Online Sales Tax Is a Money Grab by Politicians

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The debate over the so-called Marketplace Fairness Act is not about a level playing field. It is an attempt by politicians to grab more tax revenue to facilitate bigger government.

It's not unusual, of course, to find that politicians want more of our money. Heck, that's a dog-bites-man story. What makes this situation so unusual, however, is that they're trying to reach outside their borders to grab more money.

Here's what you need to know. Some states impose very high sales taxes, and politicians get irked that some consumers avoid the taxes by using the Internet to buy products from out-of-state merchants. But rather than go after in-state consumers, they want to create an elaborate and intrusive system to force out-of-state merchants to act as tax collectors.

Talk about taxation without representation!

[See a collection of political cartoons on the economy.]

To understand why this is a radical step, imagine if you took a trip to Las Vegas and played blackjack, but then got arrested when you returned home because your state doesn't allow gambling. That would be an outrage because a state only has sovereign power to enforce laws (good ones or bad ones) on things that take place within its borders. And it would be equally outrageous if state governments tried to force Las Vegas casinos to discriminate against non-Nevada residents.

The Marketplace Fairness Act violates the important sovereignty principle simply because some politicians have spent their states into a fiscal ditch. But this issue involves more than just greedy politicians and attacks on sovereignty. This legislation also has very troubling implications for privacy. It can only work by creating a massive database that matches online purchases with the state and local sales tax rates for every consumer.

[Read the U.S. News debate: Is a Flat Tax a Good Idea?]

I don't know about you, but I'm not confident that this type of untested system will be secure. We've already seen major leaks of confidential data from both government and private companies. This database will be a magnet for identity thieves and other hackers looking for credit card information. And you also might not want the world to know that you're buying skimpy undies from Victoria's Secret or dirty movies from some Web site. Heck, it's probably not a good idea to let government get all this information, even if they somehow managed to safeguard it from outside eyes.

Proponents of this risky tax are right about one thing. Many state and local governments are in fiscal trouble. But these governments got in trouble because politicians are compulsive spenders. And just as you don't cure alcoholics by giving them keys to a liquor store, you don't solve the problem of excessive spending by giving politicians a new tax.

Daniel Mitchell

About Daniel Mitchell Senior Fellow at the Cato Institute

Tags
shopping
internet
sales tax
business

Other Arguments

#2
110 Pts
Jim DeMint: Online Sales Tax is Taxation Without Representation

No – Jim DeMint: Online Sales Tax is Taxation Without Representation

Jim DeMint Republican Senator from South Carolina

#3
24 Pts
Only Largest Companies Could Survive Internet Sales Tax Plan

No – Only Largest Companies Could Survive Internet Sales Tax Plan

Adam Thierer Senior Research Fellow for the Mercatus Center at George Mason University

#4
18 Pts
Online Sales Tax Would Create an 'Unlevel' Playing Field

No – Online Sales Tax Would Create an 'Unlevel' Playing Field

Andrew Moylan Vice President of Government Affairs for the National Taxpayers Union

#5
-57 Pts
Online Sales Tax Doesn't Make Sense in Today's Economy

No – Online Sales Tax Doesn't Make Sense in Today's Economy

Neil Niman Associate Professor of Economics at the University of New Hampshire

#6
-136 Pts
Closing Online Tax Loophole Will Level the Playing Field

Yes – Closing Online Tax Loophole Will Level the Playing Field

Sandy Kennedy President of the Retail Industry Leaders Association

#7
-204 Pts
Online Sales Tax Problem Is Resolving Itself

No – Online Sales Tax Problem Is Resolving Itself

Steve DelBianco Executive Director of NetChoice

#8
-246 Pts
Not Taxing Internet Retailers Harms Local Economies

Yes – Not Taxing Internet Retailers Harms Local Economies

Michael Mazerov Senior Fellow at the Center on Budget and Policy Priorities.

#9
-410 Pts
Congress Must Act to Modernize Sales Tax Policy

Yes – Congress Must Act to Modernize Sales Tax Policy

Michael Kercheval President of the International Council of Shopping Centers

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