Marketplace Fairness Act Would Be Bad For Small Businesses

Republican lawmakers in the House and Senate join together to emphasize damage bill would do to independent biz

Grover Norquist / AP
June 18, 2013

Grover Norquist and Sens. Ted Cruz (R., Texas) and Rand Paul (R., Ky.) joined a group of Republican House members to say the Marketplace Fairness Act would stifle growth and unduly harm small business owners.

"The reason it passed, and it passed with significant margins in the Senate, is because you’ve got a lot of very powerful lobbyist in Washington, D.C. who are supporting this bill. The giant corporations … are united behind this bill because it helps all of the giant companies," Cruz said.

"The people who get hurt by this bill are the little guy," Cruz said. "Small online retailers who get hammered by this bill. Who face massive new taxes. Who face compliance costs. If you’re a small online retailor you’re suddenly subject to the jurisdiction of over 9,600 taxing jurisdictions all over the country… and the little guys, they don’t have powerful lobbyists here in Washington."

Cruz’s comments came during a press conference outside the U.S. Capitol.

The speakers at the event, which was organized by Rep. Steve Daines (R., Mont.), refuted recent statements that the passage of the bill may result in lower income taxes.

"One of the only things really known to stimulate the economy is to leave more things in the economy," Paul said. "Proponents of this bill say, oh it will raise $23 billion in taxes. … I think there are all types of constitutional questions with regards to this tax, but the bottom line is economically we want more money left in the economy so I can’t be for a 23 billion dollar tax increase."

Critics of the bill are adamant that this is a large tax increase that discriminates against small businesses, and they are particularly concerned with the notion that taxes will be implemented across state lines.

Daines said, "If you are a small business owner and you’re now forced to comply with 9,000 different tax codes …you’re not going to be investing in your business, hiring new employees, or growing your product base."

The borderless tax, Daines continued, poses a "threat … for principles that are the foundation of our nation’s tax policy. States must not be allowed to extend their taxation and regulatory authority beyond their borders."

Norquist reiterated that this bill would be a tax on individuals who cannot vote against the officials who are taxing them.

"In the United States, we are not in favor of allowing city governments, state governments, or national governments to tax other people who cannot vote against them," he said.

In a letter to Congress, Gov. Scott Walker (R., Wis.) wrote, "I want to make clear, should federal Marketplace legislation become law, my intention would be for any resulting additional revenue be used to provide individual income tax relief for Wisconsin’s taxpayers."

When asked whether the bill could be used as a tool to lower taxes, Norquist told the Washington Free Beacon, "It could be," but he did not expect that to occur in "most states."

"Even if it was revenue neutral, you’re still taxing across state lines," Norquist said. "You’re subjecting people in a different state to your tax burden and you can abuse them with audits."

Supporters of the bill say that their support does not come from a desire to implement a new tax, but rather, as Politico reported, "to correct a discrepancy in the law that has deprived states of more than $20 billion in revenue each year."

Proponents argue that some states already require individuals who shop online to "remit fees on their Web purchases … but many buyers aren’t aware of the rules or choose not to abide by them."

Norquist sees the bill as a poor use of time.

"Politicians who have time to lust after, theoretically $23 billion, in 50 states, where it’s a trillion dollars in state and local taxes, trillion and a half," he said. "Why not spend that same time trying to cut the budget? Why not spend that same time cutting spending? This is what politicians do instead of governing."

"Instead of reducing spending, instead of saving money, instead of doing things better, they just try to come up with new ways to raise taxes. This is a distraction from governing competently."

The House Judiciary Committee is reviewing the bill. Currently, it has 66 cosponsors.