Some 21 years ago, the U.S. Supreme Court did us all a huge favor. It ruled that states don’t have the legal authority to tax purchases you made from an out-of-state retailer, unless the retailer had a “physical presence” in your state.
Back in 1992, most of us didn’t purchase all that much from out-of-state companies, so the loss in tax revenue wasn’t significant. But, boy, how times have changed. Today, we buy more than $250 billion worth of stuff from online retailers each year, and that number is expected to rise to $370 billion by 2017. On most of it, we pay no sales tax.
With local and state sales taxes averaging about 10 percent, that’s $25 billion that stays in consumers’ pockets now. Needless to say, there are an awful lot of politicians who want to get their greedy little hands on those funds. You won’t be surprised to learn that the administration of President Barack Obama wants to make it happen.
In fact, Senate Majority Leader Harry Reid is so eager to get an Internet sales tax bill passed that he has skipped the normal committee process and is bringing the bill directly to the Senate floor. Word is that he’s lined up several moderate Republicans who will vote in favor of the measure so the big spenders can claim that it has bipartisan support.
And, of course, many state governors love the idea of collecting hundreds of millions of dollars in new taxes. Many state budgets are already perilously close to bankruptcy, thanks in large part to the incredibly generous pensions and other benefits that state and local government employees have extracted over the years.
In an editorial supporting passage of the Internet tax bill, USA Today complained that its lack “forces cash-strapped states to raise other taxes, or go into debt, to compensate for the $23 billion in annual uncollected e-commerce sales taxes.” Got that? Forget any nonsense about reducing spending. The only choices those poor states have if this measure isn’t passed is to “raise other taxes, or go into debt.”
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