Senators backing a bill to promote collection of sales taxes for online purchases may have to work around procedurally treacherous amendments.
A handful of amendments drafted by GOP Sens. Tom Coburn of Oklahoma and Rand Paul of Kentucky to the online sales tax collection bill would have the effect of killing the entire legislation should it ever reach the House. While the underlying measure doesn’t actually affect federal income taxes, the amendments do change the tax code. Such measures must begin in the House to avoid running afoul of the Constitution’s origination clause.
The underlying bill would not run into the “blue slip” problem, because it steers clear of federal tax changes.
However, Coburn has an amendment that would bar professional sports leagues from qualifying for tax-exempt status in the federal tax code. Coburn has criticized professional sports tax exemptions for the NFL, NHL and PGA Tour as a part of his annual “wastebook” of government spending. Coburn includes targeted tax provisions in that report.
“Taxpayers may be losing at least $91 million subsidizing these tax loopholes for professional sports leagues that generate billions of dollars annually in profits,” Coburn’s 2012 report said. “Taxpayers should not be asked to subsidize sports organizations already benefiting widely from willing fans and turning a profit, while claiming to be non-profit organizations.”
Other Coburn offerings involve federal employment of individuals with serious unpaid federal income taxes and the ability of upper-income taxpayers to claim deductions and credits. Those are proposals that may find more support in another context.
Senate Majority Whip Richard J. Durbin, one of the chief proponents of the sales tax legislation, warned he would seek to table (and thus kill) any of the extraneous tax amendments to prevent generating a House blue slip, a process by which the House effectively dismisses the bill without action because the Senate has infringed on that chamber’s constitutional prerogatives.
“Our bill does not change federal taxation, and we run [into] a procedural problem known as a blue slip problem if we amend the Internal Revenue code in the Senate and send that measure over to the House,” the Illinois Democrat said on the Senate floor. “If we end up voting before cloture, I’m going to suggest we table those, so we don’t go to the merits of any of those suggestions.”
Paul’s tax amendments take a different tack from Coburn’s. One would repeal the federal estate tax, while another would set a lower federal corporate tax rate than in current law.
Procedurally, Durbin and Majority Leader Harry Reid, D-Nev., appear to have the votes to avoid touching any of the tax code changes. Seventy-four senators voted earlier today in favor of the motion to proceed to the sales tax measure, which is backed by most senators from states with their own sales taxes. Though the original tally showed 75 senators in favor, Paul later reversed his vote after discovering he accidentally voted in favor of the motion. Coburn also opposed moving the bill forward.
The trouble, as is often the case, is time. If the Democratic leaders push forward without allowing amendments, the cloture vote to limit debate on the bill itself wouldn’t happen until Friday morning, setting up the possibility that senators opposing the bill might delay the arrival of a weeklong recess.
Indeed, Reid told senators Wednesday that he would delay the start of next week’s scheduled recess in order to finish the bill.
“I caution my colleagues, the Senate will stay in session until we finish this legislation, whether that happens today, tomorrow, Friday or Saturday,” Reid said during his opening remarks on the floor Wednesday
Supporters say that the bill would help level the playing field for brick-and-mortar retailers in states with sales taxes who currently see some customers using retail spaces as showrooms only to then go on the Internet and purchase the same product from an out-of-state retailer without paying the sales tax.
Some Republicans oppose the legislation on fiscal conservative grounds, while the majority of senators from states without their own sales taxes have criticized the plan.
For instance, Democratic Sen. Jeanne Shaheen filed an amendment Wednesday that would keep states like her home state of New Hampshire that do not have sales taxes out of the bill’s reach.
“The Senate’s decision to fast-track this bill was a bad one and that is making these amendments necessary,” Shaheen said in a statement. “The Internet sales tax legislation is bad for New Hampshire small businesses and our country’s economy as a whole.”
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