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Washington Is Chasing a Ghost on Internet Tax Revenue | Commentary

Thirteen years ago, the economy was booming and the Internet was in its infancy. Young, innovative online companies were emerging almost daily with only the potential to disrupt traditional brick-and-mortar retail sales, threatening the sales tax base on which state and local governments have come to depend. Local governments sounded the alarm: In 15 years, we were told, online sales would represent a majority of all retail sales and the resulting collapse of the state sales tax base would be catastrophic for state and local budgets. Those predictions have proved to be false. Unfortunately, the Marketplace Fairness Act is still based on those false assumptions.

When the Internet is 50 years old, hopefully there will still be innovators and entrepreneurs using it to grow into big, global companies. If the Marketplace Fairness Act becomes law, we will come to regret severely disadvantaging emerging companies with this legislation. In the 15 years that Congress has been debating this issue, the real world has passed it by. As small companies grow and seek a competitive advantage, they will find new ways to provide value and service to customers. When they do, they will build physical stores or add distribution centers for faster delivery. In doing so, they voluntarily avail themselves of the services and the taxing authority in those states without the need for congressional intervention. Congress has not kept pace with this evolution. The Marketplace Fairness Act is neither fair nor does it reflect the reality of markets. Despite Senate passage, the House should continue to oppose this unnecessary and burdensome legislation.

James S. Gilmore III was the 68th governor of Virginia, from 1998 to 2002. He currently serves as president of Gilmore Global Group LLC, a boutique consulting firm.

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