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A favorite quote of mine, by Benjamin Franklin, goes like this: “In this world nothing can be said to be certain, except death and taxes.”
This year, American businessmen and consumers are being forced to reflect on the certainty of taxes as some members of Congress – including many Republicans - are advocating for the Marketplace Fairness Act. In case you need to be reminded, the Marketplace Fairness Act is a tax bill that would authorize an interstate compact that would allow states to require online retailers to collect taxes on remote sales, essentially implementing an internet sales tax on purchases made out-of-state.
Currently, states and localities are only allowed to tax in-state sellers. For example, a retailer who owns a store in California and sells t-shirts online to a customer who lives in California must collect a sales tax on that product. But if that same retailer sells a t-shirt to a customer who lives outside their state, i.e. one who lives in New York, he doesn’t collect a sales tax because he does not have a physical store in New York. The Marketplace Fairness Act proposes to change the law to allow New York to force that California retailer to collect a NY state sales tax on the t-shirt. People who purchase goods online from out of state will be subject to a tax hike. You can learn more about how the Marketplace Fairness Act works and its negative effects here.
This renewed effort to tax online transactions puts yet another burden on economic activity at a time where we need to focus on growth and recovery. Furthermore, Senate and House Republicans, particularly those who support this tax increase, need to be reminded that voters do not support tax increases. With a stagnating economic recovery, unemployment at 7.3%, a national debt at $16.7 trillion dollars, and absolutely no indication that the majority in Congress have any desire to rein in spending or send an actual budget to the President (the last budget was passed in April of 2009, four years ago), it would seem intuitive that Americans aren’t gleefully running through the streets and shouting for joy by the prospect of new taxes. But since some Congressional Republicans rarely seem to listen to voters these days, here’s some new data compiling voter reactions to the Marketplace Fairness Act, or internet sales tax:
A recent poll conducted by the National Taxpayers Union and R Street found that when likely voters are asked if they support allowing states to force online retailers to collect taxes from customers in that state, even if the retailer has no physical presence there, 57.1% of them oppose the legislation. When asked if they would vote for a law that would allow each state to collect sales taxes on purchases its residents make online over the internet, 57% responded that they would not vote for such a law on Election Day. Nearly two-thirds of voters oppose this new internet sales tax, and that’s not just by party lines.
The poll shows that the MFA is “deeply unpopular across the board,” with liberals opposing it 46.7% to 44.9%, moderates opposing it 54.9% to 39.5%, and conservatives opposed 65.2% to 27.7%. Further, the study indicates that “swing voters like ticket-splitters, suburban voters, independents, and younger women all oppose MFA.” Among the 58.4% of swing voters who oppose the legislation, 42.1% strongly oppose the Marketplace Fairness Act.
Do I even have to point out that Republicans have the potential to mobilize on this issue and start winning elections? Typically, Republicans need support from independents, rural voters, and swing voters like suburban voters, independents, and young women, all who, according to the poll, have majority opposition against the MFA.
Republicans also need to energize their base and get GOP primary voters to get out and vote on Election Day. Among GOP voters, 52% strongly oppose while 10% somewhat oppose the bill. That’s 62% opposition within the Republican Party base, a supermajority of Republican voters. With turnout being low to start during a midterm election, can incumbent Republicans really afford to further disgust their base by supporting this tax?
If Congressional Republicans need further convincing (they shouldn’t), then consider this: younger voters, especially those who were “born digital” (18-25 years old), oppose the legislation 52.9% to 45.1% with 33.3% strongly opposed to an internet sales tax. Those ages 26-40 oppose MFA 55.8% to 36.6%. Altogether, people under 40 oppose the bill a whopping 64.6% to 27.8%. These are the demographics Republicans need to reach if they plan on winning elections.
The single most condemning statistic for the Marketplace Fairness Act, however, can be found when the tax enforcement aspect of the legislation is explained to voters. To clarify, I’ll borrow the example the study uses. Suppose a customer in New York makes an internet purchase from an Oregon retailer, where there is no sales tax. Under the MFA, authorities in New York can force that Oregon retailer to collect New York sales taxes and send it to New York, where the tax imposed on the retailer’s merchandise isn’t even used to benefit the retailer through Oregon government services.
What does the national likely voter think of that? 70% of those polled oppose this blatant violation of state sovereignty with supermajority opposition for every ideology, every major party, and every man and woman polled, except for those who never make online purchases.
The conclusion is obvious. Support among Congressional Republicans for the taxes imposed by the Marketplace Fairness Act means certain death for their political careers. If Republicans are serious about fixing the economy and putting us on a path to reduce the debt and achieve fiscal sanity, (or if they just want to get elected and re-elected) they need to stand up and fight battles to cut taxes and stop spending, not propose new and inventive ways for the government to take money out of our pockets.