ANY idea from Dick Turbin is a bad idea!
I thought tax and spending bills had to originate in the House.
First, a little history: I worked on ARPAnet, so I've watched the Internet grow from the inside. I myself was a BOFH ("bastard operator from Hell"), one of the protectors when the Internet was commercial-free NSFnet. Then came AlterNet, the commercial carriers that replaced NSF, the "endless September" from AOL and other services. And I watched commercial traffic growth and the growth in interstate commerce.
I followed the court cases closely regarding the imposition of sales taxes on Internet transactions, and the muddled and jumbled thinking that accompanied those decisions. And I've been involved in dealing with the jungle that is Internet commerce, particularly with regard to the sales tax question.
Here's the operational problem: sales tax calculation in the United States is a horrible mess, because each governmental jurisdiction has its say in what the population has to contribute to State, County, Town/City/Village, School district, Fire district, and so forth. Not only does this make calculating the tax owed by an individual a very tedious, mistake-prone process, but once the money is collected by the Internet business it has to be sent -- in varying amounts -- to an overwhelming number of end-points.
The check on excess taxing in a particular location is that the voters in those jurisdictions vote for the taxes, and for the people who implement them. In many cases, the voters have a direct say at the ballot box, in the form of ballot questions, as opposed to runaway representatives.
I have seen several proposals to allow Internet businesses to collect some kind of sales tax on sales outside of the business "nexus" (Quill v. North Dakota, 1992). Most of the proposals are in reality thought frameworks, and not complete suggestions. They don't address the complexities involved in implementing their suggestion, because the people who prepare these proposals keep thinking "Amazon" and not "Shop Around The Corner". Small businesses don't have the people or the computer cycles to handle thousands and thousands of taxing districts.
Of all the proposals, here is the one I would put forth as a solution that meets the needs of government, buyers, and Internet businesses: a uniform sales tax, one rate per state, that an out-of-state business would charge the customer. The business would remit the amount collected for each state to a state collection agency. That state collection agency would then distribute the tax money, by formula, to each tax jurisdiction.
(The Internet businesses could use a clearinghouse that would take a single check and a distribution letter from each business. The clearinghouse could send a check to each state. How the clearinghouse makes its money could be a slice of the pie, like the credit cards, or a flat rate. That's a market-driven nit and need not be part of the proposal.)
That would mean that the people who receive the services like local fire and police would be paying for those local services via their Internet purchases, as well as their brick-and-morter purchases. The scheme could be expanded beyond Internet business to all mail-order businesses. Local brick-and-morter businesses would not have the tax disadvantage -- unless the locality imposes much higher taxes than the uniform sales tax for the state, which would be a curb on excessive local levies.
The burden on Internet businesses would be less than the current burden of dealing with the "nexus" approach. Fifty ranges (perhaps more, when you include the territories) of ZIP codes, with a tax rate for each range. It's a simple table or database lookup, with the data provided at low cost. No more convoluted calculations, and no more collecting the sales tax information on a regular basis.
Has anyone considered the impact on local government of a national requirement for sales tax without the simplification of using a single rate per State would provide? When a town imposes a local sales tax, the information would have to go from coast to coast, instead of just the town boundaries. Isn't local government already strapped enough?
Is this "raising taxes"? I think the Heartland Institute has mis-stated the situation. Citizens in most of these 50 states are required by law to pay "use tax" on items they buy for which they do not pay sales tax. In short, the Internet customer has an obligation to pay the sales tax, usually at a state-mandated rate not unlike the uniform tax rate contained in this proposal. Customer who don't pay the use tax are, in a sense, tax evaders. (I'm one, too, so don't think I'm getting all high and mighty on you.) Paying the use tax is hard in the three states I've lived in -- indeed, when I tried in my current state to pay a use tax on a large purchase, I got a run-around that made me give up.
A tax on Internet commerce, thought out carefully, would have a minimal impact on Internet commerce, and in fact would simplify the rules that an Internet business has to follow. State and local government don't see a drain on their coffers. For the customer, it's far easier to meet their legal obligation this way than having to try to file a "use tax"; the States win because they don't have to handle the volume of payments if everyone got religion.