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Tax fairness would level playing field for Main Street

Peter Rose

All businesses deserve to be treated fairly and equally under the law, free to compete on a level playing field. But today, Main Street retailers are denied that right by inequitable sales tax regulations that give Internet sellers a built-in competitive advantage. Like the owners and employees of other brick-and-mortar businesses in Wyandotte and across America, we at The Chelsea Group support passage of the Marketplace Fairness Act to restore justice to this broken system.

It’s a simple issue of fairness. Like all other local retailers, we collect and remit the sales taxes that apply to our transactions—each and every one of them, day in and day out. But our online competitors do not.

Why the disparity? A 20-year old Supreme Court decision unintentionally created a loophole in the system that prevents taxing authorities from enforcing sales tax collections online, allowing Internet-only companies to skirt the law and pass that burden onto consumers—many of whom are either unaware of their obligation or choose to ignore it.

From 2007 to 2012, this glitch in our tax laws accounted for more than $3 billion in lost revenue for state and local governments. It doesn’t take an economist to realize that when states lose money, they will find ways to make up for it—usually through higher tax rates in other areas.

The sales tax loophole also costs our communities jobs. When Main Street companies lose sales to tax-free online competitors, they are forced to lay off employees to stay afloat. In many cases, local retailers have been forced out of business completely, putting family breadwinners in the unemployment line and leaving vacant storefronts in our community shopping districts.

The Marketplace Fairness Act can change that. The “e-fairness” it promises would make it possible for states and communities to uniformly enforce their sales tax laws for all sellers.

The sales tax base would expand—allowing fiscally responsible state leaders to actually lower in-state tax rates—and our local businesses would be given a chance to compete for customers on an equal basis.

It is important to note that the Marketplace Fairness Act would not increase any tax. The effective enforcement of sales taxes already on the books would strengthen revenue streams and make future tax increases less likely. Several state leaders and legislators have even indicated that fair-handed sales tax collections would give them the ability to reduce present individual and corporate tax rates. In fact, any states have already passed laws that would result in tax cuts—if and when Congress finally passes some form of e-fairness legislation.

With the holiday shopping season upon us, there is an urgent need for Congress to address e-fairness now. Businesses like mine can’t weather another shopping season with one hand tied behind our backs.

Allowing giant, online-only retailers to avoid their sales tax obligations while local merchants struggle to compete and taxpayers singlehandedly foot the bill to fund public services is simply unacceptable.

The persistent and indifferent failure to correct this inequity is tantamount to a deliberate and calculated intention of directing advantage to Wall Street companies that have no stake in the local economies of Michigan. It weakens and ultimately cripples the ability of Michigan’s government to serve its citizens properly. It saps resources and capital that otherwise circulates and benefits Michigan residents.

While government cannot have a role in determining winners and losers in a war between different genres of commerce, it in fact does exactly that through policy that refuses to ensure proper taxation. Federal government has clearly given crystal clear indication that it has every intention of directing success to Internet providers, brazenly giving massive handouts to companies that will not collect sales tax and turns it over to state governments. This forces businesses that do have a stake in our economy to shoulder the entire tax burden.

It is surreal in its unfairness. It is far more than unacceptable — it exacerbates the mushrooming perception that our leaders believe we are stupid; mere pawns in a game played by politicians. In regards to this specific issue, our country is in serious trouble, and deferring the issue is reckless, irresponsible and mean-spirited.

The Marketplace Fairness Act has been before Congress for some time now. In fact, it passed the Senate with broad bipartisan support in May of 2013. But like many other worthwhile proposals, its progress has been thwarted by the political gridlock that has gripped our nation’s capital.

Gridlock has dire consequences.

Peter Rose is owner of The Chelsea Group in Wyandotte.

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