A group of conservative congressmen is clamoring to bolster the Republican Party’s anti-tax brand as GOP governors break ranks in support of expanded online sales taxes.
The governors are looking for additional state revenues, which they argue can be used to cut other taxes. But Florida Republican Rep. Ron DeSantis blasted a federal online sales tax bill as the “21st century version of taxation without representation.”
At issue is legislation called the Marketplace Fairness Act, which passed the Senate by a wide margin in May. Earlier this month, House Judiciary Committee Chairman Bob Goodlatte appeared to predict it wouldn’t pass the House in its current form, though he later clarified in a statement that he was “open to considering legislation concerning this topic.”
Kentucky Republican Sen. Rand Paul and Texas Republican Sen. Ted Cruz joined House conservatives and anti-tax activist Grover Norquist in criticizing the bill Tuesday. Cruz called the Senate vote on the Marketplace Fairness Act “Washington at its worst.”
Internet transactions are currently only taxed in states where an online retailer has a physical presence. Though many states require that consumers report taxes on their online transactions, this is rarely enforced. The Marketplace Fairness Act would require online retailers to collect sales taxes for their customers’ jurisdictions, regardless of the location of the business itself.
Supporters argue that the bill levels the playing field between brick-and-mortar businesses and their online counterparts. Online companies are not required to charge a sales tax to out-of-state customers, while physical stores must include sales tax in all purchases.
However, opponents contend that the bill is a new tax that would stifle small online businesses, who would be required to account for up to 9,600 jurisdictions with different sales tax laws. Paul said Tuesday that he “can’t be for a $23 billion tax increase.”
Norquist maintained that the bill would allow politicians to levy taxes on people who cannot vote them out of office.
Wisconsin Gov. Scott Walker has said he will use any revenues brought in by the passage of the bill as a way to fund individual income tax cuts for Wisconsin residents. Iowa Gov. Terry Branstad hopes to do the same. In a letter to Iowa’s congressional delegation, Branstad argued that Iowa’s small businesses are hurt by large online retailers who aren’t subject to sales tax.
Republican governors Rick Snyder, Robert Bentley and Bill Haslam have also backed the bill on the grounds that state governments are already owed these taxes.
Former Virginia Gov. Jim Gilmore said this support from GOP governors was misguided, arguing Tuesday that the “windfall isn’t there.” Gilmore said that large online retailers already have physical presences in many states, with the top hundred Internet retailers currently taxing 83 percent of their online sales.
The Marketplace Fairness Act, Gilmore contended, would end up targeting small businesses.
After the 69-27 Senate vote, the bill has been referred to a House subcommittee.
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