Internet Tax Debate Flares, But a Bigger Issue Won’t go Away

Death-and-TaxesWe’re all familiar with the old proverb: “Nothing is certain but death and taxes.”

But these days, that statement should be revised to say: “Nothing is certain but death and unchecked federal government spending that causes higher, more complex, burdensome taxes that disproportionately fall on small businesses.”

That’s not as catchy as the seven-word version, but it’s true.

Today, an unusual tax issue that could significantly alter our free enterprise system has suddenly appeared on the horizon. The Marketplace Fairness Act, more commonly known as the Internet tax, would require retailers who have online sales of more than $1 million and don’t have physical outlets in states to pay sales taxes.

It’s somewhat more complicated than that, as most legislation tends to be, but that’s the gist of it.

It passed the Senate by a strong margin. Whether the House of Representatives goes along is far from certain, but the idea has momentum and at the same time, it has divided the small-business community.

It has been called everything from a job killer to a tax grab to a measure that would allow low-tax states to steal revenue from higher-levying states.

Those in favor say it would “level the playing field” and bring equity to the marketplace for retailers with bricks-and-mortar facilities. Opponents claim it will be extremely complex for small businesses to figure out, run off customers and even violate the Constitution of the United States.

No matter how you feel about this new tax proposal, remember two things: First, the Internet is here to stay and it will continue to evolve and change, for better or worse, how our free enterprise system functions.

Second, the real tax issue facing not just small business but our entire nation is the assumed certainty that the federal government cannot break its free-spending habit. Until that is resolved, we will steadily lose fiscal ground and always face calls for more and bigger taxes.

In NFIB’s latest Small Business Economic Trends report, a majority of our members cited taxes as their single most important problem. And the last time NFIB asked its entire membership to rank issues of concern, taxes occupied the five of the top 10 problems on the list.

*Important note: When polled on the Marketplace Fairness Act specifically, NFIB membership was split. Therefore NFIB cannot align with a position on this Act.*

If you have strong feelings one way or the other about the Internet tax, contact your representatives and share your feelings with them. But before you do that, take the time to study this issue carefully, keeping in mind that as long as we allow Congress and the president to avoid responsible action on federal spending, the debt and the deficit, there will always be a push for more tax revenue.

It may seem impossible, given the state of our government today, but with enough grassroots support from small business, meaningful tax reform could become a certainty in its own right.

Who knows? One day we might even disprove the tax part of that old proverb.

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