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The Senate's $100 Billion-Plus Deception

Stocks in this article: WMT AMZN TGT

Backers say even though nobody's ever paid sales taxes on out-of-state purchases, state laws require it, even though the Supreme Court in 1992 ruled such laws unconstitutional in Quill Corp. vs. North Dakota. And, states have always collected fees from local businesses for "tax exempt resale certificates" mandating only businesses with a physical presence in a state to tax residents. It appears the states, having had their cake, now want to eat several bigger ones at your expense.

Supporters have the audacity to claim it's not a huge tax increase when it's really more like they're creating a new tax and almost certainly thousands of new taxes in the future by allowing states to enforce laws they never could before.

HOW BIG BROTHER DOES IT

While it lets states tax all industries, legislators have singled out only mail and Internet businesses to enforce initially. It requires states to give free software to businesses that calculate tax on point-of-sale transactions for the 9600 different tax jurisdictions that will be charging you tax. As if drafters of the "Marketplace Fairness Act of 2013" think that's fair to you or those businesses.

But it will be easy for states to extend enforcement to all other industries by creating software for each industry. There won't be anything stopping them. No new federal legislation will be required for any state to tax you on any good or service it wants to. And because service is the biggest chunk of GDP, that's where the money is. The bill's senate proponents are so confident of its passage, note that Big Brother already has 6 "Certified Software Developers" spending money, at work on it.

Today, states exempt many industries from sales tax because taxing them isn't popular in the state. Eventually money-grubbing state legislators will likely eliminate many of these exemptions to get at your out-of-state money.

Any currently exempt industry that might generate lots of out-of-state tax is at risk. State legislators foam at the mouth at the thought of gouging out-of-state purchasers who can't vote them out of office. This is taxation without representation. Your option will be to buy elsewhere and be gouged by money-hungry legislators of other states.

The initial $23 billion they're after is chump change -- just like the original federal income tax was supposedly permanently capped at 2%. As states enforce taxation on more industries the bill could easily cost taxpayers endlessly more than $100 billion annually. Internet and mail order sales are a small fraction of our economy. Again, ours is primarily a service economy and the bill lets states tax you on services from their state. And that is precisely the basis of a European-style VAT.

Taxes on services and income is the ultimate Trojan Horse. Once states start accepting each other's tax claims against you, nothing stops them from coming after your business income. Scary!

It would initially cost the average adult about $100 a year, but eventually could cost endlessly over your lifetime, either in taxes on you, or price increases businesses will pass to you.

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