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PITFA a Poor Hostage for Internet Sales Taxes

Despite the premise of many a political cartoon, U.S. senators aren’t stupid. But a few of them are hoping to bamboozle at least 60 of their colleagues into voting to strip the Permanent Internet Tax Freedom Act (PITFA) out of new customs legislation, the conference version of The Trade Facilitation and Trade Enforcement Act

The House has already passed PITFA and it would permanently ban unpopular discriminatory taxes on Internet commerce and access being pursued by multiple state legislatures. The original ban has been extended with bipartisan support many times since its inception in 1998. It protects consumers from new and, if telecommunication taxes are any indication, typically high taxes related to accessing the Internet. Its permanence would be a boon for Internet users, innovators, and investors. On its merits, it’s hard to argue against PITFA.

But as any disaffected primary voter will tell you, sometimes playing politics trumps merit inside the beltway. Case in point: a few senators are seeking to strip PITFA from the customs bill so they can tie a slam-dunk PITFA vote to the hugely unpopular Marketplace Fairness Act (MFA) they all support later on in the session. 

For the merit-minded among us, it’s important to clarify that the MFA and its House-side equivalent, the Remote Transactions Parity Act, represent the largest expansion of state taxing powers in U.S. history. It would allow states to reach across their borders and tax businesses with no presence in that state. It’s a small business killer, an enabler for spendthrift state politicians, an example of crony capitalism, and is wildly unpopular with voters. It’s hard to argue for MFA on its merits. 

The senators expected to advocate for the removal of PITFA from the customs bill are smart enough to realize that a bad bill (MFA), unpopular with voters, needs to be hitched to an unassailable bill with widespread support (PITFA). It’s a little like serving a side of cyanide with dessert.  

For the sake of taxpayers, let’s hope at least 41 senators are too smart for that plan.    

The MFA is a harmful tax burden that doesn’t warrant holding PITFA hostage. A vote to strip PITFA from the Trade Facilitation and Trade Enforcement Act is a vote to aid the biggest expansion of state taxing power in U.S. history.