NCPA - National Center for Policy Analysis


January 4, 2008

Congressman William Delahunt (D-Mass.) has sponsored the "Sales Tax Fairness and Simplification Act," an attempt to get Congress to approve a massive revenue grab by various state and local politicians, says Raymond J. Keating, chief economist with the Small Business and Entrepreneurship Council.

The proposed legislation would allow various states and localities to extend the reach of their sales taxes to businesses that lie beyond their borders.  According to the Wall Street Journal's editorial ("Taxing E-Shoppers") on the topic on December 26:

  • The bill would force all but the tiniest businesses to answer to every one of America's 7,500 taxing jurisdictions.
  • Each merchant would also have to submit to audits from governments coast to coast and while "only" 7,500 state and local governments currently collect sales taxes in the United States, more than 22,000 other governments can choose to collect them in the future, and there's no limit on the creation of new taxing entities.
  • Anticipating growth in government and complexity, the plan limits the tax collectors to two rates per zip code; multiply that by America's 43,000 zip codes and small merchants could potentially have to keep track of 86,000 different tax rates, depending on what they sell and to whom.
  • A Tax Foundation analysis shows that, even after adjusting for inflation, state and local tax revenues have increased almost 48 percent since 1992; throw in the generous federal-to-state transfers, and the states and locals are now collecting almost $2 trillion annually.

As the Journal's editorial makes clear, this would be a frighteningly costly tax measure for both consumers and businesses.  Indeed, the only people who could embrace this tax proposal are politicians who are not interested in tax fairness, but instead simply long to expand the size of government, says Keating.

Source: Raymond J. Keating, "Anything But Sales Tax Fairness," Small Business and Entrepreneurship Council, December 28, 2007.


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