U.S. senators like the idea of allowing each state to force vendors outside their jurisdictions to collect sales taxes. National Review does not like the idea. The magazine’s latest print edition offers an alternative in its section dubbed “The Week.”
A large bipartisan majority of the Senate voted to let states collect sales taxes from vendors located outside their jurisdictions. Most of the arguments that the majority made were terrible. Senators claimed that granting the states this power would advance federalism, for example. The Founders’ federalism was actually intensely concerned with restraining states’ extraterritorial economic aggression. That’s why it would take an act of Congress to give the states this power. The unterrible argument the senators made is that it is unfair for states to collect taxes from consumers at physical stores when Internet buyers do not have to pay tax. Some unfairness is, however, built into our state-by-state sales-tax system, and this bill would create its own. A Massachusetts resident would now have to pay his state’s taxes when buying online but could evade them by shopping in New Hampshire. One way to lessen unfairness would be to have all states tax sales based on the origination point of the transaction: The state where the Internet seller was located, for example, would levy taxes on its sales. That rule would restrain the states’ abuse of the taxing power, since sellers would be able to relocate in more welcoming states. Presumably that is why the state governments, and their too-ardent friends in the Senate, are not interested in that kind of federalism.
As noted before in this forum, one way to avoid additional sales tax is to scrap the sales tax altogether and move toward a consumed-income tax.
