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Monday, October 17, 2011

Dustin Gawrylow: What is “Tax Fairness”?


There are many people who think that "tax fairness" is defined by someone else paying more.

The recent issue of internet taxation has brought this issue to the forefront.With the exception of ObamaCare and Cap&Trade, this issue has generated more feedback to NDTA than any other issue.


In 1992, the "Quill vs. North Dakota" Supreme Court decision blocked North Dakota and other states from requiring out-of-state businesses that did not have a physical presence in their state from collecting sales tax on behalf of the state.


Furthermore, the Federal Internet Tax Moratorium prohibited internet sales tax from 1998-2007. It was first passed under the Republican Congress in 1998.  It was then extended in 2001, 2003, and 2005. 


It wasn't until the Congress came under Democratic control in 2006, and Nancy Pelosi blocked the extension of the moratorium in 2007 that the provisions of the Mainstreet Fairness Act even became a possibility.


While the folks promoting this bill are using the sentiment of tax fairness, the real purpose of this bill is to generate more revenue for states.   


On the issue of tax fairness, consider the other ways the sales tax is probably considered unfair:


Montana does not charge a sales tax, North Dakota allows Montanans to shop tax free.


Is it fair to North Dakota customers that Montana residents come to Williston or Dickinson and pay no sales tax because Montana has no sales tax? 


Is it fair to Montana businesses that North Dakota uses tax policy to poach their customers?


Minnesota does not charge sales tax on clothing, North Dakota does.


Is it fair to Fargo and Grand Forks retailers that North Dakota residents can go across the river and buy clothes tax free?


Of course, it's not just the sales tax that has problems with fairness. 


When it comes to property taxes, local governments routinely issue subjective exemptions and abatements that allow some property owners to get out of all or some of their property tax liability.  State law allows cities to create "renaissance zones" in which a new business can move in an get property tax and income tax exemptions, while the businesses next door get punished for being in business and paying their taxes all along.


Let's not forget that income tax is riddled with exemptions and credits that allow some people and businesses get out of more of their tax liability just by being able to afford the right accountants and lawyers.


There are countless ways that the tax code is unfair to one type of taxpayer or another.  While it is proper to try to eliminate those differences, expanding the tax burden to include activities previously exempted by federal laws and court cases is not a proper way to handle it.  And we should certainly not be looking at taking money out of consumer pockets in the middle of a national recession.


North Dakota is sitting in a good position financially.  When legislative leadership supports federal laws that would allow for automatic tax revenue increases, at least in North Dakota, they need to follow it up by telling the public where other taxes will be cut.  Otherwise it is really is a tax increase, and North Dakota simply doesn't need any more tax revenue.


Let's focus on making North Dakota's tax policy more competitive by reducing taxes on North Dakotans and less on making others pay more..

Click here to email your elected representatives.


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