Washington, D.C., May 6, 2013 – Senators crossed a dangerous line today when they voted to approve the dubiously named Marketplace Fairness Act (S. 743), according to experts at the Competitive Enterprise Institute.
“America’s economy and American consumers have long benefited from the requirement that politicians can tax only those who can vote them out of office,” said Fred L. Smith Jr., founder of CEI and now director of its Center for Advancing Capitalism. “The Constitution established a system of competitive federalism to prevent states from violating this ‘No-taxation-without-representation” restraint. Those voting for this measure have no regard for the Constitution or for the restraints it established.”
Added CEI policy analyst Jessica Melugin:
“It’s alarming the Senate would pass an unprecedented expansion of state tax authority without holding a single hearing on the legislation. This legislation will raise compliance costs for online retailers, reduce healthy downward pressure on tax rates, tax online retailers for services they cannot use, increase consumer privacy concerns, remove political accountability for tax authorities and create new inequities between bricks-and-mortar and online businesses.
“No doubt sales tax inequities between traditional and online retailers exist, but this legislation is a cure worse than the disease. As this issue moves to the House, representatives would be wise to put the legislation (H.R. 684) through regular order to address the harmful unintended consequences of the Marketplace Fairness Act.”
John Berlau, CEI senior fellow for finance and access to capital, says the bill could result not only in new state taxes on internet shopping but even on their retirement savings. “This bill also could enable states to tax 401 (k) and other savings,” Berlau says. “Out-of-state ‘sellers’ and ‘sales” are never defined, and there are no specific exemptions for certain types of products or services. Thus financial services, such as stock trades, may well be on the table of state governments with ravenous appetites for tax revenue.”
>> For more from CEI on the Marketplace Fairness Act, see the links below. CEI was also a signatory to a Conservative Political Action Project memo circulated today on the bill.
– Jessica Melugin, “Facts on Marketplace Fairness Act,” a CEI Web Memo
– Jessica Melugin, “The Marketplace Fairness Act Would Create a State Sales Tax Cartel,” a CEI OnPoint
– Jessica Melugin, “Internet Sales Tax Bill a Bad Idea,” a March 10 op-ed in The Washington Examiner