The Michigan House of Representatives is considering two bills 4202 and 4203 to expand Michigan’s taxation authority into other states. These bills are unlikely to withstand constitutional scrutiny, without the passage of the so-called Marketplace Fairness Act (MFA). However, the MFA is vastly unpopular with voters nationwide.
Due to the harm House Bills 4202 and 4203 would cause Michiganders and the likely unconstitutionality of the proposed legislation, Americans for Tax Reform sent a letter to members of the Michigan House of Representatives urging them to oppose to House Bills 4202 and 4203.
“The bills would have terrible consequences for the Michigan economy. It forces out-of-state businesses that bring even a small ownership stake into the state to collect taxes. This will provide a powerful incentive for businesses to stay entirely out of state, which means less investment in Michigan,” said Grover Norquist, president of Americans for Tax Reform. “Anything that discourages investment is bad policy for a state that’s had a sluggish economic recovery, still struggling five years after the 2008 crisis.”
The online sales tax bills awaiting a vote in the Michigan House are not just bad policy; they’re probably unconstitutional. In Quill v. North Dakota the Supreme Court ruled that states could not make businesses without a physical presence in their state collect taxes. Interstate tax collection is a responsibility of Congress, not the states.
As stated in ATR’s letter to Michigan legislators, “Poor enforcement of ‘use tax’ law is no justification for constitutionally dubious legislation, especially if its only guarantee is to negatively impact Michiganders.”
Consider if nearby Illinois attempted similar legislation affecting Michigan state businesses. Illinois would try to force Michigan businesses to collect and remit Illinois sales tax, thereby making Michigan businesses subject to the tax laws, court proceedings, audits and liens of Illinois. Michiganders would have no recourse at the ballot box, and there would be nothing that their home state could do to protect them. This cuts at the principles of federalism, competition between the states, and due process.
New polling data released by the R Street Institute and the National Taxpayers Union shows that voters are strongly against Internet sales taxes. The Marketplace Fairness Act (MFA) is a losing bet among likely voters; 62 percent of likely primary voters and 57 percent of likely national voters are opposed to the idea.