Throughout our state, Idahoans are turning hobbies or talents into a sources of income, developing websites to sell their creativity or ingenuity or products to customers in other states. This is the free market at work. This is what entrepreneurialism and capitalism are all about—the resourceful small businessman using the web to make ends meet, get ahead or enjoy the fruits of his labor.
In the shadows of all of this opportunity, proponents of collecting taxes from Internet sales are back. They plan to show up at the Statehouse next winter armed with new ammo; namely, a column written by Reagan economist Art Laffer. Laffer wrote in the Wall Street Journal recently that states would do well to collect taxes from goods sold via the Web. Laffer wrote his column ahead of a pending U.S. Senate vote on a bill that would facilitate the multistate collection of Internet sales tax.
"The exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes," Laffer wrote. He said states could lower other taxes by collecting taxes on items sold online.
When I told mentioned Laffer's position to an audience in Wallace, Idaho, the crowd erupted in laughter. His position defies plausibility.
Laffer could be correct, but only if state legislatures were made up entirely of people like Art Laffer. They're not. They're made up of politicians who can't help themselves but to raise taxes, even when new revenue streams present themselves.
And lest you think that Idaho is different, it isn't. Once the state grabs a new revenue stream it can't help but add to it, be it a sales tax or a sin tax. And this tax, the sales tax, is particularly onerous, because it forces businesses to play the role of tax collector for thousands of locales assessing the tax throughout the country.
If Idaho retailers have a problem with state tax collectors in Arkansas, what are they to do? Which elected official will represent their interests? This is a prime reason why Congress should reject this kind of legislation.
Idaho Sen. Mike Crapo says he views the Senate proposal to be a matter of state sovereignty, and is leaning toward support for the bill. He is also echoing the Laffer argument that states will use the additional revenue to lower other taxes.
Idaho retailers may have reason to complain about the 6 percent government surcharge added to their products. But if they're really concerned about it, maybe they should start lobbying the government to cut the spending made possible by the high sales tax rate. That's much easier, and more preferable, than crushing our entrepreneurial spirit by compelling Idaho's budding Internet-based small businesses to comply with sales tax enforcers from thousands of jurisdictions across the country.