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‘Marketplace Fairness’ fools the Senate, but there are Skeptics in the House

The Marketplace Fairness Act is a like a bad impressionist painting – it’s appealing at first glance, but the longer you stare the worse it looks. The Senate got around that problem today by making sure nobody had a chance to look too closely at this legislation.  Thankfully for businesses and consumers, the House of Representatives won’t be so accommodating.

Today’s vote to limit debate on the ironically named Marketplace Fairness Act (MFA) effectively ends any chance that the Senate will fix the measure’s many crippling flaws before they pass it over to the House.

Cash-strapped state executives and big-box-store lobbyists finally got what they have been working for, a measure that adds tax burdens on small and midsized businesses around the country, without forcing states to go through with the vexing task of actually simplifying their Byzantine tax codes. The MFA contains none of the simplifications identified by the True Simplification of Taxation coalition and is actually worse for consumers than the bad bill that failed to move last year.

That’s the bad news.

The good news is that this shoddy art project now goes to a new set of critics, who may not be so quick to dismiss its numerous flaws, or to overlook the fact that it looks an awful lot like a new tax.

In the House, the Judiciary Committee has jurisdiction over the bill since it sweeps aside constitutional and Supreme Court protections for interstate commerce.   Congressman Goodlatte’s committee will get an opportunity to ask tough questions, such as:

  • Why haven’t states been able to truly simplify their 10,000 different rates, rules, and definitions?
  • How much new tax money would this really mean for state governments, and where would that money come from?  (hint: hold on to your wallets)
  • What is the economic impact of unleashing a horde of state tax auditors on businesses in every corner of America?
  • And finally, the big one, isn’t this a new tax on all those businesses that’s don’t have to pay it today?

None of the true answers to those questions will be comfortable for MFA supporters, who have opted for expediency and cynical political calculus over building real consensus and compromise.

Some think that today’s White House endorsement of the measure will juice its journey through Congress, but perhaps they should think again.

This Administration found itself on the wrong side of another tax law that imposed onerous requirements on business, and had to reverse its support a few months later.

In 2010, the Administration’s Health Care Act expanded 1099 reporting requirements for businesses.  This required every America business to compile data and file 1099 reports for every vendor paid at least $600 for the year.

The outcry from businesses was swift and substantial.  Just 5 months later the 1099 reporting mandate was repealed with overwhelming Congressional and White House support.   It sailed through the Senate 87-12, had 273 co-sponsors in the House, and the Administration bragged, “We have removed a requirement that would have been an undue barrier to small business growth.”

That was for annual 1099 filings to the IRS.  Considering that MFA gives thousands of tax jurisdictions a monthly shot at every American business, this bill will be more like 1099 times 10,000.

All of this can be avoided by the House of Representatives simply taking a closer look at the Marketplace Fairness painting, and deciding that it’s not nearly worthy of anybody’s art show.

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