Schafer Column: There’s No Need For The Marketplace Fairness Act


Online shoppers last year spent an estimated $225 billion in retail. While that number is significant in this economy, it only represents about six percent of all retail transactions. Nearly 95 percent of consumers still prefer to see, feel and touch what they are buying.

Nevertheless, the growth in online sales has been impressive enough that it has received the attention of traditional ‘brick and mortar’ retailers as well as cash-strapped state and local governments. This powerful array of interests united in Washington behind the so-called “Marketplace Fairness Act.”

The “Marketplace Fairness Act” establishes a national sales tax collection mandate on Internet sellers. With state and local governments desperate for new sources of revenue, it is easier to turn to Washington to raise taxes rather than managing their own budgets properly. Local retailers have said they simply want to “level the playing field,” but consider this: traditional retailers today have to collect and pay sales taxes in the states where they are physically located as do the online retailers. With the proposed ‘fairness’ tax increase, online retailers will have to collect and pay sales taxes in every jurisdiction where they have a customer.

Today, if you purchase an item in one state that doesn’t impose a sales tax, your cost is less than in another state that does collect a sales tax. But now politicians want to force you to pay sales tax on everything you purchase online. There is nothing ‘fair’ about that.

Because more than 85 percent of online sales are dominated by big-box retail, most of the anticipated revenue for states and localities is an illusion.

In places like New York and California where this tax collection has already gone into effect, estimates of new tax revenue proved to be exaggerated by 75 to 80 percent. Perhaps this is because most of Internet sales are already taxed.

For anyone who hasn’t been paying attention, the hard lesson of this economy is that increasing the size and scope of government doesn’t work to stimulate the economy. Raising more government revenue through a new tax and subsequent collection costs on small businesses will not put us on the path to economic growth that everyone in Washington claims to be their priority.

As bad as new taxes are for a floundering economy, however, the unintended consequences are the biggest looming tragedy. In my home state of North Dakota, many rural farmers and ranchers have to drive 50 or 60 miles or more to a small rural town only to find limited retail options and a reduced selection of goods and services.

Sixty million people live in rural America and Internet shopping has helped this hardworking and yet easily ignored segment of our nation have access to the same goods and services that are easily reached by urban communities. And what they save in the way of taxes is pretty well offset by the added costs of shipping and handling, making the current market already plenty ‘fair.’

Another easily forgotten segment of our society this looming tax increase dressed up as ‘fairness’ is anything but fair to is the home-bound and those who lack the transportation options others take for granted.

The “Marketplace Fairness Act” is actually unfair for consumers and the small to medium-sized businesses that create most of the jobs and economic growth in our country. The consequence of this legislation will only be to accelerate the trend toward market dominance by the very biggest of retailers at the expense of both consumer choice and, ultimately, good old-fashioned market competition. And for taxing jurisdictions that believe they are going to somehow harvest a big tax windfall and build into their budgets increased spending, their only option when the projected revenue doesn’t appear will be to raise other taxes to make up the difference.

The U.S. House of Representatives has a chance to stop this ill-conceived and misunderstood legislation. Please contact your local member of Congress and tell them to really be ‘fair’ to you and vote against this legislation.

Ed Schafer is the former Governor of North Dakota and served as Secretary of Agriculture in the George W. Bush administration.

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  • toomuchguvmint

    Government and higher education are continually proving they are nearly totally inept when it comes to managing vast sums of money. Why would we entrust these people with more money to manage?

  • camsaure

    You are correct. The proof is already there as can be seen by the difficulty small town grocery and hardware stores are experiencing in competition with larger cities. This will not help them one iota and will cause them even more harm. Then when the difficulties of collection arise, I am sure the “benevolent” Federal Govt will step in to collect the tax for us and redistribute it all “fairly”. And if the past is any indication, there will be not one bit of relief, but rather just another additional, detrimental tax. The left has never yet found a tax that they did not like. Also they care very little of any damage it will cause, in fact history has proven that they will usually find another “cure” that will prove to be even worse.

  • Thresherman

    I do grow weary of such phrases as “cash-strapped state and local governments” and “state and local governments desperate for new sources of revenue”. When ever I see or hear such phrases it sounds as if these entities are existing on miniscule amounts of money when in fact, almost without exception, they are lavishly funded. The problem is that their reach is often beyond their grasp.

    When anyone in private business or personally has a shortage of money, they have to economize to make ends meet. Governments, on the other hand, never do for they view everything they do as essential regardless of the truth of the matter.

    Thus when these phrases are used, it gives the opposite meaning than what is really going on. When we refer to governments as “cash-strapped” or “desperate” it makes it sound as if they are victims. We really should be using terms such as “greedy” or “insatiable” when talking about governments that want to tax us even more. How can we expect to make our case against further taxation when we yield victim status to the government? Further, the government is greedy and it is insatiable. Unrestrained, the power to tax is the power to make the government the master and the people the servants instead of the other way around.

    In my opinion, not only is the Marketplace Fairness Act wrong, but it is the camel’s nose under the tent leading eventually to a Federal Sales Tax. Which in itself would not be a bad idea, if it replaced the income tax, but a greedy government will not easily yield the revenue and the power of the income tax and so this new act would lead to an additional tax.

    A last point, it seems lately that the worse the law the more laudable the name. Thus the Marketplace Fairness Act be better viewed as the Marketplace Punishment Act.

  • Roy_Bean

    Maybe we should take this “fairness” a step further. Maybe when those of us in rural North Dakota shop in Fargo the Fargo merchants should collect local taxes based on where we live and then return the money to the political subdivision that produced the revenue. The Fargo merchants already make a profit on the goods sold, and the store already pays Fargo property tax, is it really fair that the city also makes a killing by charging us local taxes too? Maybe when we shop at a Walmart store in another state they should get some ID and collect taxes based on North Dakota’s rate and then send the money back to North Dakota. If the goal is “fairness” then the sky’s the limit. You can’t be too fair, can you?

  • JoeMN

    Many of these “online retailers” are mom and pop shops.
    This is simply another case of politicians parking lot rendezvous in the back seat of a Rolls with the big boyz who paid their way into the dance.

  • kevindf

    “Fair” is a nebulous word used by shysters and slackers.

  • Lynn Bergman

    Exactly correct, Governor! The “Marketplace Fairness Act” should have been called the “Socialism Expansion Act”, and is simply the precursor to a national value added tax that smart governments have employed to REPLACE other taxes, not ADD to them. DEMOCRAT Heitkamp and REPUBLICRAT Hoeven are of the same cloth in this issue; an extension of the “local government mentality” in North Dakota, namely “How much more revenue from increased valuation is there? Let’s spend it.”

    Soon a second property tax elimination measure will come forth, this time with an implementation formula that will prevent it from becoming a “votes for favors” program of the increasingly liberal REPUBLICRAT legislature.

  • Dallas

    Ed didn’t write this either…..