Saturday, July 3, 2010

Seeking to Undermine Competition from the Internet, Politicians Pushing Privacy-Destroying State Sales Tax Cartel

One of the good features of the Internet is that it gives people more options. But this is bad news for politicians, who like to control - and tax - what people are doing. But it's not easy for politicians at the state level to impose high sales taxes on consumers when people have the freedom to buy things sold in other states. Politicians do impose "use taxes," which supposedly require people to pay taxes on goods purchased in other states, but 99 percent of consumers evade this tax since there's no feasible way to enforce the levy. In an effort to gain more control (and more money), greedy politicians at the state and local level want Congress to impose a nationwide sales tax cartel. I wrote about why this was a bad idea back in 2001, both because it would undermine tax competition between states and because it would be a gross invasion of privacy. Here's an excerpt from a report on the latest battle in this fiscal war:

The halcyon days of tax-free Internet shopping will, if Rep. Bill Delahunt gets his way, soon be coming to an abrupt end. Delahunt, a Massachusetts Democrat, introduced a bill on Thursday that would rewrite the ground rules for Internet and mail order sales by eliminating the option for many Americans to shop over the Internet without paying state sales taxes. At the moment, Americans who shop over the Internet from out-of-state vendors usually aren't required to pay sales taxes. Californians buying books from or cameras from Manhattan's B&H Photo, for example, won't be required to cough up the sales taxes that they would if shopping at a local mall. ...The National Conference of State Legislatures applauded Delahunt's legislation, saying he should be commended for allowing states to collect as much as $23 billion in new taxes. ...the pro-tax forces have offered a proposal that they hope Congress can be persuaded to adopt. The concept is called the Streamlined Sales Tax Agreement, invented in 2002 by state tax officials hoping to straighten out some of sales tax laws' most notorious convolutions. Since then, some 24 states have signed on, either wholly or partially, to the agreement, meaning they agree to simplify their tax codes and make them uniform. If enough states participate, proponents believe it will be easier to convince Congress to make sales collection mandatory for out-of-state retailers. ...State tax collectors haven't exactly been idle while waiting for Congress. They've been trying to force Amazon to turn over purchase records in North Carolina, attempting to force retailers to become tax-tattlers in California and Tennessee, and putting the squeeze on affiliate programs in Colorado.

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