.

Asurea on March 22, 2012 at 11:08 AM

Marketplace Fairness Act

You know what’s coming next with President 10-289….

The “Anti-Dog-Eat-Dog Rule”

And the “The Equalization of Opportunity Bill”

Followed by “Directive 10-289″

I’ve read this story before.

MichaelGabriel on March 21, 2012 at 7:23 PM

My God, we’re living in a 1957 work of fiction.

SpiderMike on March 22, 2012 at 11:57 AM

The first part is a grossly hyperbolic oversimplification of taxes. Taxes are taking your money by force, in order to provide services (such as an army to defend the country) that are necessary in order to ensure liberties to all citizens of the country.

You’re claiming that the ends justify the means. This belief has wrought untold misery and bloodshed.
Why is theft by one wrong but theft by millions right?
The individual who robs is morally superior to those who justify taxation as you do. The individual takes his own risks and doesn’t demand the sanction of his victims. You hire heavily armed thugs to do your dirty work while hiding behind the needs of society to justify an evil proposition.
This leads to the question of how do we operate a society without initiating the use of force and robbing our fellow citizens. This question is almost never asked, or even thought about, and until it is adequately answered the cycle of tyranny and bloodshed that has been man’s lot throughout history will never be broken. You can’t claim that a system based on something other than force and institutionalized robbery wouldn’t work because it’s never been tried-ever.

single stack on March 22, 2012 at 12:16 PM

For all of you arguing for the elimination of all sales taxes, I have one question: where is the state supposed to get its revenue?

The states should cut back on their activities until they do nothing but provide police and court services that people are willing to pay for. (At the federal level, the armed forces should be included.)

Governments would not need anywhere near as much money as they now take if they were limited to providing only legitimate government functions involving protection from the initiation of force and fraud. How much of what government at all levels spends our money on is outside that limit of legitimacy? 90%? 95%?

Steve Stoddard on March 22, 2012 at 12:34 PM

You’re claiming that the ends justify the means. This belief has wrought untold misery and bloodshed.
Why is theft by one wrong but theft by millions right?
The individual who robs is morally superior to those who justify taxation as you do. The individual takes his own risks and doesn’t demand the sanction of his victims. You hire heavily armed thugs to do your dirty work while hiding behind the needs of society to justify an evil proposition.
This leads to the question of how do we operate a society without initiating the use of force and robbing our fellow citizens. This question is almost never asked, or even thought about, and until it is adequately answered the cycle of tyranny and bloodshed that has been man’s lot throughout history will never be broken. You can’t claim that a system based on something other than force and institutionalized robbery wouldn’t work because it’s never been tried-ever.

single stack on March 22, 2012 at 12:16 PM

Congratulations on your Alinsky-esque intentional misreading of my comments. Here, let me quote something for you:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Let me spell this out, point-by-point, so even someone such as yourself can’t misread it (though I’m sure you’ll ignore this part):

1. Government has legitimate functions.
2. Performing these duties costs money.
3. People do not voluntarily give government money for these duties. See Articles of Confederation.
4. Our current government has exceeded its legitimate functions.

You’re sitting here trying to argue that because our current government abuses its power of taxation, that all taxes are wrong. This is a logical fallacy.

My argument is that taxes are necessary, but that, as currently implemented, they exceed the boundaries initially placed upon them in the Constitution.

Asurea on March 24, 2012 at 5:40 PM