Internet sales tax measure splits GOP

House Republicans are under intensifying pressure to pass an online sales tax measure from leading GOP governors who have promised to use the revenue it would unleash to cut taxes elsewhere.

Govs. Terry Branstad (Iowa), Paul LePage (Maine) and Scott Walker (Wis.) have all made the tax-cutting vow in reaching out to lawmakers.

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The pledge from GOP governors comes as all sides acknowledge that the Marketplace Fairness Act — which easily cleared the Senate last month — faces a stiffer test in the House, where conservatives are skeptical of the bill.

But supporters of the legislation, as well as lawmakers who are on the fence, said the lobbying efforts of the governors could only help.

“He’s pretty good at lowering taxes,” Rep. Steve King (R-Iowa) said about Branstad. “So I’d say it’s a positive.” King, who has called for a national sales tax, told The Hill he was sympathetic toward the bill. 

“The main point is that states ought to be allowed to decide their own tax policy,” said Sen. Lamar Alexander (R-Tenn.), a backer of the bill. 

But a group of conservative lawmakers — many of them freshmen or relative newcomers to Capitol Hill — are digging in their heels against the bill, and say that pleas from even respected governors will not move them.

“Gov. Walker’s a great leader, but in general, I’m always a bit skeptical when somebody promises a tax decrease in exchange for a tax increase,” Rep. Steve Daines (R-Mont.) said at a news conference organized by opponents of the bill. 

Even Rep. Reid Ribble (R-Wis.), who called himself a “big supporter” of Walker, said he wasn’t sold on his tax-cutting pledge.

Ribble said he hadn’t personally talked to Walker about the proposal, but added, “It wouldn’t surprise me that state legislators and state governors would like to see it because they view it as a revenue source that they’ve not been able to tap into.”

Under the Marketplace Fairness Act, states would be allowed to force online U.S. retailers to collect sales taxes on purchases from their residents — even if the business wasn’t physically located in that state. 

Currently, states can only mandate that companies located within their borders charge a sales tax.

Supporters of the bill — including Amazon and lobby groups like the National Retail Federation and the Retail Industry Leaders Association — say the proposal corrects a long-standing and unfair advantage that online retailers have over brick-and-mortar shops. 

The estimated $23 billion in fresh annual revenue would also come at a time when state and local governments are still struggling to make ends meet, and the bill has the backing of the bipartisan National Governors Association.

Retail groups pushing for House passage of the online bill say that the governors’ statements are helping to push back on what they say is a misinformation campaign run by opponents. 

Jason Brewer, vice president for communications and advocacy for the Retail Industry Leaders Association, said the governors help to shed light on the fact that consumers generally already owe — but rarely pay — taxes on online purchases.

“It completely undercuts the argument from Jim DeMint that this is some kind of tax increase,” Brewer said, referring to the former South Carolina senator and current head of the Heritage Foundation. “These governors provide an incentive to their delegation to level the playing field for their main street retailers and cut taxes for everyone.”

Reps. Steve Womack (R-Ark.) and Jackie Speier (D-Calif.), sponsors of the House version of the online sales tax bill, are set to appear at a Wednesday event to push for House passage of the bill. Technology companies that make software to ease the collection of sales tax will attend as well. 

“There’s strong opposition by a lot of people who just simply haven’t read the bill,” Womack told The Hill.

Branstad promised in a letter to Iowa’s House delegation last week to “enable further tax relief” to the state’s taxpayers once the bill passes. Both Walker and LePage have specified that the new revenue would be used for income tax relief. 

“It is very helpful to us to have governors who want to cut taxes by leveling the playing field,” said David French, senior vice president for government relations for the National Retail Federation. “We like that message.”

Still, the online sales tax bill has to make it through a host of high-profile skeptics in the House — perhaps none bigger than Speaker John Boehner (R-Ohio), who has expressed concern that forcing small businesses to collect sales taxes from around the country would be a burden. 

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) has also outlined a series of concerns about the bill, while adding he is open to considering legislation on the matter.

Some Republicans and the online retailer eBay also believe the provision exempting businesses with less than 

$1 million in out-of-state sales is too low.

“We are talking to a lot members, and we feel that many of them know that the Senate bill does not treat small businesses that use the Internet fairly,” said Brian Bieron, eBay’s senior director for global public policy.

At Tuesday’s news conference, lawmakers like Sens. Ted Cruz (R-Texas) and Rand Paul (R-Ky.) cast their opposition to the online sales tax bill in both generational and populist terms. 

Cruz noted all the GOP senators 50 and under — seven in all — voted against the measure in the Senate, something he chalked up to being part of “the Internet age.”

“What we are seeing in this bill is Washington ganging up with the giant corporations,” Cruz said. “Democrats and Republicans, arm in arm with giant corporations.” 

Rep. Thomas Massie (R-Ky.), meanwhile, dismissed the idea that the proposal wasn’t a tax increase, and said that the measure would still be a regulatory burden if the new revenues went to tax cuts in the states.

“If at the end of a transaction, I have less money in my wallet, and the government has more money in their coffers, this is a tax,” Massie said. “So we should call it for what it is.”

Grover Norquist of Americans for Tax Reform said the plan to cut taxes elsewhere from Walker, Branstad and others would be the best-case scenario if the bill passed. But he also noted that not every governor has said the revenue would be used to finance tax cuts.

“Fine if you live in those two states,” he said.