Why Corporations Love Big Government: The Internet Sales Tax

People who believe in free markets commonly make the mistake of assuming that successful businessmen also believe in free markets. But the sad truth is that a successful businessman is often someone who knows how to use politicians to give him an advantage. Also even entrepreneurs who have become wealthy due to the free market have no reason to believe that they will be equally successful in the future. Rather than favoring the free market as the ethical economic system, these people may simply be opportunists. While the free market gave them an opportunity in the past, they reason, the now need to use the government to “make their own luck” going forward.

Thus, WalMart and Amazon favor an internet sales tax. Others do not:

“This bill is a centralized effort to address something states have been working on for years, coming at a time when the online market is changing. Amazon, which could once shut down warehouses to evade state sales tax, has embraced a more fast-paced sales model that requires local facilities; it supports the tax bill. eBay and others, by contrast, have argued that the bill would impose serious costs and inconvenience for small sellers, making them manage taxes for every state that chooses to collect. The bill doesn’t apply to businesses that sell less than $1 million a year online, but both Etsy and eBay have said that threshold is too low and worked to push it higher.”

The amount of the sales tax isn’t the important part. It is true that by imposing a tax now, demand for online products may shrink, and make new online start-ups slightly more difficult. Thus, sales tax is way of rewarding the companies that are already established online and preventing some future competition.

But the real difference that an internet sales tax will make is found in the compliance costs. There are companies that do nothing but charge a great deal of money to find out and help businesses in multiple states figure out what their tax obligations are. Most people have no idea how much just figuring out what you owe costs a business trying to stay legal and compliant in several states at once.

Up until now, selling something online has been compliant-free because there is no internet sales tax. But when that all changes, companies that are bigger will be better able to absorb the cost of figuring out what they owe because of their scale. Amazon and WalMart will have a great advantage here. The name “Marketplace Fairness Act” is simply false advertising. Compliance costs will be “fairer” to some companies more than others—it will favor the large over the small and the established over the startup.

Furthermore, a million dollar cut off point will change entrepreneurial behavior. Rather than trying to grow new businesses, people will start them up and then try to sell out to Amazon or some already-large business.

In the meantime, we see the government, Democrat and Republican alike, cannot keep their hands off a hurting economy. For the same reason families all across the nation are suffering economically, the states are hungering for more revenue. People in government can either reduce spending or increase taxes on the people who are already in economic pain.

Naturally, they choose to squeeze taxpayers some more.