Iowa governor lobbies for online sales tax bill

Terry Branstad, Iowa’s Republican governor, is urging his state’s four House members to back a Senate-passed measure that would give states greater latitude to collect sales tax revenue on online purchases.

Branstad, one of several prominent GOP governors to back the Marketplace Fairness Act, said the measure could allow Iowa to collect an extra $18 million a year — revenue, Branstad said, that would be used to offset other tax relief.

“I want to be transparent in my intentions regarding any additional revenues if the Marketplace Fairness legislation ultimately becomes law — I intend to utilize any related revenue that the State would receive to enable further tax relief to Iowans, including income tax reductions,” Branstad wrote in a letter to Rep. Bruce Braley (D) dated Wednesday and obtained by The Hill.

“Such reductions would help stretch family incomes, create jobs, and increase our competitiveness compared to other states.”

With his letter, Branstad joins other prominent Republican governors in trying to show that they will not use the new online sales tax revenue for big-government purposes.

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But the Iowa governor’s outreach also underscores that the online sales tax bill has deep pockets of skepticism among top House Republicans, even as supporters say the Senate’s action on the measure has given them momentum.

The Senate passed the Marketplace Fairness Act last month, in a bipartisan 69-27 vote that came after the chamber’s top Democrats sidestepped the Finance Committee and brought the bill straight to the Senate floor.

House Speaker John Boehner (R-Ohio) said in May that he probably couldn’t support the bill, which would allow states to collect sales taxes on purchases from any state. States are currently only allowed to collect from businesses with a physical location within their borders due to a 1992 Supreme Court case.

Boehner says that the online sales tax would be a burden on small businesses, while House Judiciary Committee Chairman Bob Goodlatte (R-Va.), whose panel has jurisdiction on the measure, has said he has “serious concerns” about the Senate bill.

Iowa’s two senators split on the online sales tax bill, with Tom Harkin, a Democrat, supporting it and Chuck Grassley, a Republican, voting against it.

None of Iowa’s four congressmen — Braley and Dave Loebsack, both Democrats, and Steve King and Tom Latham, both Republicans — are among the proposal’s more than 60 co-sponsors in the House.

Big-box retailers and Amazon are some of the key supporters of the Marketplace Fairness Act, saying it would roll back an unfair advantage that online sellers have over their brick-and-mortar counterparts.

The White House has also announced its support of the measure, which could raise some $23 billion for state governments. Generally speaking, online shoppers are required to report taxes on their purchases, but that rarely happens.

Still, big name conservative groups like Grover Norquist’s Americans for Tax Reform and the Heritage Foundation have said the measure would serve as a tax increase for consumers while also expanding the reach of state governments.

Some tech groups have also echoed Boehner in saying the bill would make it more difficult for Internet startups, while eBay has been lobbying to exempt retailers with less than $10 million in out-of-state sales from the bill, instead of the current $1 million.

Goodlatte has said that, despite his concerns that the current version is too complicated and would weigh down businesses, he is willing to consider online sales tax legislation. The Virginia Republican also pushed back on a report this month that said it was unlikely that the House would pass the Marketplace Fairness Act.

“The House Judiciary Committee is looking at alternatives that could enable states to collect sales tax revenues without opening the door to aggressive state action against out-of-state companies,” Goodlatte said in a recent statement. “Furthermore, any alternative in the House would address fairness to all businesses and consumers.”

Branstad and other Republican governors are clearly taking those concerns from the right into account as they lobby for the bill.

In his letter, Branstad pointed out that he signed the biggest tax cut in Iowa’s history on Wednesday and stressed that he had “no interest or intent in growing the size of the state government with these new revenues.”

Gov. Scott Walker (R) of Wisconsin said in a letter to his state’s delegation last month that he would use the fresh revenue to lower the state’s income taxes. Meanwhile, in Goodlatte’s home state of Virginia, the transportation package signed into law by Gov. Bob McDonnell (R) also utilizes online sales tax revenue.

Jason Brewer, a spokesman for the Retail Industry Leaders Association, called Branstad’s letter “another great step forward for the effort,” and said it was a “roadmap” for how conservative governors would use the added flexibility that comes with the Marketplace Fairness Act.