Congressional plans to get tough on Internet sales tax collections have hit a stone wall in the U.S. House. And that has to be welcome news for the majority of Americans who like Internet sales taxes just the way they are — almost nonexistent.
A June poll conducted by the Gallup organization showed widespread opposition to a tougher collection policy. The U.S. Senate passed the Marketplace Fairness Act by a comfortable 69-27 margin, but the bill has stalled in the House. Sen. Mary Landrieu, D-La., voted for it, and Sen. David Vitter, R-La., was opposed.
Getting a measure of this magnitude enacted is never easy in either chamber, but the odds are definitely stacked against it in the GOP-controlled House. Speaker of the House John Boehner, R-Ohio, is opposed, along with U.S. Rep. Bob Goodlatte, R-Va., chairman of the House Judiciary Committee that would hear the bill. Goodlatte said the legislation won’t be considered without some major changes.
The Senate bill would allow states to require online sellers to collect sales taxes for state and local governments. The only companies doing it now are those that have a physical presence in a state. Companies with out-of-state sales of less than $1 million would be exempted.
Some states, like Louisiana, have laws on the books requiring income taxpayers to report their Internet purchases and pay the required sales taxes when they file their annual returns. However, most taxpayers don’t do it, and the law isn’t enforced.
Why the big push for Internet sales taxes?
Lost revenue heads the list. It has been estimated states are losing $23 billion a year in tax revenues. The Advocate reported that Louisiana is losing $800 million annually.
In-state businesses believe it’s a fairness issue. Their owners say the Internet legislation would level the playing field.
Economist Arthur Laffer thinks the bill would increase the country’s gross domestic product by more than $563 billion and create 1.5 million jobs nationwide. His backing is significant because the Los Angeles Times in a Friday copyrighted story said Laffer “occupies an exalted place in Republican tax-policy circles…”
The Times said Laffer believes tax evasion is a bad thing because it causes government to raise taxes on people who obey the law. And he says consumption taxes are better than income taxes. But the newspaper said excessive sales taxes also hurt consumer spending and are harder on low-income families.
“All taxes are bad, some are just worse than others,” Laffer told FoxNews.com. “When you look at this carefully, this is exactly what you want. The lowest tax rate on the broadest possible base.”
Laffer said income taxes are burdensome and a deterrent to economic development, and they could be lowered if the bill passes the House. But opponents say it isn’t necessarily true that states would lower other taxes if the Internet bill became law.
Ultra-conservatives definitely disagree with Laffer. U.S. Sens. Ted Cruz, R-Texas, and Rand Paul, R-Ky., both tea party favorites, are outspoken opponents. Cruz argues the $23 billion in uncollected taxes are new taxes. Paul told The Advocate the best way to stimulate growth is to leave more money in the economy, a favorite argument of tax opponents.
“(The Internet) has been a portal to the American dream,” Cruz told U.S. News and World Report. “The idea that Washington would get together to slam the door makes no sense at all…”
Gallup said it is significant that Americans 18 to 29 years of age oppose the forced collection of Internet sales taxes by a 73-to-27 percent margin. The margin of opposition dropped to 62 percent for those in the 30 to 49 age bracket.
“… If Republicans in the House oppose the Internet sales tax bill, that may help the GOP’s appeal to younger Americans, a key demographic in the party’s plans to build support before the 2014 and 2016 elections,” the Gallup report said.
Adults nationwide oppose the Internet tax measure 57 to 39 percent. The only group favoring Internet taxes (50 to 46 percent) are those ages 50 to 64. Americans 65 and over are split 46 to 46 percent, with 8 percent having no opinion.
The highest percentage of opposition in the Gallup poll came from Republicans (63-34 percent); families where household income is less than $24,000 (60-34 percent); and from those who are not college graduates (59-37 percent).
Government Technology Magazine said some states aren’t waiting for Congress to act. Some imposed sales taxes on online transactions July 1. Minnesota, for example, has imposed taxes on digital audio works like songs, readings of books, speeches, ring tones or other sound recordings. Iowa and Maine are two others, the magazine said.
One of the leaders in the fight against Internet sales taxes is Grover Norquist, founder of Americans for Tax Reform and author of the no-tax pledge. He opposes taxes of any kind. Gov. Bobby Jindal is a devotee of Norquist, so don’t look for Louisiana to make any effort to tax Internet sales. It won’t even come close.