Senate’s “Shop China” Moment
In a symbolic but telling vote, a whole bunch of United States Senators supported what may become known as the “shop China bill.”
During the Senate’s vote-a-rama, 75 Senators supported the so-called Marketplace Fairness Act. Many Senators inaccurately believed the bill was about “fairness.” Sen. Ron Wyden (D-OR), however, explained the “international implications” of the scheme are anything but fair:
“What concerns me, especially after the legal analysis I received from the Congressional Research Service, is I think the way this bill is going to work, people are going to end up calling it the shop Canada bill or maybe the shop Mexico bill or, what is even more ominous, the shop China bill.”
The bill, more frequently referred to as an “Internet Sales Tax” bill, would place costly burdens on retailers and allow states to impose taxes in a way that favors their local businesses over out-of-state firms, who have no representation in the taxing state.
As Sen. Kelly Ayotte (R-NH) personalized the massive compliance burden that would be placed on businesses:
I want to share some stories from New Hampshire. My constituents have written to me about this. A company in Franconia, which is in the northern part of New Hampshire, calls this a job killer. From Pittsfield, an online coin and stamp dealer says: If policymakers decide to impose new sales tax collection burdens on small businesses and force them to collect and remit 9,600 tax jurisdictions nationwide, the legal compliance and administrative cost alone would undoubtedly make it harder and, in many cases, impossible to enjoy the opportunities and benefits of the Internet marketplace.
She concluded by saying this is “not about small government.” Rather, it “is about forcing businesses in States like mine, with no sales tax, to become the tax collectors for the Nation.”
Wyden explained many internet-based businesses would flee the United States instead of playing the role of national tax collectors:
“So an Oregon business would have to collect taxes for New York, but Chinese firms wouldn’t have to collect taxes for any State. Washington State businesses would have to collect taxes for Idaho, but Canadian firms are under no such obligation. I ask my colleagues: What is fair about sacking these American small businesses, these entrepreneurs, which are adding so much value to the new economy, to make it even more difficult for our small businesses to compete with Canadian sellers and European sellers and Chinese sellers? This bill as written is going to be a huge boon, for example, for the idea of setting up online businesses in Canada.”
The Heritage Foundation further explained:
“They seek enactment of [the Marketplace Fairness Act] so that states can prefer in-state businesses over out-of-state businesses in the kind of anti-competitive economic discrimination the U.S. Constitution was in part adopted to prevent. As the U.S. Supreme Court has stated, ‘[p]reservation of local industry by protecting it from the rigors of interstate competition is the hallmark of the economic protectionism that the Commerce Clause prohibits.’”
The so-called Marketplace Fairness Act will be a key vote on Heritage Action’s legislative scorecard. While often referred to as an “Internet sales tax” bill, the legislation has far broader and more complex implications than most Senators, staffers and lobbyists realize.
Fortunately, the Senate’s vote was non-binding and there is still time to turn the tide against this sweeping federal overreach that will destroy jobs and erode competition.