Odd Timing to Promote “Fairness”

You can tell a lot about whether a lawmaker is proud of a bill by watching how and when they introduce it. If you’re at a big press conference in the morning, early in the week, with lots of reporters around, you can be pretty sure the lawmaker behind the bill feels pretty good about it. 

So what does it say about the so called “Main Street Fairness Act” that Sen. Richard Durbin (D-IL) and Rep. John Conyers (D-MI) chose to slip the measure into the legislative agenda on a Friday afternoon, at the end of July, right in the middle of an apocalyptic congressional battle over the debt ceiling?

It’s almost as if the sponsors know that the bill – backed by big box mega stores like Walmart and Target – isn’t the panacea of “fairness” that supporters are making it out to be.

The stated purpose of the Main Street Fairness Act is to “level the playing field” between online sellers and traditional bricks and mortar retailers by requiring online sellers to collect sales taxes on purchases from states where the seller has no physical presence. 

The reality of the bill is that it would impose unfair and disproportionate collection burdens on exactly the sort of small businesses that lawmakers say are vital to the economic recovery. 

And the real kicker? The proposal would generate a paltry amount of revenue, adding less than three-tenths of a percent to total state and local taxes.

According to the SSTP's own study, small businesses spend 17 cents of their own money to collect and file every dollar of sales tax they send to their home states.  This bill would force small online retailers to collect for two dozen states, requiring expensive software updates, inviting exposure to an army of auditors, and cutting into resources they'd rather spend on building businesses and creating jobs.

So if the bill isn’t a revenue generator, and it’s not making things any more “fair,” what exactly is the purpose of it? Do big box stores really need more help steamrolling small and midsized sellers, by undercutting their ability to compete?

Of all the problems with the Main Street Fairness Act, one of the worst is that it fails to define safe harbors for small businesses that could be crushed by its onerous, multi-jurisdictional collection regime.

Past attempts to pass similar legislation included a specified safe harbor that protected small businesses from the cost and complexity of this new Internet tax.  Today’s legislation leaves the job of defining such safe harbors up to the unelected tax administrators on the SSTP’s Governing Board.  That's like letting the foxes run the hen house.

This Governing Board, for example, claims to have simplified definitions, but it defines beef jerky as "candy" while defining cotton candy as not candy.

If this all seems a little ridiculous and unfair to you, you're not the only one.   Not a single Republican joined the Democrats sponsoring these bills.  On the other hand, there was wide bi-partisan support for a House Resolution to protect small businesses from just this sort of tax collection burden.  

So there's no bi-partisan support, no protection for small business, and no real simplification.   Maybe a hot Friday afternoon in the middle of a landmark debt debate, is the time to showcase something you’re not very proud of.

 

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