Posted on 06/10/2003 9:30:54 AM PDT by show me state
ALEXANDRIA, Va. - State officials are desperately looking for ways to pay for spending programs they introduced during the economic bubble of the 1990s that have proven unaffordable in the current slow-growth era.
States increased taxes by $9.1 billion in 2002 alone. Besides attempting to raise every tax imaginable, most states are aggressively lobbying on behalf of the "Streamlined Sales Tax Proposal" to tax every sale made over the Internet.
The slick campaign - led in Washington by the National Governors' Association and National Conference of State Legislators - might lead a casual observer to believe that allowing states to collect taxes on e-commerce is the key to solving state budget deficits.
Unfortunately for these misguided leaders, Internet sales make up only 1.5 percent of all retail sales, or less than $12 billion. Nationwide, the amount that went uncollected from online sales in 2001 was only $2 billion - a fraction of the nearly $900 billion in state and local taxes collected that year.
Even in the absence of Streamlined Sales Tax Proposal, states tax many online sales. In fact, they tax online sales made within their borders. The online divisions of Wal-Mart, Target and several other major brick-and-mortar retailers have voluntarily decided to collect taxes on sales via their Web sites. Of course, it goes without mentioning that online retailers pay a myriad of other taxes to the states each day - including major levies on property, payroll and income.
The major impediment to the Streamlined Sales Tax Proposal is a 1992 Supreme Court decision that a state can only require sellers with a physical presence in the same state as the consumer to collect so-called "use taxes."
The idea behind Streamlined Sales Tax Proposal is for the states to create a sales tax collection cartel - with the U.S. Congress' blessing - to coordinate taxing policies and definitions among themselves in an effort to "simplify" tax collection for businesses.
In exchange for simplification, companies, regardless of their location, would be forced to collect sales taxes. State and local officials, in essence, are using the very compliance and complexity costs they created to justify increasing their own taxing power.
These same officials fail to mention that they already possess the authority to simplify taxes right now, merely by limiting tax rates and remittances within their own states. Such efficiency gains would actually help states capture additional tax revenue by reducing compliance costs, increasing efficiency and raising corporate profit margins.
Simply put, the Streamlined Sales Tax Proposal battle is not being fought over the 1.5 percent of online retail sales. Rather, the ultimate objective is to increase sales tax rates and their reach through interstate collusion, thus putting a padlock on the "laboratory of the states."
Instead of trying to pull a fast one on the Constitution and the American public, the states should work within the system to improve their economic and fiscal situations. Congress, like a good parent, must know when to say "no."
Paul J. Gessing is director of government affairs for the National Taxpayers Union, www.ntu.org.
Disgusting...
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