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March 20th, 2013 
Peter Nolan
by Glenn Jacobs
by Glenn Jacobs
Previously by Glenn Jacobs: An
Open Letter to Senator Lindsey Graham
The Internet
is currently our best example of the free market at work. Since
the government has not been able to capture the Internet under
its thumb, the Net illustrates how well the market really functions
when the government stays out of the way.
But have
no fear. Control freak politicians never rest, and a few of the
more dedicated ones are working relentlessly to slap chains on
the world’s most unfettered market. Of course, no exercise in
the destruction of free markets would be complete without a rhetorical
flourish of socialism’s ostensible raison d’etre: fairness.
Yes, something must be done to stop the free flow of information
and commerce that is the Internet because it’s not FAIR.
The Marketplace
Fairness Act is being pushed by three US senators, Dick Durbin,
an Illinois Democrat, Mike Enzi, a Wyoming Republican, and Lamar
Alexander, a Tennessee Republican. What is the injustice that
the Marketplace Fairness Act addresses? Under
current US law, states are prohibited from forcing Internet
retailers who have no physical presence within their borders to
collect sales tax on Internet transactions. This policy gives
Internet retailers an advantage over traditional brick-and-mortar
retailers who must tack, in some cases, up to 10% onto transactions
due to sales tax.
While it
is obvious that on-line retailers do have a tax advantage in this
particular area, politicians sure have a perverted sense of “fairness.”
After all, taxes are a creation of the government. Not all states
impose sales taxes and sales tax rates vary among the states and
sometimes even on different items within a particular state. So
this has nothing to do with the market, but everything to do with
government interventions in the market. If politicians were truly
interested in fairness, they would eliminate coercive taxation
from the marketplace altogether. Granted, US Senators have no
power over state sales taxes (yet), but the Marketplace Fairness
Act would make these taxes that much more inescapable. For Durbin,
Enzi, and Alexander, the definition of fairness means that the
iron fist of the government should crush all of us equally.
By giving
state governments the power to tax Internet retailers, the Marketplace
Fairness Act further undermines our already moribund system of
federalism. One of the key components of federalism is competition
between the states. The idea is that the better the state, the
more attractive it will be to individuals and businesses. Folks
have the ability to “vote with their feet” for the system
of government and level of freedom that they prefer. Conceivably,
if on-line retailers were capturing sales from brick-and-mortar
retailers due to sales taxes, the brick-and-mortar retailers would
pressure local officials to lower their tax rates to allow them
to be more competitive or, if possible, move to states with lower
tax rates. We see this happening all the time when consumers go
across state lines to buy products that are cheaper in an adjacent
state due to lower taxes there. The Internet represents another
competitor for state governments in regard to commerce and taxes.
Unfortunately, if there is one thing politicians won’t tolerate,
it’s competition.
At the state
level, the effort to tax Internet commerce is being led by Alexander’s
fellow Volunteer, Tennessee Governor Bill Haslam. Haslam claims
that the state of Tennessee is losing between $300 and $500 million
a year on untaxed Internet sales. Haslam says, “it’s not going
to begin eroding the state’s tax base; it already is. Something
has to happen nationally…It has to be addressed on a national
level or we’re going to keep playing these kinds of move-around
games.” What’s next, Governor Haslam? Would you support restrictions
on individuals and businesses physically moving from higher tax
jurisdictions such as California to lower tax jurisdictions such
as Tennessee? Isn’t that a “move-around game” as well?
In addition,
Haslam’s estimate of $300 to $500 million in lost tax revenue
is problematic. If folks are forced to pay more for their purchases
on the Internet, they will have less money to spend on other purchases.
This means that they might not buy as much. Thus, tax revenues
may drop in other areas. While tax-and-spend politicians like
Haslam are always looking for ways to tighten the onerous net
of taxation, they ignore the reality that the more burdensome
the tax load becomes the less money they actually collect. Meanwhile,
higher taxes further stifle and suffocate the economy. As the
great Austrian economist Ludwig von Mises said, “capitalism
breathes through those [tax] loopholes“.
Likewise,
many brick-and-mortar retailers may be surprised to find that
taxing their Internet counterparts may not necessarily result
in increased sales in their own stores. Again, higher taxes mean
that consumers have less money to spend on other items. In some
instances, consumers will pay higher prices for certain items,
in other cases they will simply do without, wait for bargains,
etc. Thus, higher revenues for all brick-and-mortar stores are
not a guaranteed outcome of the Marketplace Fairness Act. Brick-and-mortar
retailers should also realize that the Internet offers consumers
more convenience and more choices than traditional shopping does.
Put simply, the game has changed, and this controversy about taxes
is just one aspect of this evolution.
Advocating
higher taxes, even on your competition, ends up hurting everyone.
But the people that are hurt the most are consumers, everyday
working families. The Marketplace Fairness Act will end up forcing
consumers to pay higher prices for the goods they desire. It will
limit consumer choice. As with all tax programs, it will transfer
resources from the productive sector of the economy to the parasitic
sector, thereby inhibiting capital formation and investment. It
will put shackles on one of the economy’s fastest growing sectors,
Internet commerce.
As the debt
crisis caused by the spendthrift Congress intensifies, Congress
will look for more ways to extract tax dollars from Americans.
The Marketplace Fairness Act is particularly terrifying because
Congress is insinuating itself into an area that has traditionally
been left to state governments. Will a national retail sales tax
be next? What about a value added tax? Or a “wealth”
(property) tax? The Marketplace Fairness Act may be the camel
pushing its nose under our tent.
Don’t be
fooled by its title, the Marketplace Fairness Act is anything
but fair.
March
20, 2013
Glenn Jacobs [send him mail] is the actor and wrestler Kane. Visit his blog.
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