Why Durbin's Internet Tax Isn't Fair

Jeff Jacoby explains that Sen. Dick Durbin's plan to impose local sales taxes on online retailers like Amazon.com isn't fair.  The supporters of Durbin's plan say "a sale is a sale".  But is it?

All other things being equal, consumers no doubt prefer a tax-free shopping experience. But all other things are rarely equal. E-retailers (or mail-order catalogs) may have a price advantage, but well-run “Main Street’’ businesses have competitive advantages of their own. They attract customers with eye-catching window displays. They play up local ties and neighborhood loyalty. They give shoppers the chance to see, feel, or try on items before buying them. They enable the serendipitous joys of browsing. They don’t charge for shipping. And they offer potential customers a degree of personal service and warmth that no website can match.

The current system is far fairer than the one Durbin wants. Bricks-and-mortar merchants charge sales taxes based on their physical location. The same rule applies to online merchants. A Pennsylvania tobacco shop doesn’t collect Ohio sales taxes whenever it sells a humidor to a visitor from Ohio. Amazon shouldn’t have to, either.

“Out-of-state companies that aren’t paying their fair share of taxes,’’ Durbin argues, “are sticking Illinois residents and businesses with the tab.’’ What tab? Taxes paid should bear some relation to services received, and merchants with no “substantial nexus’’ to a state receive no services from it. They don’t use its firefighters or sewers, don’t send their kids to its schools, and don’t expect it to plow their streets after a blizzard. To force them nevertheless to collect and remit that state’s taxes would be grossly unreasonable.

Durbin’s bill would only hurt the consumers he claims to be “looking out for.’’ The existing arrangement has worked well for 40 years. All it needs from Congress is a good leaving-alone.

I don't think Durbin's plan will get any traction in Congress. There are enough Democrats to pass it in the Senate, but I don't think it could withstand a filibuster. As I mentioned in a previous post Amazon is based in Washington State, and they have two Democrat Senators. I doubt they'd be willing to take on such a large business in their own backyard.