E-Fairness foes use smoke and mirrors to distort reality

by John Fredericks

Those fighting to protect an economically perverse preferred tax status for out-of-state online merchants, at the expense of large and small retailers committed to Virginia with stores and employees here, must be anxious they aren’t fooling anyone.

How else to explain the intense misinformation campaign about E-Fairness – typified by two recent Bearing Drift guest opinion columns, here and here – to sham the public into supporting a free market-subverting system where government picks tax winners and losers? Both pieces are premised on the false claim that E-Fairness is a new “internet tax” and fueled by feigned indignation from purportedly fiscal conservative authors.

In actuality, the state gasoline tax drivers pay is the only levy at risk of a rate spike if E-Fairness isn’t approved.

By any reasonable definition, E-Fairness is not a new tax.

The policy simply would enable states to more efficiently collect already owed sales tax from internet transactions with non-compliant companies.

At present, main street merchants and national retailers with stores in Virginia collect that tax on behalf of the state for in-store and online sales. Online only sellers which profit off Virginians are exempt from that duty even though the tax is still owed. Unfortunately, few people follow through and submit the unpaid amount owed on their annual income tax filings. That arrangement makes unwitting tax scofflaws of many Virginians and deprives the state of at least $250 million each year in owed revenue that would pay for roads, schools, and support local governments. Even worse, preservation of the current dynamic guarantees taxes soon will “increase on Virginians,” as one of the recent columns declared.

That coming tax hit is real, unlike the phony “internet tax” meme. It is a dramatic 45 percent increase in Virginia’s gas tax that will be triggered Jan. 1 unless Congress rescues drivers from higher prices at the pump by approving E-Fairness legislation. That sharp gas tax increase is a revenue insurance policy state lawmakers approved as part of the 2013 landmark transportation funding package. Virginia legislators at that time endorsed E-Fairness and urged Congress to approve it. The U.S. Senate took a stand for tax parity in 2013 by overwhelmingly supporting legislation to end the unfair advantage out-of-state online retailers have over Virginia’s retailers that invest in our communities, contribute to our economy, and employ our fellow citizens. Things have moved slower in the House of Representatives where E-Fairness legislation has languished more than a year.

Like the state legislature, grassroots conservatives, chambers of commerce, retail groups, and local governments across Virginia support E-Fairness. So does the American Conservative Union, which hosts the annual Conservative Political Action Conference

Everyone is waiting on Congressman Bob Goodlatte to clear the way for E-Fairness legislation. Goodlatte, R-Roanoke County, controls the legislation’s fate as chairman of the House Judiciary Committee that as yet hasn’t been allowed to vote on E-Fairness legislation.

Under the higher gas tax, the average Virginia driver will spend an extra $52 a year on gas without E-Fairness in place. That’s $104 for a husband and wife who both drive regularly, and $156 if there is a third driver in the house. That’s far more out of pocket than what the average online shopper would pay in owed sales tax under E-Fairness. In this context, it’s also critical to consider how these tax policies would be applied and how they would impact the economy. Raising the gas tax would cause widespread pain on most drivers. In contrast, E-Fairness is a targeted tax parity solution. Ask yourself if it makes sense to punish most drivers just so out-of-state internet retailers can avoid a basic tax accounting responsibility? You should also know that a higher gas tax will not fully offset lost E-Fairness revenue. So Virginians would pay significantly more in gas taxes and still be shortchanged on millions in owed revenues needed to fund core public services.

E-Fairness opponents ignore those inconvenient realities. Their advocacy often starts with the scary-sounding “internet tax” canard – taxes are universally loathed, after all – before a bait-and-switch is pulled. That magician-worthy shift is necessary, you see, because the claim is bogus. Also phony are boogeyman warnings that E-Fairness will expose businesses to out-of-state tax audits, the burden of calculating scores of state and local tax rates, and cause job losses.

Each is untrue. Many businesses already keep up with accounting, taxes, shipping and other functions with affordable software that’s also capable of computing E-Fairness duties. Businesses would not face a tax code labyrinth because the leading E-Fairness proposals call for one standard rate per state in the 45 states with a sales tax. Virginia has had a sales and use tax since 1966. And the baseless job loss claim falls flat when you consider that Virginia retailers who create jobs say they need this to stay competitive and preserve employment. Those companies want E-Fairness. And they have told Congress that the real threat to jobs comes from the current system of inequality which benefits out-of-state online retailers to the detriment of companies actually invested in Virginia.

E-Fairness is about everyone playing by the same rules, as true a free market economic ideal as there is. That’s why it’s so shocking to see how some supposed fiscal conservatives have approached this debate. Since when do conservatives want the federal government manipulating the marketplace by favoring one type of business – and its location – over another?

John Fredericks is a longtime media professional, and conservative who hosts the syndicated John Fredericks Radio Show news talk program in Virginia.

 

 

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