Proposed Internet Sales Tax Bill Sacrifices Fairness and Federalism to Private Interest

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Posted by Timothy Wilt on Wednesday, June 17th, 2015, 11:00 AM PERMALINK

In the latest assault on Internet freedom, Rep. Jason Chaffetz (R-Utah) introduced the Remote Transactions Parity Act (RTPA). Americans for Tax Reform strongly opposes this piece of legislation, and joined a coalition criticizing Rep. Chaffetz’ (R-Utah) new bill. The coalition penned an open letter to the U.S. House of Representatives explaining the gross injustice of the proposed legislation.

In 2013, Congressman Bob Goodlatte (R-Va.) Chairman of the House Judiciary Committee, released a set of 7 principals to which any internet tax legislation should adhere. 

Rep. Chaffetz bill violates nearly every one of these guiding principles. In particular, the bill places small businesses at a significant disadvantage to larger retailers. Unsurprisingly, the bill’s support is derived primarily from the large retailers who recognize the advantage it gives them over their competition, and software companies who will profit off the accounting programs that will be needed to deal with the outrageously complex requirements the bill will impose.

Rep. Chaffetz’ (R-Utah) congressional district just so happens to include Provo, Utah, one of the fastest growing cities in the nation, largely due to the recent influx of software companies, many of which specialize in accounting software programs. Salt Lake City, which lies just outside Rep. Chaffetz’ (R-Utah) district, has also seen significant investment from accounting software firms. Many of the employees of these companies vote in Rep. Chaffetz (R-Utah) district, and they are certainly aware of the profit they stand to make if RTPA is passed.

Contrary to declarations from supporters of this bill, it seems unlikely that fairness was really the force motivating its creation. Especially considering the bill was penned by Rep. Chaffetz’ former legislative director Mike Jerman. Mr. Jerman has recently flipped to the private sector, taking a position with Taxometry, a Salt Lake City based Certified Solutions Provider (CSP), which would benefit immensely from this legislation. RTPA is clearly an attempt for Rep. Chaffetz (R-Utah) to achieve a big win for his home district, at the expense of the rest of the United States.

RTPA is a re-incarnation of the failed Marketplace Fairness Act (MFA) from last session. Although RTPA is billed as a bi-partisan effort to overcome the problematic aspects of MFA, in reality it not only fails to solve the key issues that led to MFA’s failure, but also ushers in new and worrisome statutes which threaten the core tenants of tax equity.

RTPA also undermines the recent progress towards a national taxation framework that protects traditional federalist values and ensures politicians remain accountable for their policy. This progress includes legislation such as: the Digital Goods and Services Tax Fairness Act (H.R. 1643), the Business Activity Tax Simplification Act (H.R. 2584), and the Mobile Workforce State Income Tax Simplification Act (H.R. 2315).

The cost of Rep. Chaffetz (R-Utah) political maneuvering will be steep. RTPA will violate one of the most important qualities of our nation’s structure, the ability for states to compete for businesses using their tax codes. As Grover Norquist, president of Americans for Tax Reform, remarked in a recent subcommittee meeting regarding Nexus:

“Politicians love to tax people who can’t vote against them… That’s a challenge because it undermines tax competition between the states. It is what keeps state taxes more responsible than they’d otherwise be and efforts to allow people to tax across state lines, such as taxing online sales, allows you to tax, audit, and harass a business who cannot vote against you and its employees who cannot vote against you, and it’s safe to beat up on them.”

The RPTA paves the way for politicians to take advantage of businesses using the internet, and disregards nearly every taxation precedent in our nation’s history, most notably no taxation without representation. The internet is an emerging and dynamic medium for interaction, one never before seen in history. Its’ novelty however does not justify a complete overhaul of the taxation policy that has allowed businesses and individuals to flourish in our nation. RTPA is an awful piece of legislation that seeks to reinvent the wheel, and in doing so places not only the future of small businesses at risk, but also threatens the very framework of America’s federalist system. 

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