With SCOTUS ruling, state govs found another way into your pockets
The Supreme Court decision South Dakota v. Wayfair Inc. marks a new era in internet commerce but not in a good way. It eliminates a substantial advantage that the internet had over the physical world: fewer taxes. People say that this is levels the playing field.
Trump tweeted support for the decision: “about time! Big victory for fairness and for our country. Great victory for consumers and retailers.”
In fact, the decision was heralded by many in the political class, that group distinguished for its talents at justifying every method of getting wealth from your pockets to theirs.
A correction is in order: It is never a victory for consumers to pay more in taxes. A new tax might benefit some retailers but this is short sighted. Enterprise has no greater enemy than a well-funded government that stands ready to tax and regulate more.
The new burdens are going to be intense on startups. It’s hard enough to find capital, build a product, deal with marketing, grapple with consumer service and tangle with federal regulators.
Now even the smallest company will have to comply with the various tax regimes of 50 different states. The high bar for survival will discourage new online companies and reduce competition across the board.
“You could have small online businesses having to file and pay sales tax in all 50 states (assuming they pass laws requiring it),” one online entrepreneur told me, “which would be an absolute accounting nightmare. This would, as far as I can tell, require acquiring a sales tax ID permit in every, or nearly every state. And honestly, it gets more complicated than that.”
Ask yourself this: Why is it that when we “level the playing field,” it always seems to result in governments getting more of your money? If we want online commerce to have no more advantages than brick and mortar, there is another solution: lower taxes on traditional commerce.
People say this will create a “race to the bottom.” I see it differently: This creates a race toward freedom. Government takes far too much money from individuals, families and businesses now. We need a dramatic change in order to inspire new rounds of creativity, productivity and innovation.
What is most disappointing is that states now have, courtesy of the Supreme Court, another excuse to take from you and me money that is not theirs. Make no mistake about it: State governments love this approach to law.
States don’t have access to the Federal Reserve’s printing presses, which means that they can’t run high debts without suffering the consequences. Generally that incentivizes them to keep budgets that sometimes approach being balanced (unlike, for example), the federal government. In many states, such as California, voters have imposed limits on taxation.
What are fiscally ambitious states to do? They look for other ways to extract wealth from the public. The great excuse in California is the use of fake emergencies.
As Bloomberg News recently reported, many cities in California perpetually report emergencies in order to raise fees outside of the legal windows and put a tax on a ballot outside voting seasons, even when the major rating agencies rank them as stable.
When it comes to pilfering, states are always looking for a good excuse. This is why the cause of freedom has worked so hard for so many centuries to erect strict barriers to their powers over person and property. Every time one of those barriers come down, it is not a reason for celebration but for weeping.
It is never a bullish sign for the future when an entire ruling class celebrates increased tax burdens on anyone.
Edward Pr. Stringham is president of American Institute for Economic Research and a professor or economics at Trinity College. He is the author of “Private Governance” (Oxford University Press).
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