Main Street Deserves a Level Playing Field

One of the basic principles of the conservative movement is that the market, not the government, should pick economic winners and losers. The only role that government should play is to ensure a fair and level playing field.

When it comes to sales taxes, that principle has gone out the window in the Internet age. Here’s an example: If you need a new pair of running shoes, your neighborhood sporting goods shop is compelled by state law to collect any sales taxes due. But the same is not necessarily true for a store selling shoes online.

Under current law, states are only allowed to mandate the remittance of sales taxes on retailers physically located within their boundaries. Which means online competitors can often sell the exact same shoes at a reduced price—no taxes included. (Technically, the shoes’ purchaser is supposed to declare and pay the tax directly, but you can probably guess how often that happens.)

You can understand how frustrated these brick-and-mortar shop owners are with their government. This tax discrimination tilts the playing field against them. The customer (and profit) goes not to the company that is most innovative or efficient, but to the one least shackled with taxes. In other words, the government is picking the winner and the loser.

Our government—at all levels—should treat Main Street retailers and online ones equally, as would be consistent with conservative principles. Thus far, Congress has refused to give up power and allow states to regulate in this area. But there is now a bipartisan proposal, the Marketplace Fairness Act, to give states full authority to set policies regarding collection of state sales taxes. This bill would not give any additional power to tax, nor does it encourage higher taxes. It simply allows for uniform collection of taxes that are already legally due. Conservatives need to embrace this proposal, which would put all retailers on equal footing, and then step back and let the market work.

Of course all conservatives embrace the concept of lower taxes for consumers, but not through carve-outs and special favors in the tax code. William F. Buckley, Jr., the godfather of the conservative movement, understood this growing problem, even as the Internet was in its infancy. In an article penned in 2001 and entitled “Get that internet tax right and don’t contaminate this medium,” Buckley described the status quo as inconsistent with conservative principles: “…if the advantage of tax free internet commerce marginally closes out local industry, reforms are required.” He suggested that online sellers of goods could be required to collect the sales tax and send it straight to the treasury of the state in question—which is exactly what the Marketplace Fairness Act, proposed by Rep. Steve Womack and Sens. Mike Enzi and Lamar Alexander, would allow.

There are wonderful conservative governors across the country who take their pledges to not raise taxes seriously. One such governor, Mike Pence of Indiana, advocated fixing this tax discrimination when he was a member of Congress. I trust Pence to tax transactions in his state fairly and at the lowest tax rate possible. Michigan Governor Rick Snyder has encouraged states to use this proposed authority only to impose fairness, and to offset any increased revenues with tax cuts elsewhere.

Taxes should be as low as possible, evenly applied, and as visible as fireworks on the Fourth of July. If everyone has to pay them and knows exactly what is being taxed, we have our best chance as conservatives to advocate their reduction. However our current tax code is a bizarre mixture of earmarks, carve-outs, and special treatment for politically connected interests, with the true level of taxation for everyday Americans hidden.

The tax discrimination in favor of online sales is unfortunately another example of a federal government that has lost its way by clinging to its power. Under federalism and the 10th Amendment, powers not vested in the federal government are retained by the states. Yet some conservatives are uncomfortable with this, because they fear blue state will become bluer, even less hospitable to business and freedom. But it is the genius of the Founders to have created a country that allows states to be a reflection of the values of the people who reside in them. Decisions that can be made by governors and state legislatures—who are close to the people and thus responsive to citizens’ needs—should be left at the state level. That is the heart of true federalism.

We should embrace, not fear, taking power back from Washington, D.C. States have famously been called the laboratories of democracy. As states with free-spending, out-of-control governments founder, Americans will vote with their feet and flock to the success found in red states. We have all watched as well-meaning conservatives, elected to Congress, find themselves essentially powerless to change the system, even with allied majorities and presidencies. This doesn’t mean we should retreat from fighting in the halls of Congress, of course. But our movement will achieve greater success when Washington can be bypassed altogether.