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Marketplace Fairness Act Is More about Tax Revenue and Rent-Seeking than Fairness
By Jessica Melugin of CEI.
"Yesterday,
Sens. Mike Enzi (R-Wy.), Dick Durbin (D-Ill.), Lamar Alexander
(R-Tenn.), and Heidi Heitkamp (D-N.D.) reintroduced the speciously named
Marketplace Fairness Act (MFA) in the 114th Congress. The legislation
would authorize state tax collectors to reach across borders and tax
out-of-state businesses, therein subjecting online retailers to taxation
without representation.
Certainly, there are inequities in the way remote sales are taxed,
but the MFA’s approach is a cure worse than the disease. It would
unfairly burden remote retailers by forcing them to calculate for
approximately 10,000 distinct tax jurisdictions—each with their own
rates, definitions and tax exemptions—while leaving brick and mortar
shops to simply apply and remit tax based on the point of sale. Not much
of a level playing field there.
So if not “fairness,” as supporters of the bill claim, what is motivating pro-MFA sentiments?
For the states and localities it’s purely a tax grab. Instead of
trimming fat from their bloated budgets, governors and mayors are opting
to spend time in D.C. schmoozing congress for the right to tax other
state’s businesses. Why deal with disappointing or taxing your own
constituents, to whom you are politically accountable, when you
can spend the week office hopping on the Hill, collecting pins for your
lapel, and topping it all off with an expensed dinner at Cap Grille?
The other proponents of the MFA are big retailers. If it’s hard for
you to believe that Walmart, Target, Best Buy, and Amazon are fighting
for “fairness” for main street brick-and-mortar mom-and-pop shops,
you’ve got good instincts. They’ve spent millions lobbying to impose
these tax collection costs on competitor online retailers. The big guys
are banking on MFA’s compliance costs being lethal for their smaller
online competitors. Again, why succeed by creating value for consumers
in the marketplace when you can bury would-be competitors with tax
collection and remittance burdens?
It’s obvious that congressional Republicans, voted into majorities to
shrink government, not expand its reach, should reject the MFA for what
it is—a tax grab and rent-seeking.
And if legislators are serious about injecting fairness into taxing
remote sales they should opt for an origin-based approach. All remote
sales would be taxed at the principle point of business—whether online,
by catalogue, or whatever we think of next. This would preserve tax
competition among jurisdictions, keep authorities politically
accountable to those they tax, and never trigger the need for cross
state audits or consumer information collection. None of which can be
said for the MFA."
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