The Fraudulent Marketplace Fairness Act
By giving state governments the power to tax Internet retailers, the Marketplace Fairness Act further undermines our already moribund system of federalism. One of the key components of federalism is competition between the states. The idea is that the better the state, the more attractive it will be to individuals and businesses. Folks have the ability to “vote with their feet” for the system of government and level of freedom that they prefer. Conceivably, if on-line retailers were capturing sales from brick-and-mortar retailers due to sales taxes, the brick-and-mortar retailers would pressure local officials to lower their tax rates to allow them to be more competitive or, if possible, move to states with lower tax rates. We see this happening all the time when consumers go across state lines to buy products that are cheaper in an adjacent state due to lower taxes there. The Internet represents another competitor for state governments in regard to commerce and taxes. Unfortunately, if there is one thing politicians won’t tolerate, it’s competition.