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Internet tax plan would burden Wyoming’s businesses

By and   /   January 23, 2017  /   No Comments

No state voted more lopsidedly for the 2016 Republican presidential candidate than Wyoming, where voters gave President Donald Trump the nod with more than 68 percent of the vote compared to Hillary Clinton’s 22 percent. Clearly, Cowboy State voters are ready for a change in the way the nation is governed and are tired of political “business as usual.”

How strange that in the same month the nation is inaugurating a Republican president, Wyoming’s state Republican Party leadership is pushing an old liberal political trick – significant tax burdens and new regulations on internet commerce. It’s done in the name of fairness, but there’s nothing fair about it.

AP File Photo/Ross D. Franklin

ONLINE TAX: Wyoming lawmakers are considering imposing a tax on internet commerce firms with no facilities or employees in the state.

House Bill 19 would require internet retailers that conduct more than 200 transactions a year or do more than $100,000 of business in the state annually to collect Wyoming taxes from consumers, even if they have no property or employees in the state. The measure passed the House on Jan. 17 and Gov. Matt Mead has been a supporter of efforts to prod online retailers to collect sales taxes for the state.

Supporters argue that the measure would “level the playing field” and aid struggling mom-and-pop businesses, but the reality is that the playing field is already level. Under current rules, all businesses (whether brick-and-mortar or web-based) with property or employees in Wyoming collect its sales tax, a commonsense standard that treats all sellers fairly.

The bill’s backers fail to account for the harm it would do. Wyoming residents, many of whom live in remote areas far from big retail centers, would have to pay more for myriad online purchases. And the businesses that sell to them would face complicated tax-collection rules that would make them less likely to sell to Wyomingites in the first place. But that’s not the worst of it.

By contributing to the erosion of borders as effective limits on state tax power, the bill will encourage poorly governed, tax-heavy states like California and New York to enact similar bills that would unleash their aggressive tax collectors on Wyoming businesses. Wyoming legislators’ own constituents who sell online could be subject to audit and enforcement actions in states in which they have no physical presence. This burden would fall particularly hard on specialty businesses and small sellers that are dependent on the internet to reach their customers and it could crush up-and-coming internet firms.

Republicans should understand the unforeseen consequences of imposing ominous new regulations on growing businesses. Wyoming’s GOP legislators apparently are too fixated on new sources of cash to fund their favored programs. The sad truth, however, is that the revenue associated with this bill is unlikely to reach even the paltry 2 percent of total state tax collections estimated by the Department of Revenue.

H.B. 19 and similar bills in other states are unquestionably unconstitutional, given decades-old Supreme Court precedent that makes clear state tax powers stop at the border’s edge. Such bills seem intentionally — and cynically — drafted to run afoul of the nation’s founding document. H.B. 19’s passage would draw Wyoming into a potentially expensive and bitter cycle of litigation that is duplicative of similar cases in other states.

At a time when Wyoming voters want a new line of thinking, one that reforms government rather than endlessly shaking down residents for new revenue, their elected officials are on the cutting edge of an effort to expand tax-collection powers and impose complicated new rules on businesses. Fortunately, there’s still time for Wyoming residents to make their voices heard.

Andrew Moylan and Steven Greenhut are senior fellows at the R Street Institute, a free-market think tank based in Washington, D.C.

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