Treat Businesses the Same -- Let the Market Decide

The Marketplace Fairness Act, legislation introduced by Rep. Steve Womack (R-AK), would allow states to collect sales taxes from purchases made on the Internet. 

Supporters of this bill believe that is unfair that a small bookstore on Main Street has to collect sales taxes while a multi-billion dollar bookstore like Amazon does not. 

The end result of the disparity is that the government is encouraging shoppers to do their purchases online -- creating an incentive to not support local neighborhood stores. 

Some conservatives oppose the legislation, most notably the Heritage Foundation and Sen. Jim DeMint. (R-SC).  DeMint, a Tea Party champion, argues that the legislation constitutes "taxation without representation," allowing states to apply their tax codes to non-residents with mere economic presence in the state.

Both sides have a point.  As conservatives, we don't want government picking winners and losers.  Look at the "green energy" debacle and Solyndra.  Government bureaucrats deciding what technologies to support is not only an economic disaster, it opens the door to corruption.  Yet government tax policy with regard to taxing Internet sales does the same thing.  It rewards some companies, like Amazon, while punishing others, like Main Street small businesses.  A better policy would be to treat all companies the same and let the marketplace sort out the winners and losers.

But DeMint's argument also carries weight.  Businesses should not be subject to enforcement and penalties resulting from out of state laws passed by legislatures in which the business proprietor has no representation and voice.

The solution to the problem is simple -- treat all businesses the same but allow the sales tax from the state where the purchase happens to apply.  Big Government.com and the Competitive Enterprise Institute have offered such a compromise. 

That creates fair tax policy without opening the door to "taxation without representation."