Growing State Taxes, Not Simplifying Them
After years of unsustainable spending, state and local governments now find themselves in a budget bind. So they spent the summer lobbying the federal government for approval to raise your taxes.
Unwilling to abide by the Constitution or live within their means, state and local officials traveled to Washington, DC, believing that raising taxes to get “more of what they deserve” is good for them—though, maybe not for you.
The taxes at issue? Sales taxes owed when customers make purchases online.
In 1965, the U.S. Supreme Court said states can force merchants to collect and remit sales taxes for goods sold to state residents, even if the merchant was out of state (as in mail order then, and Internet sales today).
But the Court also ruled that before they tried to collect the taxes, legislators had to address the confusing, mind-boggling mess of state tax jurisdictions, ways to remit, a plethora of rates and confusing definitions.
Forty-five years later, states have not solved the problem. Yes, in theory, taxes are owed. But given the unwillingness to simplify the state tax-code mess, the law prevents them from sticking their hands in other states’ pockets.
Claiming it's all about fairness, Rep. Delahunt (D-MA) has introduced legislation that he says will “close a loophole in the law.” That “unfair” loophole? Constitutional law.
But the real unfairness lies in the fact that states won’t get to work on honestly simplifying their tax systems so merchants are treated equally. If Delahunt’s legislation were to become law, remote merchants would be placed at a disadvantage by being required to unravel complicated tax laws in more than 7,500 tax jurisdictions across the country, while local merchants have only one set of rules to handle.
The law would provide congressional authority for the states to force sales tax collection from out-of-state merchants once at least 10 states have joined in.
Essentially the legislation would be a congressional stamp of approval to override the Supreme Court’s requirement for truly simplified tax systems. Or, put another way, the Congress stamp of approval to layer complicated, conflicting and confusing regulations on the nation’s small businesses.
More fodder for quick, sneaky lame-duck session activity? The press reports that supporters are hopeful–apparently hopeful Congress can pretend to redefine truth and facts by passing legislation.