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Editorial: How the ‘Amazon’ Internet Tax Hurts Consumers

In an attempt to acquire more money from consumers and businesses, state lawmakers are proposing legislation that would force Internet retailers to collect Michigan’s six percent sales tax if the seller has an “affiliate” located in Michigan.

Yesterday at 9:00 AM, the House Tax Policy Committee heard testimony on House Bills 4202 and 4203, commonly referred to as “Amazon” Tax Laws.

MLive reports:

The House Tax Policy Committee approved the bills in a series of 9-1-5 votes, with five members passing on the controversial legislation. Three of five Democrats joined six of 10 Republicans in supporting the measure.  State Rep. Aric Nesbitt, R-Lawton, was the only “no” vote.

State lawmakers are looking to tax out-of-state companies as though they were in-state. In Quill Corp. v. North Dakota (1992), the Supreme Court held that only Congress had the power to regulate interstate commerce.  Therefore, only a business with a “physical presence” in a state could be subject to a state’s sales tax collection requirements.

Internet_Sales_TaxLawmakers claim that tax receipts will increase by an estimated $460 million per year.  Evidence of this is to the contrary, however. According to research by the Tax Foundation, “Sponsors have promised that a revenue windfall would follow enactment of an Amazon tax, but no windfalls have been forthcoming so far. This is often because online companies respond to Amazon tax law enactments by ending their affiliate programs. In-state persons who earn income from referring potential customers lose that income source.”

Instead of seeking more revenue, lawmakers should consider that the state budget is riddled with unnecessary programs. The Mackinac Center for Public Policy has found ways to save $5.7 billion per year.

By attempting to change Michigan’s nexus standards to include retailers like Amazon that use an affiliate-referral structure, lawmakers are simply looking to protect brick-and-mortar businesses from competition. Ironically, since competition is good for consumers because it increases quality and drives down prices, legislators are promoting higher prices of goods, when for some families every dollar matters.

Instead of protecting selected businesses, lawmakers should be promoting tax and regulatory policies that benefit consumers with more choices and lower prices.

Let us look at this proposed legislation for what it truly is – a way for state lawmakers to pick winners and losers, and take more of Michiganders’ hard-earned dollars under the guise of fairness. There is nothing fair, however, about increased prices for consumers, namely families.

Greg George

Greg George is an Advocacy Coordinator with the Michigan Association of Public School Academies (MAPSA). Twitter: @GregMGeorge

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