I’m either a total optimist or a glutton for punishment. I recently explained the benefits of “tax havens” for the unfriendly readers of the New York Times.

Now I’m defending a different form of tax competition for CNN, another news outlet that leans left. In this case, the topic is whether states can reach beyond their borders for tax revenue.

Here’s some of what I wrote about the so-called Marketplace Fairness Act that was just approved by the Senate and presumably will soon be considered by the House. I start by explaining that the powers of governments should be constrained by borders.

Let’s assume you live in Utah, Hawaii or South Carolina, and you go to Nevada for a vacation. While in Las Vegas, you spend some money in the casinos. Gambling is illegal in the state where you live, so should the cops in your home state be able to track your activities and arrest you for what happened in Nevada? The answer, needless to say, is no. Or at least it should be no. Common sense tells us that state laws should only apply to things that happen inside a state’s borders. But this sensible principle is being tossed out the window by the U.S. Senate, which has approved a proposal that would give states the ability to impose their taxes on out-of-state sellers.

I also explain that this issue isn’t about whether the Internet should be taxed. Indeed, as a fan of the flat tax, I don’t want special favors or special penalties in the tax code. Internet profits and Internet sales should face the same (ideally low) taxes as all other sectors of the economy.

Instead, the fight is really about whether a state government has the right to force out-of-state merchants to act as deputy tax collectors. If you believe that borders should limit the power of governments, the answer is no.

But that rubs politicians the wrong way.

Kalifornia already has this law, so I'm wondering why they are making it a federal law.

But an interesting point... I live in a state with high sales tax.  If I visit a state with low/no sales tax, that tax applies.  If I were to visit and buy something over the internet, would that tax apply?

fngrafters.

I try to buy a majority of my hobby supplies from local hobby shops because they supply the racetracks, without them I couldn't race. A lot of times I pay more but its for a good cause. Today I spent over a $100 at the local hobby shop. Everything else I usually buy off the internet. I've gotten great service and returns are simple. The internet has 0% financing and a lot of other advantages the locals cant provide. I live mainly off of disability so I have to stretch my dollars. I've been treated rudely by locals but so far that has never happened on the internet. NC doesn't deserve a dime off of something I buy in Texas and have shipped here. Versy right now you only pay internet taxes if the place you're buying from has a store in California. Same for me, I pay sales tax on internet purchases if the internet store I'm buying from is located in NC. If this law passes the House we will pay whatever state you live in sales tax, no matter where your purchase comes from. Legally a states authority stops at its border. This is an illegal tax and just another way to rob the poor and middle class.

JOG I dont believe the big online retailers want it, it will make the price of their goods go up. Congress wants it and its highly illegal. A states rights stop at its border.

Sadly... the winners is this have nothing to do with buying or selling.. nor do they care about the specifics ( over million.. blah blah) .. no the winners will those that feel that the federal government should be the end-all be-all for everything.

Basically... the if a state wants to participate then they must GIVE up their right to frame their own tax law. That is a very big deal. Many state government dummies are standing in line to get to this feeding trough of "free tax revenue" but what they are giving up is the ability to decide their own states tax code. They are giving up their sovernty. That begins a decline for all states... for all citizens.. a loss of sovernty. Once gone it will never return.

The law is bad... regardless of anything it does or does not do .. it is bad on this one issue.