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Amazon Should Collect Taxes? Over my Dead Gadget-Loving Body!

[December 28, 2009]

Amazon Should Collect Taxes? Over my Dead Gadget-Loving Body!

Originally posted on VoIP & Gadgets Blog, here: http://blog.tmcnet.com/blog/tom-keating/internet/amazon-should-collect-taxes-over-my-dead-gadget-loving-body.asp.

The NY Times must be smoking the weed again. They have an article posted the day after Christmas arguing that Amazon should charge customers state taxes to help fill the state's tax coffers.

The NY Times writes, "Competitors aren't the only ones hurt by Amazon's stance on sales taxes: it also means the loss of considerable revenue to states and localities that badly need it." So because the states "badly need it", the NY Times argues Amazon should give up some of their capital wealth and spread it around to all 50 states? Last I checked, we still live in a capitalist republic not a socialist state. Let me explain the Constitution to ya NY Times, so you understand why charging intrastate taxes is unconstitutional.

First, let me cite Article IV of the Articles of Confederation, which was the first constitution of the United States and formed the core basis for the adoption of the final Constitution.

The better to secure and perpetuate mutual friendship and intercourse among the people of the different States in this Union, the free inhabitants of each of these States, paupers, vagabonds, and fugitives from justice excepted, shall be entitled to all privileges and immunities of free citizens in the several States; and the people of each State shall free ingress and regress to and from any other State, and shall enjoy therein all the privileges of trade and commerce, subject to the same duties, impositions, and restrictions as the inhabitants thereof respectively, provided that such restrictions shall not extend so far as to prevent the removal of property imported into any State, to any other State, of which the owner is an inhabitant; provided also that no imposition, duties or restriction shall be laid by any State, on the property of the United States, or either of them.

In order words, it was critical that states not pass legislation which punished other states via taxes or levies, which could be used to try and gain an unfair competitive advantage.

Further, the final Constitution in Article I Section 10 (Powers prohibited of States) states:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.

Therefore, the Constitution specifically prohibits interstate taxes and this forms the core heart of American federalism.

Federalism helps enable interstate economic competition. Those states who enact business-friendly legislation and which allows people to more easily "pursue liberty and happiness" will attract more people and businesses. California vs. Texas is one prime example. California used to be that shining city on a hill due to beautiful climate, low taxes, and plenty of jobs. Well no longer. Texas may now be that shining city on a hill...

Look at what Powerline had to say:

Texas, increasingly, is the economic and intellectual leader of the U.S. During the last 18 months before the current recession took hold, while the country as a whole was still creating jobs, more than half of those jobs were created in a single state: Texas.

Texas has usurped the leadership position that, decades ago, belonged to California. Today California is in decline, likely irreversibly so. William Voegeli draws the sad but instructive comparison in the Los Angeles Times:

In America's federal system, some states, such as California, offer residents a "package deal" that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over what it means to get the size and scope of government right. ...

California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau's latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higherin California than in Texas: $10,070 per person compared with $6,858. ...

Confronted with a stark choice between government dominance and freedom, Americans are voting with their feet:

One way to assess how Americans feel about the different tax and benefit packages the states offer is by examining internal U.S. migration patterns. Between April 1, 2000, and June 30, 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544 as a result of people moving in from other states. During these years, more generally, 16 of the 17 states with the lowest tax levels had positive "net internal migration," in the Census Bureau's language, while 14 of the 17 states with the highest taxes had negative net internal migration.

Look at this graph comparing Texas vs. California:

Would the NY Times consider that perhaps the problem isn't state tax revenue levels dropping off, but the rampant non-stop spending and monstrous growth of both state and federal governments? According to the City Journal:

Californians have the best possible reason to believe that the state's public sector is not holding up its end of the bargain: clear evidence that it used to do a better job. Bill Watkins, executive director of the Economic Forecast Project at the University of California at Santa Barbara, has calculated that once you adjust for population growth and inflation, the state government spent 26 percent more in 2007-08 than in 1997-98. Back then, "California had teachers. Prisoners were in jail. Health care was provided for those with the least resources." Today, Watkins asks, "Are the roads 26 percent better? Are schools 26 percent better? What is 26 percent better?"

It would appear that Americans are becoming tax-weary and even blue states such as California are all taxed-out. Now that we're in the middle of a prolonged recession and many states' tax revenue is way down, the NY Times is proposing that Internet companies such as Amazon should pay state taxes? I don't think so. In fact, "Get your stinking tax-sucking claws off my Amazon gadgets you damn dirty ape!"