Virginia Republican Pushing Internet Sales Tax Letter

Rep. Scott Rigell (R-VA) 49% is circulating a draft letter for his House colleagues to sign encouraging Rep. Bob Goodlatte, chairman of the Judiciary Committee, the committee with jurisdiction on this issue, to take up and report out the Marketplace Fairness Act (MFA) of 2013 (S. 743).

The draft letter being circulated by Rep. Rigell states:

In representing these small businesses, we must do everything we can to ensure the government does not hinder their ability to thrive. We cannot stand by and watch the government, through outdated policy, continuously pick winners and losers. It is time we level the playing field and hold all retailers to the same standard that our brick-and-mortar small businesses comply with.

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An Internet Tax Would Anger Americans and Alienate Young People

Last week, a gathering of conservative lawmakers and conservative groups including Heritage Action’s CEO Michael Needham discussed why the misnamed Marketplace Fairness Act, better known as the Internet sales tax (IST), is a terrible idea and should not even be considered by the House.  This conservative position was amplified by a fresh Gallup poll showing an overwhelming majority of Americans (57% to 39%) would vote against an Internet sales tax.

As you dig into that data even further, you quickly notice 18-29 years old are against the IST by a margin of 73-27. Gallup notes in their analysis that “If Republicans in the House oppose the Internet sales tax bill, that may help the GOP’s appeal to younger Americans, a key demographic in the party’s plan to build support before the 2014 and 2016 elections.”

At the press conference on Tuesday, our CEO Mike Needham and Senator Ted Cruz (R-TX) spent time highlighting a generational gap that Heritage Action noted from the Senate approval of the Internet sales tax in May.  All seven Republican Senators age 50 and under voted against the Marketplace Fairness Act: Kelly Ayotte (R-NH), 44; Ted Cruz (R-TX), 42; Jeff Flake (R-AZ), 50; Mike Lee (R-UT), 41; Rand Paul (R-KY), 50; Marco Rubio (R-FL), 41; Tim Scott (R-SC), 47. 

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The House Should Oppose the Harmful Internet Tax

The Internet sales tax bill passed in the Senate on May 6 by a vote of 69 to 27.  The bill’s fate is now in the hands of the House.  This tax would not promote “fairness” as its official name – the Marketplace Fairness Act – suggests.  There is bipartisan opposition to the bill, but unfortunately, there is also bipartisan support for it.  Ever in favor of more money coming into government coffers, President Obama has promised to sign the bill into law if it makes it to his desk.

EBay and Amazon.com – both internet giants – are split on the issue, with the former in opposition and the latter in support of the tax.  They have been weighing in on the debate since before the Senate passed the bill, and continued to make remarks over Memorial Day weekend:

“This legislation … is being called the Marketplace Fairness Act, but I strongly believe it creates an unfair tax burden for small online businesses,” eBay CEO John Donahoe wrote in an email to eBay account holders on Sunday.

So why is this so contentious an issue?

The truth is, it’s really not all that confusing, and if so many people weren’t interested in more taxes and less competition, it wouldn’t be so contentious.

Heritage explains in very clear terms that the Internet tax bill would harm online businesses and consumers.  Right off the bat, what must be understood is that brick-and-mortar stores are not at an “unfair” disadvantage.  Comparing them to online businesses is like comparing apples and oranges. 

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Internet Sales Tax Would Benefit Big Businesses, Not Mom-and-Pop Shops

Advocates of the so-called Marketplace Fairness Act (MFA), more commonly known as the Internet sales tax, claim that it would “level the playing field” for “mom-and-pop, brick-and-mortar stores.”  They claim that online retailers have an “unfair” advantage and state:

If Congress is serious about supporting small businesses and creating jobs on Main Street, they should pass the Marketplace Fairness Act without hesitation.

But it is not really the small brick-and-mortar businesses that would benefit from the Internet sales tax.  In fact, as we have noted, one report indicates, “physical stores remain the centerpiece of the purchase journey for many categories.”  The report indicates that in 9 out of 11 categories, the “majority of consumers use physical stores for both researching and purchasing the products they want to buy.”

The Motley Fool recently posted the video below in which contributor Travis Hoium explains that big businesses like Best Buy – that sells a lot of TVs or high-end electronics – are the ones that will really benefit from the Marketplace Fairness Act and the new tax scheme it would create.   In fact, Hoium says Best Buy will be the biggest winner of the Internet sales tax.

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Internet Tax: It’s A Generational Thing

Last week, the Senate approved the so-called Marketplace Fairness Act, more commonly known as the Internet sales tax. Proponents tried to paint the vote as evidence of overwhelming support for the bill. That is simply not the case, though.  As you dig deeper in to the numbers, it becomes apparent the push from big government and big government special interests was losing momentum.

On the final vote, a majority of Republicans voted against the Internet sales tax, splitting 22-21. Furthermore, the appearance of an age demographic split amongst supporters and opponents signals an uphill battle in the younger, more conservative House.

All seven Republican Senators age 50 and under voted against the Marketplace Fairness Act:  Kelly Ayotte (R-NH), 44;  Ted Cruz (R-TX), 42;  Jeff Flake (R-AZ), 50; Mike Lee (R-UT), 41 Rand Paul (R-KY), 50; Marco Rubio (R-FL), 41; Tim Scott (R-SC), 47.  In the House, 79 of the 233 Republicans are age 50 or under.

Twelve of thirteen Senate Republicans age 55 and under voted against the Marketplace Fairness Act.  In the House, there are 118 Republicans – more than half the conference – are age 55 or under.

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