The Market Fairness Act: Hurting Business and Hurting Consumers
by Kyle Scott on May 7, 2013 at 11:36 AM
The Market Fairness Act just passed the Senate. The Act would give local entities the power to require retailers with sales of over one million dollars a year to collect state and local sales taxes for online purchases. The bill passed with an overwhelming majority in the Senate with only a few Senators like Ted Cruz and Rand Paul voting against it. The bill is likely to face fierce opposition in the House. This bill encapsulates what is wrong with the government’s view of how to improve the economy.
The recovery we are experiencing is tentative at best. As a nation we are not adding jobs at a rapid rate and consumer confidence wanes. In reply, big government proponents say that now is when we need to increase government spending. Government spending puts money into the economy that helps spur growth. Stimulus after stimulus has proven ineffective, or at least inadequate, for bringing the economy back. The simple reason is because only private sector growth can bring back the economy.
The best way to bring back the economy is to reduce barriers to growth. Reducing restrictions on businesses and making it easier for people to enter the market will go a long way in spurring economic growth. The Market Fairness Act increases barriers for consumers and businesses. Businesses will now be required to employ teams of tax specialists to figure out the proper tax rate to charge each customer. There are 9600 taxing entities within the U.S. that online retailers would have to accommodate. This would make it tough for small businesses to compete on a national level. Small businesses are the businesses that can least afford a complex tax structure.
This bill, of course, only applies to retailers that gross in excess of one million dollars in sales per year. Like Obamacare, this will discourage businesses from growing. Under Obamacare, businesses with more than fifty employees will have to offer government approved insurance or pay a penalty. This provision in Obamacare encourages businesses to stop hiring people and start firing others. In the same way the Market Fairness Act discourages business growth by punishing those who have more than one million dollars in sales.
The second sector that the Market Fairness Act introduces barriers to is the consumer. If consumers are forced to pay taxes for online purchases they will buy less online. This will not drive them to local businesses; rather, it will drive them to buy less. Consumers, at least responsible consumers, live within a budget. If the responsible consumer must pay taxes on their purchases then they have less money to make additional purchases with. What we need at this moment is not more government intervention but less. We need the government to lower the barriers for consumers not raise them.
The argument is that online retailers are not competing on a level playing field with brick and mortar stores. To level the playing field, I would prefer reducing the taxes on brick and mortar businesses rather than raising taxes on online retailers. Those who favor big government expansion see things differently. Let your Congressman know that you favor reducing barriers to free market solutions.