Heartland Institute Experts Comment on Internet Sales Tax Hearing in Senate

August 01, 2012

The Senate Commerce Committee today held a hearing on the Marketplace Fairness Act (MFA). The bill would overrule a 1992 Supreme Court decision – Quill v. North Dakota – that barred states from collecting sales taxes from online retailers unless those retailers had a physical “nexus” in the state.

To see a collection of Heartland Institute research and commentary on Internet sales taxes, go to this search result at Heartland’s online database, PolicyBot.

The following statements from technology and tax experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at tnash@heartland.org and 312/377-4000. After regular business hours, contact Jim Lakely at jlakely@heartland.org and 312/731-9364.

“State and local lawmakers who enthusiastically bought votes by overspending during the mid-2000s good times are doing whatever they can to squeeze every possible penny out of the public now that revenues are down because of the recession and non-recovery. The Marketplace Fairness Act has nothing to do with fairness. It’s just another tax hike to prop up big government.”

S.T. Karnick
Director of Research
The Heartland Institute

“In the middle of the weakest economy in a generation, the last thing America needs is another taxing avenue – which will only grow wider over time, further retarding much-needed economic growth. The digital economy, which has helped prop up the U.S. economy in the past decade or so, will never be as vibrant as it once was with this yoke around its neck.

“The fiscal crisis facing the states is not a result of too few taxes, but too much spending. Siphoning more productive dollars out of the digital economy won’t change that fact, but only make it worse.”

Jim Lakely
Co-Director, Center on the Digital Economy
The Heartland Institute

“The fundamental problem with the Marketplace Fairness Act (MFA) is that by eliminating the physical presence standard Congress would be eliminating an important taxpayer protection, impeding tax competition among the states, and undercutting federalism. Without the physical presence standard in place there is no end in sight to the tax-collection burden states will put on businesses.

“If Members of Congress truly want to create a ‘level playing field’ for retailers, then they should support the origin-based tax system that states already use for sales taxes. This would preserve the physical presence standard by having both online and bricks-and-mortar retailers collect taxes based on the location where the product is sold. This would be a much simpler and taxpayer-friendly solution.”

John Nothdurft
Director of Government Relations
The Heartland Institute

“The Marketplace Fairness Act takes tax policy in the wrong direction, setting up a classic slippery slope that will see states becoming more and more predatory. What’s needed instead is an alternative that respects both states’ rights and the limits set by the Constitution. While an origin-based tax scheme may not be the best answer, it is a much better place to begin the debate. Let’s remember that preservation of low-tax environments is one way states can compete constructively for commerce and economic growth. Consumers and businesses would be much better off if states looked at e-commerce as an opportunity to boost their economies by welcoming Internet enterprises instead of treating them, and their customers, as just another cash pump.”

Steven Titch
Policy Advisor
The Heartland Institute

“It’s a shame that Congress is now looking under every rock to try to find new sources of revenue for government at all levels. Economist Adam Smith had it right, way back in the late 1700s, when he wrote: ‘Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the State.’

“In short, lower taxes should be preferred to higher ones when determining the ‘wealth of nations or states’. In this case, that’s not happening on most main streets or in the current congressional proposal for Internet purchases.”

John Skorburg
Lecturer in Economics
University of Illinois at Chicago
Associate Editor, Budget & Tax News
The Heartland Institute

“The Marketplace Fairness Act is problematic for several reasons. First, by taxing online retailers in states where they may not have a physical presence, they are in fact paying taxes to a government with whom they have no political voice. This amounts to taxation without representation.

“Second, despite today’s technology it remains difficult for an online merchant to accurately charge sales taxes for the products they sell given the 9,600 different taxing sectors in this country. The costs of applying these taxes will inevitably be passed on to consumers. While there is an argument for restoring a balance between online and bricks-and-mortar retailers, this approach is not it.”

Matthew Glans
Senior Policv Analyst
The Heartland Institute

“A story in USA Today informs us: ‘Research from University of Tennessee shows states will miss out on more than $23 billion in revenue this year from uncollected taxes.’ That sentence easily could have been rewritten to say: ‘Consumers would have missed out on more than $23 billion in purchasing power this year if these taxes were already being collected.’

“Need I add that means online and traditional retailers both would have seen lower sales because of shoppers with less money to spend? People in state and local governments want more money to spend. That’s what this is all about.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News

The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.