SharksWithLasers -- Seth Cooper

A CUTTING-EDGE BLOG FOR THE WORLD OF THE 21st CENTURY, Currently operated by Seth L. Cooper, a 27 year-old attorney in Seattle (sethlcooper at comcast dot net)

Monday, February 23, 2004

FEDERALISM FIRESIDE READING! As much as I may enjoy purchasing books at Barnes & Noble dot com and avoiding all sales tax, I still think there’s something messed up with a system where that allows me to do just that but would also require me to pay that tax at the local B&N store. It would seem that the system we have now certainly won’t continue forever, particularly as e-commerce continues to grow.

In any event, over the weekend I read an interesting booklet called Sell Globally, Tax Locally, by Dr. Michael Greve of the American Enterprise Institute (AEI). Greve proposes a system of origins-based sales taxation for all of e-commerce, and for the sales of all goods, for that matter. I found it a very interesting read. Well, interesting if you happen find taxation and federalism interesting. And I just so happen to.

A few months ago, Disco hosted Dr. Philip Munoz of AEI for an lunch event about two First Amendment Free Exercise/Non-Establishment cases pending before the U.S. Supreme Court. I told Munoz about how I’d personally hosted his colleague, Greve, for an event at Seattle University’s law school on cartels and interstate compacts. Apparently, Greve works on the “smoker’s floor” at AEI. Smoker’s floor…how East Coast!

Aside from being a total crack-up, I’ve always found Greve’s work to be top-rate scholarship and entirely sensible (not to mention witty), and I’m sure I will be blogging about more of his work with the Federalism Project in the future.

His pamphlet on taxation makes a strong case for origins-based sales tax in e-commerce over destination-based sales tax. In other words, we should compute sales taxes on e-commerce items based upon the tax rates of the producer’s principal place of business, rather than upon the tax rates of the consumer’s jurisdiction.

I particularly appreciate the importance he places upon the notion that one state’s rights ends where another state’s rights begin. According to Greve:

An origin-based tax regime permits each state or country to tax and regulate its own businesses and citizens as it sees fit. Each jurisdiction’s regulatory autonomy and authority however would stop at the border—precisely where they ought to stop. A destination-based tax regime, in contrast, imposes tax collection, reporting and remittance obligations on out-of-state parties…a destination-based regime entails an extraterritorial imposition of a coercive regime that can be enforced by civil and criminal sanctions.

It was ever the concern of the Framers that big states would beat up upon little states or that a group of states would pick on another state. Somehow, this fact seems lost to many people, including Supreme Court Justices.


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