Economically – MFA or MITFA is a New Tax

Is it a new tax?  From an economic perspective, it absolutely is.

The Marketplace Fairness Act/MFA/MITFA – whatever incarnation you call it, will collect use tax from consumers on remote sales that wasn’t collected before.  Do use tax laws already exist?  Yes.  It’s the states jobs to collect them from their citizens and they mostly don’t on consumer purchases.

  • From an economic perspective, it doesn’t matter if the law existed or not
  • The real-world economic effects are that dollars are coming out of the consumers wallets that didn’t before
  • Even Pro-MFA’s Laffer’s tortured theories support this assertion (re: “states need to spend this money wisely”)
  • Consumers will have less money to spend
  • These new tax revenues will go to the states/localities
  • The vast majority of states won’t cut taxes by an offsetting amount
  • And the converse of Laffer’s theory – without matching tax cuts: job losses & economic harm, not growth.

You can debate all you want about if the MFA is just enforcing existing law, it really doesn’t matter.  To an economist, or a consumer, it’s a new tax.  Those dollars aren’t created by the tooth fairy.  It’s a direct transfer from consumers wallets to states’ coffers.

 

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