March 1, 2007 8:13AM

Resistance Grows to State Tax Cartel

Idaho’s legislature has rejected the so‐​called streamlined sales tax proposal (or streamlined sales and use tax agreement). As reported by Euro2​day​.gr, lawmakers correctly viewed the scheme as an attack on sovereignty and a means of insulating governments from competitive pressure:

Anti‐​tax hawks in the state House have put a halt to Idaho’s plan to join a nationwide push aimed at eventually forcing Internet and catalog companies to collect sales taxes when they sell to out‐​of‐​state customers. Wednesday’s vote was 37‐​to‐​32 against the plan, with foes arguing it was unconstitutional and would lead to tax increases on Internet businesses that sell elsewhere. …So far, 18 states, including Wyoming, have signed agreements to simplify their tax systems in this push. Idaho won’t be the next one, after conservatives including Rep. Lenore Barrett, R‐​Challis, likened the Streamlined Sales Tax Project to “crawling into bed with other states.” “It’s a backdoor tax‐​increase waiting to happen,” Barrett said during House debate. “It would allow member states to collude and destroy tax competition.”

A similar battle is taking place in Hawaii, and Grover Norquist of Americans for Tax Reform has an article asking legislators in that state to resist this proposed cartel that will hurt consumers and enrich politicians:

The real motivation of SSUTA is to target businesses that are not physically located in the state and to export a state’s tax burden. SSUTA is a back‐​door tax increase. The implications of SSUTA go beyond the direct tax increase in coming years. Like any cartel, SSUTA would allow states to collude to destroy tax competition. The incentive to keep tax rates moderate or foster competitiveness would be gone, and the pressures to raise taxes would lose their counter‐​balance.