Editorials

Cruz, Cornyn and Internet sales tax

Texas Sen. Ted Cruz speaks at a RedState Gathering at the Renaissance Worthington Hotel in Fort Worth Friday, August 8, 2014.(Star-Telegram/ Richard W. Rodriguez)
Texas Sen. Ted Cruz speaks at a RedState Gathering at the Renaissance Worthington Hotel in Fort Worth Friday, August 8, 2014.(Star-Telegram/ Richard W. Rodriguez) Star-Telegram

For at least one member of Congress, U.S. Sen. Ted Cruz, R-Texas, the issue of Internet taxes is a two-headed monster.

And, he says, one of those heads needs to be chopped off.

The trouble is, he’d pick the wrong head.

Indeed, based on two bills that must be addressed by lawmakers next year, it is easy to see that there are two crucial issues regarding Internet taxes.

One in particular must be saved soon.

Cruz, who favors one bill and opposes the other, is a proponent of “Internet tax freedom.”

He has declared, “I am passionate in saying we should fight against taxing the Internet.”

The lame duck session of Congress addressed one of the issues — at least on a temporary basis.

It passed a $1.1 trillion omnibus spending bill this month that included a rider for the Internet Tax Freedom Act, which prohibits local and state governments from taxing access to the Internet.

For the past 15 years, ITFA had been extended every four years until this one, when there was an attempt in Congress to let it expire.

That step was originally scheduled for November and then moved to December.

The moves taken this month extend the act until October, which means Congress will be compelled to take it up again by next fall.

If it should expire, that would mean that the companies that charge you for Internet access could be required by local and state governments to charge a tax for that service.

We agree with Cruz that is a bad idea, and what Congress should do is make the ITFA permanent, eliminating the need for the repeated re-authorization.

The other proposed Internet legislation, which lawmakers put off this year but are expected to take up quickly in the new session, is the Marketplace Fairness Act.

It would allow states to collect taxes from online retailers that do not have a physical location in their states.

Cruz says this legislation would be the “height of lunacy” if it were to pass after Republicans take control of both houses of Congress next year.

Cruz said, “This is a tax that is a favorite of [lobbyists with offices on Washington’s] K Street; it is a favorite of powerful and favored corporate lobbyists and it is singularly directed against the little guys.”

The senator is wrong on this issue. It is not about favoring large companies over small businesses.

It is a matter of fairness, helping to put online retailers on the same footing as brick-and-mortar stores.

Besides, the identical bills introduced in both chambers (and passed by the Senate) would exempt online sellers with remote sales under $1 million annually.

One of the arguments against the tax is that it would be too burdensome for online retailers to figure out what to charge people from various states and cities, as the sales taxes vary so much.

That seems a specious claim in the 21st century, when computers can be programmed to address that problem.

While the tax would equalize one area of competition between in-store and online retailers, it also would add millions of dollars to state and local coffers.

Texas, for example, would have collected an additional $1.7 billion in 2012 had all online and catalog sales been taxed, according to the Texas Tribune, citing numbers from the National Conference of Legislatures.

Texas already collects taxes from online retailers, like Amazon, that have offices or distribution centers here.

Texas’ other senator, John Cornyn, also opposes the legislation expanding taxes on online sales, but he has been much less vocal than his junior colleague.

There also are other opponents in Congress, including representatives from the five states that don’t have sales taxes and some conservatives who feel that such a tax is an overreach by the federal government, an intrusion on states’ rights.

The Associated Press reported that Cruz, after quoting the state slogan, “Don’t Mess with Texas,” added, “I would suggest something that ought to receive bipartisan agreement is the very simple principle: ‘Don’t mess with the Internet.’”

It isn’t about “messing” with Texas or the Internet. It is about fairness and substantial additional revenue for the state.

Texas’ two senators ought to get on board.

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