Conservative opposition to the Marketplace Fairness Act is misguided

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Like the swallows returning to Capistrano, you can always count on certain conservative songbirds to start chirping when the topic of taxes come up. This week’s debate over the Marketplace Fairness Act is no exception. Right on cue some reliable old conservative voices have piped up about outrageous “new taxes” that all responsible conservatives should oppose.

Unfortunately, the bill’s opponents use all sorts of lies, smears, misstatements and distortions in order to create the false impression that lawmakers who support the bill are for “taxing the Internet” or violating pledges to support lower taxes or smaller government. These folks simply are not telling the truth about the Marketplace Fairness Act or its intended purpose.

The Marketplace Fairness Act is not a tax increase. It will not increase taxes on consumers. It will not increase taxes on businesses. And it will not tax the Internet or create a national sales tax as some have outlandishly claimed. The bill is simply a responsible, constitutional and, dare I say, “conservative” way to permit states to keep their sales tax policies up to date.

What it would actually do is give states the authority to require out-of-state sellers to collect sales tax on purchases made by their residents. Consumers are already supposed to voluntarily report untaxed purchases and submit the tax to their states, so this is a matter of enforcing an existing tax rather than creating a new tax. Only purchases made over the Internet would be taxed, not access to the Internet. And the tax rates and list of taxable items would be the same as what a shopper would pay at a bricks-and-mortar store in their state – not a new national sales tax.

Specifically, there are two important conservative principles at stake here: states’ rights and the notion that the best tax policies are the most broad-based ones.

True conservatives have always supported the role of states and local governments over policies that concentrate power in Washington.

The Marketplace Fairness Act restores the appropriate role of states in setting sales tax policies for their citizens. If an online seller wants to make products available to millions over the Internet, they should abide by the laws that apply where their customers are located the same as local stores. Fair is fair.

Moreover, it is important to note that a failure by Congress to act on sales tax fairness would place the views of Washington lawmakers above the views of elected officials in the states on sales tax policy – a matter of clear state jurisdiction for decades.

Conservatives have always supported broad-based tax policies with the lowest possible rates. The Heritage Foundation’s website articulates their core tenet of tax policy this way: “a better tax system would apply lower rates to a simply defined base that is not eroded by an overabundance of exemptions, credits and deductions.” The Marketplace Fairness Act would do just that.

Without federal legislation, states will find their sales tax laws undermined by the rapid growth of online retailing, which has been growing exponentially. This means states that rely on sales taxes for revenue will find less and less revenue available every year. This reduction will lead to higher taxes on income and property, shifting the burden and resulting in actual tax increases rather than imagined tax increases. That doesn’t sound very conservative to me.

Many reform-minded governors – including conservative governors – have called on Congress to fix this blatant problem so they can move ahead with substantial tax reform in their states and even work to reduce tax rates.

Congress should heed those calls and act now to pass the Marketplace Fairness Act once and for all. Let’s cage up all these “conservative” songbirds and level the playing field for all retailers.

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