Taxation Without Location

What gives here in Illinois?  Dick Durbin, one of our Senators, is prepared to introduce legislation that would require sales tax to be collected on out-of-state Internet transactions.  Argues Durbin:

Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?” Durbin said in a speech in Collinsville, Ill., in February. “Out-of-state companies that aren’t paying their fair share of taxes are sticking Illinois residents and businesses with the tab.

Whoa, there, Senator.  Let’s rewind the video.  First, they are not taking anything.  You are the taker, or rather your state government, which by the way can’t seem to resist spending itself into oblivion.  The “tab” is picked up by the set of people whose wallet you can reach and originates with a set of politicians who simply will not face reality.

The problem is not that Main Street is unfairly burdened with a sales tax.  The problem is the sales tax in the first place.  Why should anyone pony up for more when the State of Illinois cannot control itself?  There are 7500 tax jurisdictions in the US.  Aside from the fact that this is symptomatic of a nation gone tax-mad, why should a company with no physical presence in the vast majority of these jurisdictions do petty theft for them?

Here’s a suggestion, Senator Durbin.  Kill the sales tax for both clicks and bricks.  Figure out ways for government to do less with less.  Leave money that you would normally use to prop up a failed state in the hands of the citizens who earned it, from Alaska to Alabama.  Leave businesses free to do what they do best–create wealth, and you do what you do best–very little.

About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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