The Marketplace Fairness Act, otherwise simply known as the national Internet sales tax, has received a tremendous amount of support from Republicans, Democrats, state governments, big businesses and trade associations. Proponents say it levels the market playing field, while opponents argue it’s just another tax increase and cash grab for governments.
Last week, the United States Senate voted 63 to 30 to end debate on the bill and delayed a final vote on passage until May 6 because of a weeklong vacation. It also has the support of President Barack Obama. Although it has unanimous support in the Senate, it may have some hurdles to climb in the House.
Former Republican Vice Presidential candidate Paul Ryan came out in favor of an online sales tax “concept,” but noted in his email to The Hill he does not support the current legislation in the Senate. He believes the idea must be implemented the correct way.
Those who have advocated and supported the bill, including retailers, Walmart and Amazon, say this kind of “special treatment” favoring large online businesses instead of Main Street companies will soon come to an end. However, according to retired Texas Republican Congressman and three-time presidential candidate Ron Paul, it benefits the “alliance of big business and tax-hungry state governments.”
The bestselling libertarian-thinking author published an op-ed piece titled “The Internet Tax Mandate Is Backwards Thinking” in the Business Insider on Wednesday. Dr. Paul opined about the various drawbacks of the measure and the unintended consequences of an online sales tax.
Similar to other political moves supported by big corporations, such as raising the minimum wage, increasing the number of regulations or imposing anti-trust laws, passing an Internet sales tax provides them with great benefits because they can afford to absorb the costs associated with the tax, while small businesses and their competitors cannot.
“More importantly, the Mandate’s increased costs and regulations could prevent the creation and growth of the next Amazon,” wrote Paul.
Furthermore, Paul states that American consumers will also be hit hard by the tax because of the additional costs on the products they purchase. The negative effect is that the new tax would deter shoppers from buying goods sold on the Internet. In the future, they will be hit even harder by sales tax hikes.
“And giving ravenous state governments new authority to tax sales made by out-of-state businesses practically guarantees future sales tax hikes, as the arguments will be made that most of the increases will fall on out-of-state businesses,” explained Paul. “These businesses will lack effective ability to oppose the tax increases — a form of taxation without representation.”
David French, Senior Vice President of the National Retail Federation, recently said that the law governing Internet sales is outdated because it’s a “20th century interpretation of an 18th century document.” Paul, however, believes it’s those supporting the tax who are being outdated and backwards: higher taxes, further regulations and over-burdened workers.
“Opponents of the Internet Tax Mandate recognize that the principles of limited government and free markets represented by a true reading of the Commerce Clause provide a timeless guide to economic growth and prosperity,” concluded Paul.
With Internet sales reaching $226 billion in the U.S. last year, governments who need revenues – instead of cutting spending – will surely be trying to get their hands on this money, a concern by Paul and bill detractors. According to the National Conference of State Legislature, roughly $23 billion in tax revenue was lost because state governments couldn’t collect taxes on out-of-state taxes.
One of the few in Washington to fully come out against the legislation is New Hampshire Republican Senator Kelly Ayotte. Economic Collapse News reported that she would be opposing the bill because of the negative side effects and future tax increases. Her speech on the Senate floor lambasting the online sales tax can be seen here.
In total, there are 294 national trade associations, state and local trade associations and businesses in support of the Marketplace Fairness Act. There are 19 organizations opposed and five entities neutral or undecided.