IPI Publication Press Release
IPI Policy Report - # 153
Related Publication Title:
New.Economy@Old.Constitution
Released by Sonia Hoffman on 04/21/2000
IPI Policy Report - # 153
Related Publication Title:
New.Economy@Old.Constitution
Released by Sonia Hoffman on 04/21/2000
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NGA: Building An Electronic Confederacy?
For Immediate Release,
For Further Information, Contact Sonia Hoffman, 1-888-557-4IPI
Dallas, TX: The National Governors Association (NGA) is pushing a plan for states to tax internet sales. But in proposing what is essentially an “electronic confederation” of states, proponents are crafting a “virtual secession” via the Internet.
According to a new study New.Economy@Old.Constitution by the Institute for Policy Innovation (IPI), such collaboration probably violates the Compact Clause of the Constitution, and possibly the Confederation Clause as well.
“The Compact Clause, which sets the boundaries of what states can do collectively without requiring congressional approval, normally prompts recollection of the Confederate States of America,” says Lawrence Hunter, IPI research fellow and chief economist at Empower America. “When a similar Electronic Confederation can be envisioned, whereby states enter into a compact to harmonize policies geared to ‘residents’ of cyberspace, collusion between states cannot be tolerated.”
States are permitted to coordinate policy insofar as they do not run afoul of Article I Section 10 of the Constitution, which says in part that “No State shall…without the consent of Congress…enter into any agreement or compact with another State.”
This means any NGA scheme to form a one-size-fits-all Internet tax law is unconstitutional.
And even if such a proposal were constitutional, which it isn’t, then taxation would be only the first in a long line of cyberspace regulations. Privacy, censorship, residency, and voting standards would likely follow.
Ironically, the NGA’s power-play tactics also threaten states’ sovereign rights to decide when and how to change their own tax laws, including Internet sales and use taxes.
George Pieler, study co-author and Adjunct Fellow at the Competitive Enterprise Institute, adds, “The only concerns within the province of the states are electronic transactions conducted between companies with proper nexus to a state and residents of the same state. This problem does not justify constitutionally questionable compacts among states.”
Taxpayer’s interests are best served by continuing competition between the states, as envisioned by the founding fathers. They must be wary of any interstate compact, like the NGA’s, that attempts to manipulate state tax law and violate the United States Constitution.
This information taken from a newly released policy report New.Economy@Old. Constitution by Lawrence Hunter and George Pieler. To obtain copies, visit www.ipi.org or contact Sonia Hoffman at 1-888-557-4IPI.
Authors are available for interviews.
Authors are available for interviews.
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