Lost amid the news about the plethora of new Obamacare taxes, the coming increase in payroll taxes, and the president’s latest proposal to increase taxes broadly, was the news that tax receipts in the states are actually increasing. That comes as great news for states that were on a spending tear for years, infamously doling out outrageous pensions and money for pet projects.
But they want more, and are trying to get more via the so-called Marketplace Fairness Act, no matter what damage they must do to the Constitution.
For decades the Supreme Court has made clear that to require a tax from any entity, that the entity must have a “presence” in the state, usually a store or shipping center or even a team of salespeople. So ordering from a catalogue, when the merchant had no physical presence in the state, has never triggered an obligation to collect taxes (the taxes have always been due and payable by the purchaser). And today e-commerce comes under that same rule.
Those multiple Supreme Court rulings requiring physical presence are not “mere loopholes,” as the pro-tax crowd likes to call them, but rather firm and re-affirmed constitutional law.
The Act seeks to allow states to simplify their own tangled mess of tax rates, jurisdictions and collection points, and then empowers them to force merchants from out of state to collect their taxes for them. Oddly, states were directed by the Supreme Court nearly 50 years ago to simplify their systems if they wanted such authority, and yet have only spent taxpayer dollars to whine and lobby about not being able to unconstitutionally collect taxes. So why have the legislation? To overturn the physical presence constitutional requirement.
The House Judiciary Committee is scheduled to hold a hearing on the legislation on July 24. In the Senate a much less transparent plan is afoot as pro-taxers, such as Senators Durbin (D-IL) and Enzi (R- WY), are trying to avoid a debate on the merits by adding the legislation as an amendment—a scheme that should rankle both those who want sunlight shone on the legislative process and all Teaparty believers. They are trying to add it to the Small Business Jobs and Tax Relief Act, adding a tax and cost-raising amendment to legislation reported to reduce taxes and costs. Kafka would be proud.
Haven't we already seen enough damage done to the Constitution with legislation that raises taxes and increases costs?
July 12, 2012