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An Open Letter to Fiscal Conservatives in the Senate: The “Main Street Fairness Act” Is a Dead-End Street for Taxpayers and Small Businesses!
June 2, 2011
On behalf of the 362,000-member National Taxpayers Union (NTU), I write to express our deep concern about soon-to-be-introduced legislation under the likely name of “Main Street Fairness Act.” We strongly urge Senators against supporting this bill, which according to media reports will be authored by Senator Durbin. Despite its title, the Main Street Fairness Act would in our opinion inflict a great deal of harm upon taxpayers as well as small businesses, by effectively giving Congress’s blessing to a multistate scheme known as the Streamlined Sales and Use Tax Agreement (SSUTA).
NTU has long opposed SSUTA on a number of grounds. Contrary to proponents’ claims, retail e-commerce purchases are not “tax-free.” Online sales involving a buyer and a seller in the same state are subject to tax at purchase, while remote sales are subject to use tax on the part of the customer. Numerous other tax liabilities are triggered in the course of this activity, including income and payroll taxes for the employees involved and fuel taxes for shipping.
Furthermore, SSUTA would heap heavy burdens upon small businesses, which would face the task of collecting and remitting taxes in an environment with as many as 15,000 jurisdictions capable of levying taxes on sales. These burdens would not simply disappear through the existence of compliance software, as some supporters of SSUTA seem to imply. After all, despite the widespread use of preparation programs for federal individual and corporate income taxes, citizens and businesses spent some 7.6 billion hours in 2009 complying with Treasury Department paperwork, according to the Information Collection Budget. NTU calculates that the value of this time alone (not counting software and other costs) was more than $227 billion.
Equally important, taxpayers could be forgiven for worrying that SSUTA’s multistate structure would naturally encourage participating governments with lower sales tax rates to “round up” their levels, thus depriving citizens of the tax competition that has characterized the “laboratory of the states.” Of more immediate concern is that so many of the “Main Street” businesses Senator Durbin’s forthcoming bill aims to protect are actually thriving because of, not in spite of, the Internet. E-commerce allows “mom and pop” firms and even sole proprietorships to market their goods and services to the entire world, not just to their immediate neighborhoods. It also gives these firms a much wider range of options to purchase supplies and other inputs, maximizing their cost-efficiency and productivity.
Legitimate debate continues over what constitutes taxable nexus in multistate commerce, and over matters such as how states can better make citizens aware of use taxes. Thoughtful legislation, such as the Business Activity Tax Simplification Act (H.R. 1439) and H. Res. 95 (supporting the preservation of Internet entrepreneurs and small businesses) has been introduced in response. The Main Street Fairness Act is certainly not among these appropriate, pro-taxpayer remedies.
Last week, more than two dozen organizations – among them NTU – sent a letter asking all Senators to “declare net tax increases ‘off the table’ in any budget or debt limit negotiations.” Although we do not speak for other groups on SSUTA, we believe that the principles outlined in that joint statement would also advise against any Senator’s support for the Main Street Fairness Act. States, many of which are facing fiscal problems of their own, must likewise look to spending restraint rather than new revenues for solutions. Accordingly, we hope that you and your fellow Senators will avoid cosponsoring or voting for the Main Street Fairness Act. Please feel free to call upon us if we can offer advice or assistance on this issue.Sincerely, Pete Sepp Executive Vice President
108 North Alfred Street Ø Alexandria, Virginia 22314 Ø Phone: (703) 683-5700 Ø Fax: (703) 683-5722 ØWeb: www.ntu.org