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Internet Tax Bill Would Undermine Constitution

by Brandon Arnold / /

Did you buy something online for your Valentine yesterday? Perhaps some chocolates or flowers? Well, if some Members of Congress get their way, you could soon see the cost of these items – and everything else you purchase on the internet – increase significantly.

That’s because a group of bipartisan politicians just introduced the so-called Marketplace Fairness Act, which would enable state tax collectors to reach into the wallets of out-of-state consumers who make purchases on the Internet. This would run counter to the Constitution’s Commerce Clause, which gives the federal government, not the states, the ability to regulate interstate commerce. This important provision means that the United States is essentially a huge "free trade zone." It’s the reason why you don’t have to pass through customs, declare your purchases and pay levies whenever you cross state lines. In short, the Commerce Clause and the accompanying free-flow of goods, services and people are key reasons why the United States has become the richest nation in the world. The MFA chips away at the very foundation of the Commerce Clause by granting state tax collectors with unprecedented authority to assess taxes in other states.

Supporters of MFA have argued that this is a matter of fairness and that individuals are taking advantage of a tax "loophole" by making purchases online. As my colleague, Nan Swift points out in a recent paper, these arguments are quite simply false. The so-called "loophole" is actually a safeguard that, as she states, "helps to protect taxpayers from many types of aggressive policies that could affect income, property and other taxes."

For more on NTU’s opposition to the MFA, please click here.