It’s been nearly 250 years since the king passed his Stamp Act to pay for all that royal spending, and nearly 240 years since gramps found that generally Intolerable and sent the British running. But the issue is not dead. On the contrary, legislators are again actively attempting to pass what is effectively taxation without representation, and far from being a distant king in England, the villains today are both Democratic and Republican lawmakers from Washington to Tennessee.
That’s right: Taxation without representation is the situation we may find ourselves in soon if the states get the feds to pass their Internet tax law. And stop right there! Because before anyone says Internet taxes are boring, reread the first graph of this riot; and also recall that stamps and tea are way more boring than the Internet, but that didn’t stop grandpa from dressing up in war paint and bashing things up over them.
So in the vein of old Paul Revere, we’re here to spread the alarm and lay out exactly what it is they’re scheming.
How they usually steal money
Typically, politicians confiscate Americans’ money through an origin-based system — essentially, one based on physical presence. So, if we drive to Virginia to buy a book, we pay the sales tax in Virginia and no one asks us where we’re going to read that book. And if we live in a home in Maryland, we pay property taxes and the rest in Maryland. And if we own a business in Washington, D.C., we pay a whole slew of other taxes in Washington, D.C.
While there are plenty of overly complicated deviations from this basic rule, by and large, physical presence is the anchor. This is really, really important, because it keeps the tax man in check: Virginia doesn’t want to make it too expensive to buy a book in Virginia; Maryland doesn’t want to make it too expensive to live in Maryland (plus the homeowner can vote there); and D.C. doesn’t want to make it too difficult to operate a business in D.C.
These are the checks and balances that generally stop the greedy tax man from fleecing the people he relies on. Allowing for the precedent of the 50 states to tax beyond their borders is dangerous as hell, not only to our wallets but to the very way people operate in this country.
But so far, we’ve been talking about physically present, brick & mortar things. So what about the Internet?
How the schemers want to steal (more) money
What the schemers want to do is tax transactions that take place on the Internet. Basically, states want to tax Internet imports. So if we want to sell something on eBay to a buyer in Florida, Florida wants to tax us, even though we have no property, physical presence or political representation in Florida. And if we tell Florida to take a hike, we have to leave the comforts of home and fight that in court in Florida.
All of this, of course, is in the interest of “fairness.” See, legislators point out that Internet businesses should not be able to dodge the taxes that brick & mortar businesses pay every day. But since “fairness” is almost always a code word for an incredibly stupid government idea, the major proposal to fix this is a lot more taxes on a lot more people with a lot less accountability.
Now, the real problem with this is when a state can tax people who have no property, physical presence or political representation in them, that state then has zero incentive not to tax those people out of existence. In fact, making it harder for folks in our state to compete with folks in Florida could serve as an actual incentive for Florida to tax our business! That, friends, is a form of protectionism, and it’s something we’ve seen before.
We’ve seen it before because when states were allowed to engage in protectionist policies, they did. Little known fact: The U.S. Constitution is not the first constitution we had — it just worked a lot better than the first, known as the Articles of Confederation. Under the Articles, Congress was powerless to regulate interstate commerce, leaving the states free to engage in trade wars with each other, which they did with great mirth while the Red Coats ran roughshod over the young country’s attempts to get its shit together. This, to say the least, was bad for American prosperity.
Fortunately, today, as the states fight to see who will get the plunder and who won’t, we have the modern Constitution, which gives Congress the power “To regulate commerce … among the several states.”