Both Idaho GOP Sens. Mike Crapo and Jim Risch say they support allowing states to collect sales tax on Internet purchases by their residents and both backed an April 24 procedural vote to allow the Marketplace Fairness Act of 2013 to advance.
But when the roll was called in the Senate Monday night, Crapo were on the short side of a 69-27 Senate vote to approve S. 743 authored by Wyoming Republican Mike Enzi. The bill now goes to the House, where it is expected to face a tougher fight in the GOP-controlled chamber. Among the 27 Senate opponents were 22 Republicans and five Democrats.
Crapo and Risch voted no despite pressure from Idaho business groups, including the Idaho Chamber Alliance and Idaho Association of Commerce and Industry. In a full-page newspaper ad Sunday, the groups thanked Crapo and Risch for supporting small business and urged them “Keep standing with Main Street” and vote for S. 743 on Monday. The ad was organized by a national group, the Alliance for Main Street Fairness.
“The Marketplace Fairness Act will help Idaho’s small businesses, Main Street retailers, and local mom-and-pop stores thrive by leveling the playing field so all businesses can compete fairly,” said the ad. “It’s time to send special treatment for online retailers.”
Crapo and Risch still say they support letting states decide whether to collect the tax. But they wanted amendments that would allow a higher exemption for small businesses — from the bill’s $1 million in annual sales to $3 million — and clarifying language to block states from taxing financial transactions.
Crapo’s spokesman, Lindsay Nothern, said Tuesday that “the final version did not satisfy his concerns.”
Said Risch spokesman Brad Hoaglun: “Senator Risch supported the underlying bill and Senator Enzi’s perfecting amendment prior to the vote but in the end did not vote for S. 743. First, he did not believe the process allowed for a robust review and debate of the bill and amendments, and the bill never underwent the markup process in committee.”
Hoaglun provided a longer statement, which appears below. Nothern supplied a letter a letter that Crapo is sending constituents who inquire about his vote.
First, Hoaglun, on behalf of Risch:
The majority leader was only going to allow two amendments to the bill, one by Sen. Enzi (which the Idaho senators supported) and one by Sen. Durbin (which was disposed of).
While he voted to proceed to consideration of the bill on April 22, Senator Risch believed there needed to be consideration of some additional amendments.
A major amendment Senator Risch wanted to see was an increase in the small-seller exception from $1 million in sales to $3 million. There are over 9400 separate sales tax codes in the country and the Enzi amendment opens up the possibility for more than 500 tribal sales taxes on online transactions. A company like Amazon can keep track, but for small Idaho online businesses that the senator heard from, it is very difficult and costly. With Senator Risch as the ranking member of the senate small business committee, he understands the importance of small businesses and wanted to ensure that they were adequately protected from a dangerously low tax exception.
Senator Crapo shared his concern with Senator Risch about the ability to create new taxes on financial transactions conducted online. That was another fix that could have been easily done if the amendment process was followed.
Again, Senator Risch supported the concept since it is not a new tax, but strengthens the process for a tax already owed. And, it is up to each state to determine if they want to sign on to the Streamlined Sales and Use Tax Agreement (http://www.
An important point to note here, even if S. 743 does not become law, the Idaho Legislature can still sign on to the Agreement.
Second, the Crapo letter to constituents:
The Marketplace Fairness Act, S. 743, was introduced by Senator Mike Enzi (R-Wyoming) on April 16, 2013. In 2009, 18.6 percent of all retail and wholesale transactions were conducted over the Internet. S. 743 would give individual states, rather than the federal government, the discretion to collect sales and use taxes on all purchases, regardless of whether they are made over the Internet or at a local retail store. On April 22, 2013, the Senate voted 74-20 to proceed to debate and consideration of the bill. As a strong proponent of states’ rights, I voted in favor of proceeding to consideration of S. 743.
It is important to note, despite some misrepresentations in the media, that this legislation would not create, or even encourage, any new taxes. In fact, the language in the legislation specifically states, “Nothing in this Act shall be construed as encouraging a State to impose sales and use taxes on any products or services not subject to taxation prior to the enactment of this Act.” Instead, the true effect of this bill would be to remove the current federal barrier that prevents states from enacting pro-growth tax policies that focus on consumption. When states have such freedom to set their own tax policies, it allows states to cut many of their current broad-based taxes on property and income.
As many conservative economists have recently discussed, including the Chairman of the American Conservative Union, and Arthur Laffer, former economic policy advisor to President Reagan, by preserving the right of states, like Idaho, to collect sales and use taxes on all sales made by Idaho-based businesses, it would allow states to lower their income and property tax rates. It is consistent with pro-growth tax policy to focus taxation on consumption, whether that purchase is done online or in person at a small business on Main Street.
Due to the distortion in current law, states are required to make up that lost revenue by increasing broad-based taxes on all state residents, regardless of how much shopping they may do online. As the Farm Bureau notes, this is a particularly unfair burden in rural states, like Idaho, where many farmers and ranchers are land rich and cash poor, but are now forced to pay higher property taxes to make up for the fact that the federal government does not allow states to collect sales and use taxes on online sales in the same way they are if that same product is purchased at a main street small business.
It was for these reasons, support for states’ rights and pro-growth tax policy which could lead to reduced income and property taxes for Idahoans, that I voted to proceed to debate and consideration of amendments to S. 743. However, as the debate continued, it became clear that additional protections would be necessary to protect some small businesses, and to ensure that the ultimate tax rate reductions that many conservative economists say should result from the enactment of this legislation will actually take place.
I agree that states should retain the authority to administer the tax laws governing the citizens of their state, and I have supported previous efforts to encourage the preservation of states’ rights regarding online commerce. I also agree that any proposal must be developed in a way to ensure that it does not impose new costly and burdensome requirements on small businesses, including online small businesses. Unfortunately, the Senate’s ability to consider and vote on many constructive amendments was prevented by a few Senators who objected to the consideration of any amendments. For example, efforts were blocked to allow for an amendment to improve the small business protections in the bill. I also supported efforts that sought to clarify language in the bill to ensure that this legislation would not open the door to new taxes on any online financial transactions. These efforts were also blocked. For these reasons, I voted against the motion to invoke cloture and end debate on S. 743. Nevertheless, cloture was invoked by a vote of 63-30.
Further, because all efforts to improve or amend the bill were blocked, I voted against final passage of the bill. Nevertheless, the Senate approved S. 743 on May 6, 2013, by a vote of 69 to 27. The bill now moves to the House of Representatives for further consideration. In the meantime, please rest assured I will continue to work with my colleagues to support states’ rights and promote small business growth and job creation.