As Senate Debates Marketplace Fairness, Editorials Urge Passage

As the Senate moves closer to a vote on the Marketplace Fairness Act of 2013 (S.743/S.336), legislation that would give state the authority to require remote sellers to collect and remit sales tax, numerous editorials and newspaper columns published this week expressed support for the bill’s passage.

In an April 23 editorial, the Washington Post [1] noted that warnings issued by eBay to its business users that the sales tax fairness legislation will harm their business were much ado about nothing. The Act “will level the playing field for stores that have a physical presence, which are already charging tax on all local purchases,” the Washington Post stated. “That is fair for retailers, good for state budgets, and even beneficial for consumers who would rather shop in person. The Senate should follow through and pass the bill, which it could do as early as Wednesday.”

The editorial continued: “Government shouldn’t decide by unfairly favoring one outcome over the other. Treat all retailers the same way and let consumers decide. At the moment, the government is pushing consumers toward Internet retailers by failing to collect sales tax on many online transactions — an unprincipled, $11 billion annual tax giveaway.”

In his April 22 U.S. News & World Report column “The Easy Case for Online Sales Taxes [2],” Rick Newman wrote: “States impose sales taxes as part of their overall plan to raise revenue (along with taxes on income, property and other things), not as a scheme meant to incentivize one form of commerce over another. It’s also time for legislators to treat the Internet as a mainstream element of the U.S. economy rather than a fragile bit of new technology that needs the protection of special rules.”

Newman concluded: “It’s a safe bet that even with sales taxes, online shopping will remain an appealing option.”

In an April 23 editorial, USA Today [3] noted that exempting online purchases from sales tax may seem like a good deal for consumers but “it has a number of negative effects.” Among other things, it “punishes stores that hire locally, are involved in the community, and generate foot traffic that helps other nearby businesses.” In addition, USA Today noted that it subsidizes “big Internet retailers, while hurting conventional stores thatinclude many mom-and-pop shops, and [is forcing]cash-strapped states to raise other taxes, or go into debt, to compensate for the $23 billion in annual uncollected e-commerce sales taxes.”

The editorial concluded, “A law treating all sales equally for tax purposes is long overdue. Now it’s time for members of Congress to show that even if they can’t keep up with technological change, they can at least catch up to it.”

In The Atlantic column “Yes, It’s Time for an Internet Sales Tax [4],” Jordan Weismann emphasized that sales tax fairness is just common sense. “As a rule of thumb, it’s best to be skeptical of politicians and journalists who describe their pet policy preferences as ‘common sense.’ Unless it involves renaming a post office, pretty much any piece of legislation that gets brewed up in Washington will, by necessity, involve tough trade-offs between values and interest groups,” Weismann wrote. “But there are exceptions, and today, I’d like to cautiously suggest Congress has hit on one. The Senate is preparing to vote on a bill that would finally let states make online retailers collect sales taxes.”

Later in the column, he continued, “[M]ost Americans like smooth roads and safe streets. And outside a few royal blue corners of the country these days, income taxes are anathema to most voters. Practically speaking, there just isn’t much upside to letting the web cut a growing hunk out of state budgets each year. Nor is there a good reason to give online retailers a baked-in price advantage over businesses that operate and employ people locally.”

On April 17, writing in the Wall Street Journal [5], Arthur Laffer, a former member of President Ronald Reagan’s Economic Policy Advisory Board in the 1980s, wrote that addressing e-fairness will help to stimulate economic growth: “Addressing e-fairness from a pro-growth perspective creates several benefits for the economy. A gross inequity is addressed — all retailers would be treated equally under state law. It also provides states with the opportunity to make their tax systems more efficient and better aligned toward economic growth, as well as improve the productivity of local retailers.”

In a column published on April 23 on The Ticker [6], Bloomberg View’s blog on economics, finance and politics, Josh Barro argues against the position of Sen. Ron Wyden (D-OR), a staunch sales tax fairness opponent. The rise of e-commerce, Barro noted, has made it “much easier to buy stuff from merchants located outside your state …. [and] it has become easier for those merchants to charge you the tax. If a store in New Hampshire sells a TV to someone from Massachusetts, it doesn’t necessarily know the buyer is going to put the TV in his car and take it back to Massachusetts. If an online store based in New Hampshire sells a TV to someone from Massachusetts, it knows exactly where it is shipping that TV.

“So this tax-avoidance problem is getting worse — but it’s also getting easier to fix. Why doesn’t [Sen.] Wyden want a fix that will help make the consumption-tax base more comprehensive and therefore more efficient? It probably has to do with the fact that Oregon doesn’t have a sales tax.”

Pointing to a bipartisan letter [7] that Sen. Wyden signed onto in opposition to S.743, Barro noted that the letter “mischaracterizes Quill Corp. vs. North Dakota, a 1992 Supreme Court decision on the taxation of out-of-state sales. Citing the decision, the letter says requiring sellers to remit out-of-state sales tax ‘would place an unconstitutional burden on interstate commerce.’”

But Quill actually found that “‘Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes,’” Barro said. “This is what the Marketplace Fairness Act would do.”