That was quick. The ink is barely dry on Chief Justice Roberts’ decision that the Federal government can do anything it please if it just calls it a tax, and already Congress is angling to give states a sales tax on internet sales to bring in as much as $23 billion in new state revenues.
That’s a terrible idea, and here’s why. Many states are in a financial mess of their own doing. States have spent like drunken sailors, although the metaphor is unfair to drunken sailors. After all, drunken sailors spend their own money and they eventually sober up.
The irresponsible spending by states, especially states run by Democrats, have buried them in debt and obligations. A huge part of their problem is unfunded future obligations for overly generous pension bemefits to state and local government workers.
So state politicians argue, of course, that they need new revenue sources. But anyone who thinks new revenue sources will get those states out of the mess they are in need to think again. The reason the private sector seldom gets itself in hock to this extent is because profligate entrepreneurs are penalized by the free market and face the loss of their businesses and livelihoods when they borrow to spend recklessly. The public sector seldom pays a price for its reckless spending, particularly if it can just make up the difference by raising taxes.
Anyone who wants state and local governments to reform their bad habits should oppose giving them any new source of revenue because they will just find new ways to spend that revenue and their financial problems will remain just as bad or, more likely, get even worse.
We already have a shining example of how to fix ailing state government finances in the state of Wisconsin. There, Governor Scott Walker instituted reforms to the state and county budgets that has already wiped out the state deficit and resulted in a lowering of taxes, not raising them and not instituting any new taxes. This only became possible after the voters in Wisconsin threw out the Democrat big spenders in the 2010 elections, elected Republican Scott Walker and gave him a Republican legislature to work with. The reckless spenders and their free-loading clients erupted in a tantrum of a magnitude seldom seen in a civilized state. They further responded with recall petitions to throw Walker out of office. Last month the voters in Wisconsin gave Walker another resounding victory by standing solidly behind him in the recall election that followed.
So we know that there is a way for states like New York, California and Illinois to get their houses in order. Giving them a new source of revenue will only enable them to double down on the reckless behavior that got them in the mess they are in now. If a new tax on internet sales becomes law it will surely sink these states deeper into a financial quicksand of their own making.
And no one is even thinking of the further harm it will do to an already stalled economy.