Internet Tax Unconstitutional?

By Clint Lacy

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The State of Missouri is once again claiming that it is losing millions of dollars due to Internet sales. About 261 million dollars in 2001 to be precise. Brent Martin, a reporter for Missouri Net wrote in a recent news brief that, “Even as the state anxiously awaits the sales tax revenue to come in from Christmas sales, it knows it won't get all it should get. That's because more and more people are buying things on the Internet and that isn't good news for State Revenue Director Carol Fischer. And it is robbing tax coffers of needed money.”

It sounds to me like Mr. Martin is siding with the State of Missouri on this issue. Most troubling of all, is that fact that Mr. Martin draws the analogy that Internet shoppers are robbing the state of revenue. First of all Mr. Martin that money was taken from the citizens of Missouri (not the other way around) and in a free market shoppers are able to decide where they wish to buy products for the best value and of the best quality.

Mr. Martin also reports that Missouri Internet shoppers are hurting local retailers. This too is inaccurate in my opinion. Missouri Internet shoppers are not to blame for the losses of revenue local retailers in Missouri have witnessed. The Missouri government must bear a large portion of the responsibility of the losses Missouri retailers have felt. It is the Missouri government that levied the taxes that people do not want to pay when they shop. Therefore most people turn to the Internet in order to buy items they want.

Much of the money the state has collected through taxation has been squandered on grand road projects that were started but never completed. There is also a need to tax in order to fund prescription drug programs that our politicians wanted. You can bet that the party that promises the elderly in Missouri the most prescription drug coverage will undoubtedly garnish the most votes. And the list goes on and on with various social programs and other grand schemes that aren’t truly needed in Missouri.

Mr. Martin may have overlooked one thing in his report. Shoppers who buy locally do not have to pay shipping and handling on the goods they purchase. So maybe the Internet isn’t the culprit for lagging sales after all.

So what is the real reason local retailers and the state government are experiencing revenue loss? According to a Missouri Digital News report, written by Robert Sandler, “The biggest cause of the budget crises seems to be the continuing bad economy. With no end in sight to the economic downturn, Luebbering said the revenue shortfalls could be another $400 million for next year. The state is also facing a loss of about $435 million that won't be available next year.”

So maybe Internet shoppers aren’t to blame. Never the less many local retailers are asking the state to tax Internet purchases made in Missouri. I wonder if the proprietors of these businesses know that Governor Bob Holden is seeking to eliminate what he deems as Business Tax Loopholes? Apparently Governor Holden thinks that the local retailers are hurting state tax revenues just as much as the Internet sales companies.

Missourians are already taxed to the hilt. Maybe that is why they rejected a $500 million transportation tax in August and a proposed cigarette sales tax increase in November of 2002.

Not all of Missouri’s legislators believe that Missouri’s economic outlook is as bleak as the Governors office is claiming. Missouri Digital News reporter Robert Sandler quoted Missouri representative Rod Jetton, R-Marble Hill as stating, he'll believe the numbers when he sees them. In that same interview Jetton also stated, “I'm from Missouri, and you've got to show me." Jetton went on to say “The governor's office] cried wolf several times last year, and revenues weren't off near as bad as they said."

The taxation itself is what is hurting local businesses. You do not fix this problem by increasing existing taxes or through the addition of new taxes. Americans pay nearly 50% of their yearly income in taxes. (This includes all taxes, state, federal, income, sales, property etc.) Our founding fathers never intended to fund vast social programs through taxation.

Section 8, Clause 1 of the Constitution states that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States”.

The framers of the Constitution allowed taxation so that the basic duties of government could be performed. They did not intend for taxes to fund vast social programs.

Section 9, Clause 5: of the Constitution states that “No Tax or Duty shall be laid on Articles exported from any State.” The question I have is this, if someone shopping on the Internet from Missouri purchases a product online(or mail order) from a neighboring state isn’t that product being exported to Missouri. And if this were the case wouldn’t taxing that product be unconstitutional under Section 9, Clause: 5 of the U.S. constitution?