Bridge Span 14-15: Empower the People or Empower Bureaucrats? – Two Internet Votes

Pundits largely agree that those who cast ballots last week had more or less one idea in mind – Washington is broken and must be fixed. So imagine the surprise that online customers will receive when Senators Reid and Durbin lead the just voted out Senate to massively expand government power in their last few days at the helm of Congress.

Current leadership of the Senate (Senators Reid and Durbin still lead the Senate during a “lame duck” session until January 3rd when the new Senators the country elected last week will be sworn in and new leadership selected) plans to bring a combined Mainstreet Fairness Act (MFA) and Internet Tax Freedom Act (ITFA) to the Senate floor soon.

The ITFA would continue a moratorium on “Internet taxes,” that is, taxes on Internet access and on multiple or discriminatory taxes on Internet commerce. In other words, online merchants and consumers would be freed from the threat of discriminatory treatment. The MFA does almost the exact opposite, empowering government tax auditors to reach as far as the Internet sprawls.

The policy of that proposal is horrible, doing away with any requirement that a business have a physical connection to a jurisdiction before it can be forced to levy taxes on its sales. If this law were to pass, a person merely calling up a business’s Website could be enough to require that a business, and hence consumers, pay taxes in the state where the customer resides. Out-of-state tax authorities could audit businesses in any state – regulation without representation or reprieve. A discriminatory Internet tax would look promising by comparison.

Combining the legislation is the worst of Washington and government, cynically tying the hugely popular, taxpayer protecting ITFA to the government expanding consumer and small business hurting MFA. This sort of dirty, heavy handed government trick is exactly what the country voted against last week. This combination should earn the scorn of any legislator who believes the country is growing weary of ever sprawling and powerful government. But, the game gets rigged further against consumers.

Rumor on the Hill is that the MFA, or a MFA/ITFA combination, will be attached to a continuing resolution, that is, legislation enacted by Congress to keep government operating until the regular order of appropriations legislation is again taken up. Such legislation is typically considered “must pass,” so the pressure to vote for it regardless of some odious part will be high. The reality is that such legislation could pass as it would likely garner a huge share of Democrat support with a few wayward Republicans added on. For this to work, GOP leadership would certainly have to be in on the deal, putting politics ahead of an electorate that had hoped they voted for something better.

The politics get worse. An Internet sales tax, like the MFA, is wildly unpopular with only a mere 35 percent of the public indicating they are OK with the idea. Two-thirds of Republicans and conservatives oppose the measure, and 56 percent of independents oppose it. Democrats? A majority oppose.

Only two groups support the idea. State tax collectors, who are eager to expand their power over those who have no recourse, are the first group. While once again overall tax collections are up, according to the Pew Charitable Trust, some states have still not returned to the record tax collections, and spending, they were taking before the recession. “On the bright side, state revenue collections overall in the second quarter of this year were actually up 1.6 percent above their highest 2008 level, just before the recession – buoyed from a few states doing particularly well.”

What easier way to get more revenue than from those cannot even vote to change the policy? Their addiction to taxes, and enforcing them through grater and deeper reach of government, drive their insatiable desire.

The other group is the “big box” retailers who desperately want this discriminatory treatment for online merchants to prevail to curtail their competition. They have gone so far as to try to force the hand of House leadership arguing that the legislation should be jammed, by trickery if necessary, through Congress to “clear the decks” for the beginning of a new Congress. Of course the decks should be cleared of bad ideas by House leadership but not by making them law.

If a discriminatory Internet tax is allowed because the ITFA does not pass, or if government reach is wildly expanded via the passage of the MFA the recent protests in Hungary opposing similar attempts will look mild compared to the anger in an electorate full of online consumers that deserves much better and thought they just voted to get it.

Speaker Boehner deserves credit for indicating that the MFA is dead and that he will not bring it to a vote, and for leading the House to vote in support of the ITFA. The remaining question is what will the last days of the Leader Reid Senate do? Oppose the will of the people or follow it? Put a focus on empowering the people or keep it on empowering bureaucrats? Failing the people could result in the first Internet wave election in 2016.

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