NCPA - National Center for Policy Analysis


January 15, 2009

America's state and local governments have a new proposal for the Obama stimulus plan, says the Wall Street Journal: Slip in an Internet sales tax. 

The National Conference of State Legislatures (NCLS) estimates that states could wring another $30 billion out of consumers if Washington will allow them to force out-of-state Web merchants to collect sales taxes:

  • NCSL leads a coalition asking Congress to authorize 7,500 tax collectors to reach outside their borders to force companies to comply.
  • States and localities have met with bipartisan opposition every time they've tried to sell the plan to Congress in the past, but their hope is that this time their fiscal distress will cause Congress to relent and let them soak the Web.
  • They need Congress to pass a law overturning the 1992 Supreme Court's Quill decision.
  • And Congress may be willing to reduce the $200 billion in bailout cash it is otherwise planning to include in the stimulus.

The question is how targeting consumers for higher tax collections could possibly encourage consumer spending, which is ostensibly the point of the bill, says the Journal:

  • Yesterday the Commerce Department reported that retail sales fell 2.7 percent last month from November levels.
  • November's sales were down a surprisingly large 2.1 percent from October, which were down 3.4 percent from September.

Given that consumers represent 70 percent of the U.S. economy, the Web-tax-as-state-stimulus lobbying campaign may represent the worst proposal to date in the Beltway stimulus carnival.  States and localities are presenting an idea that is truly shovel-ready.  Congress and the President-elect should bury it, says the Journal.

Source: Editorial, "Stimulus for Tax Collectors; Internet consumers beware," Wall Street Journal, January 15, 2009.

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