One of the basic principles of the conservative movement is that
the market, not the government, should pick economic winners and
losers. The only role that government should play is to ensure a
fair and level playing field.
When it comes to sales taxes, that principle has gone out the
window in the Internet age. Here’s an example: If you need a
new pair of running shoes, your neighborhood sporting goods shop is
compelled by state law to collect any sales taxes due. But the same
is not necessarily true for a store selling shoes online.
Under current law, states are only allowed to mandate the
remittance of sales taxes on retailers physically located within
their boundaries. Which means online competitors can
often sell the exact same shoes at a reduced price—no
taxes included. (Technically, the shoes’ purchaser is supposed to
declare and pay the tax directly, but you can probably guess how
often that happens.)
You can understand how frustrated these brick-and-mortar shop
owners are with their government. This tax discrimination tilts the
playing field against them. The customer (and profit) goes not
to the company that is most innovative or efficient, but to the one
least shackled with taxes. In other words, the government is
picking the winner and the loser.
Our government—at all levels—should treat Main Street retailers
and online ones equally, as would be consistent with conservative
principles. Thus far, Congress has refused to give up power
and allow states to regulate in this area. But there is
now a
bipartisan proposal, the Marketplace Fairness Act, to give
states full authority to set policies regarding collection of state
sales taxes. This bill would not give any additional power to
tax, nor does it encourage higher taxes. It simply allows for
uniform collection of taxes that are already legally due.
Conservatives need to embrace this proposal, which would put all
retailers on equal footing, and then step back and let the market
work.
Of course all conservatives embrace the concept of lower taxes
for consumers, but not through carve-outs and special favors in the
tax code. William F. Buckley, Jr., the godfather of the
conservative movement, understood this growing problem, even as the
Internet was in its infancy. In an
article penned in 2001 and entitled “Get that internet tax
right and don’t contaminate this medium,” Buckley described the
status quo as inconsistent with conservative principles: “…if the
advantage of tax free internet commerce marginally closes out local
industry, reforms are required.” He suggested that online sellers
of goods could be required to collect the sales tax and send it
straight to the treasury of the state in question—which is exactly
what the Marketplace Fairness Act, proposed by Rep. Steve Womack
and Sens. Mike Enzi and Lamar Alexander, would allow.
There are wonderful conservative governors across the country
who take their pledges to not raise taxes seriously. One such
governor, Mike Pence of Indiana, advocated fixing this tax
discrimination when he was a member of Congress. I trust Pence to
tax transactions in his state fairly and at the lowest tax rate
possible. Michigan Governor Rick Snyder has encouraged states
to use this proposed authority only to impose fairness, and to
offset any increased revenues with tax cuts elsewhere.
Taxes should be as low as possible, evenly applied, and as
visible as fireworks on the Fourth of July. If everyone has to
pay them and knows exactly what is being taxed, we have our best
chance as conservatives to advocate their reduction. However
our current tax code is a bizarre mixture of earmarks, carve-outs,
and special treatment for politically connected interests, with the
true level of taxation for everyday Americans hidden.
The tax discrimination in favor of online sales is unfortunately
another example of a federal government that has lost its way by
clinging to its power. Under federalism and the 10th Amendment,
powers not vested in the federal government are retained by the
states. Yet some conservatives are uncomfortable with this, because
they fear blue state will become bluer, even less hospitable to
business and freedom. But it is the genius of the Founders to have
created a country that allows states to be a reflection of the
values of the people who reside in them. Decisions that can be made
by governors and state legislatures—who are close to the people and
thus responsive to citizens’ needs—should be left at the state
level. That is the heart of true federalism.
We should embrace, not fear, taking power back from Washington,
D.C. States have famously been called the laboratories of
democracy. As states with free-spending, out-of-control governments
founder, Americans will vote with their feet and flock to the
success found in red states. We have all watched as well-meaning
conservatives, elected to Congress, find themselves essentially
powerless to change the system, even with allied majorities and
presidencies. This doesn’t mean we should retreat from
fighting in the halls of Congress, of course. But our movement will
achieve greater success when Washington can be bypassed
altogether.
Photo: Wikimedia Commons
