Should online sellers have a gov-sanctioned leg up on brick & mortar?

By Curt Bramble
Utah State Senator

Market Place Fairness Act
Utah State Senator Curt Bramble

Gridlock in Washington has stymied efforts by conservatives to enact pro-growth tax reform and other policy initiatives that would help shrink the size of government and grow the private sector economy. But at the state level it’s a different story. Conservative governors and state legislatures are leading the charge to cut taxes and promote free markets as an elixir for the partisanship and red tape that seem to be the two major exports from our nation’s capital.

States could do more if Washington simply untied our hands and returned more power back to state legislatures. Fortunately, amid all the turmoil, there is an important issue gaining steam with the leadership of members from both parties. It is an issue that goes to the core of America’s free enterprise system and our Founding Fathers’ fundamental belief in states’ rights. Congress is considering closing the loophole that currently gives online-only retailers special treatment in the marketplace over traditional brick and mortar retailers.

One of the founding principles of our country is a belief in the free enterprise system where buyers and sellers are the driving forces in the marketplace, and not a government that unfairly picks winners and losers. Current tax policy effectively subsidizes online sellers and gives them a “government-sanctioned leg up” over their competitors. This inequity punishes local job providers in our communities and disrupts basic free market competition. States have been clamoring for Washington to end this inequity for over a decade, and it appears this long-overdue reform could soon be a reality.

With broad and bipartisan support, including many conservative Republicans, the Senate last year passed the Marketplace Fairness Act, which would allow states to collect already-owed Internet and remote sales taxes from online businesses. The bill aims to establish a fair and level playing field on which all businesses can compete, while restoring powers back to state governments what was stripped through an antiquated court decision more than 20 years ago.

In states across the country, savvy conservative lawmakers are embracing this rare opportunity from Washington to lower taxes and make their states more competitive.

In Wisconsin, Gov. Scott Walker has already signed legislation that would dedicate revenues generated from federal e-fairness legislation to income tax relief for middle class families and small businesses. That plan was spearheaded by State Representative John Nygren, the Republican co-chair of the state’s Joint Committee on Finance, who wrote in a recent Wisconsin State Journal op-ed that the “current system of government picking winners and losers in the marketplace has created a disincentive for small businesses to invest in communities, hire workers and grow our economy.”

In Ohio, state legislators worked with Gov. John Kasich to include a provision in their budget that directs revenue gained from passage of marketplace fairness to Ohio’s income tax reduction fund. As in Wisconsin, lawmakers in Ohio are proactively taking steps to improve their state business climate by closing loopholes and cutting taxes — conservatives in Washington should take note.

And here in Utah, Sen. Wayne Harper [see last year’s post] recently sponsored and passed legislation that will broaden our sales tax base and reduce our sales tax rate. His legislation mandates that any new revenue received must be deposited in a restricted account so that the Utah Legislature can then reduce the overall sales tax rate, ensuring that passage of federal legislation will be revenue neutral in Utah.

These state lawmakers are enacting conservative economic policies by championing tax reform that closes loopholes and special interest carve-outs in favor of flatter and lower overall tax rates for everyone. The idea comes from an economic playbook championed by respected conservative economist Arthur Laffer who recently released a study showing that closing the sales tax loophole and cutting taxes would have profoundly positive economic results. Laffer concluded that gross domestic product would grow by more than $563 billion, and 1.5 million jobs could be created nationwide if Congress would simply untie the hands of governors and state lawmakers with this policy.

The 113th Congress failed to pass eFairness legislation. However, we are fortunate to have the leadership of Congressman Jason Chaffetz of Utah, who has drafted a new bill that gives the states collection authority and provides small businesses with extra protections. We expect this legislation early in the 114th Congressional session that will finally end the reverse discrimination that hamstrings Main Street retailers. The Utah Legislature has been at the forefront and unwavering in their support of the federal legislation seeking tax equity by supporting federal legislation that will level the playing field between brick and mortar businesses and remote online sellers.

Originally posted in The Daily Herald and on The Utah Senate site. Reposted with permission.

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