Selling our national soul for 30 pieces of silver

moneybagThe United States Senate recently voted overwhelmingly to proceed with debate on the so-called Marketplace Fairness Act, and scheduled a final vote for May 6. This law, if passed, would authorize states to require Internet-based companies without a physical presence in the state to collect and remit sales taxes to state and local governments, forcing Internet retailers to know and apply thousands of different sales tax laws – potentially one for every state, county and city in America that collects a sales tax.

The problem with this law is that it is a violation of the principle of balanced federalism, and of the spirit of the American Constitution. In order for a state to collect Internet sales taxes, the law would require states to adopt “minimum simplification standards,” because evidently the federal government cannot let sovereign states do anything without also forcing states – I’m sorry, “encouraging” states – to adopt federal standards.

By introducing “minimum simplification standards” for Internet sales taxes, the federal government would be explicitly pushing the idea that it is proper for Washington, D.C. to explicitly influence state and local sales and use tax policies. This idea violates the foundational idea of our federalist system, wherein the federal government focuses on its constitutionally delegated areas of law and public policy (e.g., federal income and excise taxes) and leaves the states, as sovereign entities, to address their areas of law and policy free of federal interference or intrusion (e.g., state and local sales taxes). The federal government has no right to impose “minimum standards” on state and local sales taxes, all twisting of the language of the federal Constitution by legal sophists aside.

Some advocates, including some in Utah, would like to see state and local sales taxes standardized nationwide, and that is their right. However, sacrificing the founding principles of America’s freedom on the Altar of Business in the name of Almighty Commerce would be to sell our nation’s soul for 30 pieces of silver.

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  • Andrea

    This is such a lame argument. First, states do not have to comply with the simplification requirements, and in fact some won’t. If they don’t simplify, then they don’t receive the revenues, but nothing forces them to change their systems if they don’t want to. Second, the US Constitution explicitly gives Congress the right to regulate interstate commerce, which this bill would do. Yes, Congress has abused the Interestate Commerce Clause in the past, but this bill is clearly within the bounds of Congress regulating interstate commerce.

    • Derek H Monson

      Andrea,

      Neither of your points refute my argument, and your first sentence is a good reminder that “ridicule is the last resort of desperate arguments” (Girgis, Anderson, and George, “What is Marriage”). The violation of balanced federalism is in the fact that the Marketplace Fairness Act would establish federal standards for state-levied sales taxes. It has nothing to do with either of your points.

      Further, following the thinking behind your comment, the federal government could establish “minimum simplification standards” for states in the name of interstate commerce on state corporate income taxes, property taxes, or any other tax that businesses pay, and there would be nothing wrong with that in principle because of the Interstate Commerce Clause and because the states have the choice not to collect those taxes.

      That makes sense if you believe that states should be little more than the subjects or vassal governments of Washington, D.C. But for those that believe in the freedom that is engendered by limiting what the central government can do in regards to state authority – such as the authority to collect state sales taxes free of federal “minimum simplification standards” – the thinking behind your dismissal of genuine (i.e. balanced) federalism is concerning, to say the least. That kind of thinking readily justifies very abuses of the Interstate Commerce Clause that you mention.

      Derek Monson

      • Andrea

        Actually, Congress has already established “standards” for states based on interstate commerce concerns for corporate income taxes, property taxes and other taxes. Several decades ago, Congress set nexus requirements for state corporate income taxes (which need to be updated, see next paragraph). Congress also set standards on property taxes for pipelines, transmission lines and railroads that cross state lines. Congress has also set limits on local utility franchise taxes on cable TV. And then there is the moratorium on Internet access taxes (not to be confused with taxation of remote sales). Congress did all of this to protect and promote interstate commerce. Conservatives have generally supported these measures.

        In addition to actions taken in previous years and the remote sales tax bill currently being considered, Congress is also considering at least two other bills that impact state and local taxation and interstate commerce: the business activity tax simplification act (BATSA) and the Mobile Workforce State Income Tax Simplification Act which revises existing nexus standards and creates new nexus standards, all in the name of interstate commerce. These bills set “federal” standards for states and local governments that conservatives, except perhaps Sutherland, are supporting.

      • andrea

        When the states request Congress to establish minimum standards to enable collection of remote sales, they are not becoming “subjects or vassal governments of Washington DC” since they can choose to ignore these standards and continue not collecting remote sales. If the bill passes, nothing changes for state governments who choose not to simplify. It is as if Congress did nothing at all. Those states still have “the authority to collect state sales taxes free of federal ‘minimum simplification standards’”. Your dismissal of this fact is concerning, to say the least.

      • andrea

        Your argument is self-contradictory because this bill would actually promote federalism by allowing states to collect taxes that are already on their own book, and they would not be forced to do anything. They can keep the status quo if they like, and they won’t be penalized for doing so.

        One of the several problems with your argument is that you are looking at the Constitution through the prism of only one of the principles in the Constitution, federalism in your case, while ignoring other principles found in the Constitution. Focusing on one aspect of the Constitution at the expense of all other principles is a common fallacy with interest groups, mainly because some groups do not want to go through the intellectual struggle of having to reconcile conflicts. For some groups, all issues are driven by the First Amendment, or the Second or Tenth Amendment. Or the interstate commerce clause.

        Fortunately, in this case the conflict is easily reconciled. We can have balanced federalism and promote interstate commerce by allowing — not forcing — states to simplify their sales taxes. Moreover, this approach ALLOWS states to collect taxes that are already on their books.

  • Andrea

    I would also add that states, including Utah, generally support these standards so calling them “federal standards” doesn’t make a lot of sense. States have been pushing this for years. The feds aren’t pushing this on the states. The states are lobbying Congress to pass this.

    • Derek H Monson

      Andrea,

      Your comment doesn’t make any sense, unless you are simply trying to distract from the point of my post or muddy the dialogue. When standards are adopted as a matter of federal law, they become federal standards…that is simply what “federal standards” means, your belief in its sensibility notwithstanding. The fact that some states are supporting the bill and lobbying Congress is beside the point.

      Derek Monson

      • andrea

        The states WANT standards to enable them to collect their taxes. This is not your typical scenario of the federal government imposing standards (educational, environmental, etc.) that the states don’t want or didn’t ask for. Also, this is more than just “some” states asking for this.

        As to your argument that “standards are adopted as a matter of federal law, they become federal standards”, if the states were to ask the feds to adopt certain crime reporting standards so the FBI could track and solve interstate crimes more effectively, you would have to oppose such efforts as well.

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