One of the most underrated U.S. presidents in the nation’s history, Calvin Coolidge, said in his inaugural address in March 1925: “The collection of taxes which are not absolutely required, why do not beyond reasonable doubt contribute to the public welfare, is only a species of legalized larceny.” That was likely the last time the country would ever hear a head of state utter these kinds of words – and actually follow through with these sage leanings, too.
The U.S. Supreme Court recently ruled 5-4 allowing states to require any business, even those “without a physical presence,” in the state to collect sales taxes. This decision is likely to encourage multiple states to submit and enact legislation that extracts even more money from the people to help fill government coffers and plug their gaping budget holes. LN’s Scott Cosenza reported that these digital levies “will remove billions from Americans’ wallets.”
So, do you want to purchase a Ninja blender to make a spinach smoothie on Overstock.com? Or do you want to buy a ski mask to hide your embarrassment when attending a Baltimore Orioles baseball game from a digital sports vendor? Get ready to pay more.
Online behemoths such as Wayfair, fought against the idea that they could be taxed in this manner; South Dakota v. Wayfair is likely to embolden state legislatures. In his war of words with the likes of Amazon, President Donald Trump has backed states that want to mandate eCommerce companies to collect sales taxes.
This is what government does. Whenever anything is successful, the state needs to get its share.
The Evolution of US Sales Taxes
Throughout the early years of the republic, the federal government collected revenues from import duties and excise taxes. The Founding Fathers believed that consumption levies were the preferred tax policy for two reasons: it would make it harder for the government to fleece the public, and Americans could avoid paying these taxes by not buying certain goods and services. At the same time, they warned that anything above 10% would lead to black markets, smuggling, and evasion.
Despite their infinite wisdom, they might have had too much faith in elected officials – both their respect for their constituents and their ability to see anything beyond the next election.
While the federal government has never established a general consumption tax, every state has adopted one since the 1930s, ranging from a fraction of a percent to double digits. Plus, there are various incarnations of the sales tax: wholesale sales tax, manufacturers’ sales tax, gross receipts tax, use tax, and the list goes on. What’s worse is that there is a national push to implement either a direct federal sales tax or a value-added tax – a levy imposed on producers.
This has garnered bipartisan support, but the primary debate is to either complement the current IRS code, or abolish the income tax and replace it with a national consumption tax, otherwise known as the FairTax.
With the meteoric rise of eCommerce, cash-strapped politicians are clamoring for new revenue tools. Since it is merely an inevitability that new tax laws will pass in legislatures nationwide with very little scrutiny and debate, state and local officials are projected to receive as much as $23 billion annually that will ultimately be wasted.
Who says the government doesn’t keep up with the times? The state always comes up with innovative ways to take your money. Like restrictions on Uber or penalties on Airbnb, online sales taxes are just the latest schemes to control your life.
A Tax on Living
Not only do politicians believe they’re entitled to confiscate half of the fruits of your labor, they also feel compelled to add to the cost of living with consumption taxes. Whether you obtained the item at a brick-and-mortar store or on a website, this policy is essentially an odious levy on living that does the most harm to low- and middle-income shoppers.
For years, many eCommerce vendors – large and small – have gotten away with not charging their customers sales taxes. Riled up by this so-called unfair practice, pro-tax public officials and political candidates demanded a level playing field, leading the charge to close these loopholes. This, they say, will make sure that physical stores can compete with Internet entrepreneurs.
As economist Ludwig von Mises noted, capitalism can receive some reprieve from the continual strangulation by the swamp thanks to loopholes. But don’t tell that to the privileged politicos. They feel entitled to your income, your spending, and your day-to-day living.
Former Representative Ron Paul (R-TX) had a quote on his congressional desk: “Don’t steal. The government hates competition.” In the era of big government, only the state can partake in thievery. Perhaps those who are supposed to serve us should Keep Cool with Coolidge and make government small again.
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