Internet Taxes Will Encourage Underground Commerce

Photo: Darren Shaw

Photo: Darren Shaw

The senators who just voted in favor of the so-called Marketplace Fairness Act of 2013 (S.336) will continue to wax eloquent about its benefits. Colorado’s Mark Udall whines about how “[i]t does not seem fair for a business that establishes a presence in Colorado to be at a disadvantage to a company that sells goods to Coloradans online but does not have a physical presence.”

Why are the businesses that are big enough to have a physical presence so favorable toward this kind of legislation? It’s because they’re big enough, while the various, smaller-sized competitors they have to contend with are not. And while Udall and his colleagues will argue that a new tax imposed on internet sales is about “fairness,” it’s instead a classic example of rent-seeking, where the political process is manipulated by some entities (groups of people, companies, etc) in order for them to gain the most benefit for themselves over others.

If the U.S. House also approves the measure, we’ll soon see a national internet tax signed into law. But of course, this kind of added constraint on the freedom of consumers is always bound to reveal the fact that the black market is the true market. A smart consumer will do everything possible to spend as little as possible, even if it sometimes means avoiding the burden of added taxation; he or she will find sellers who won’t impose it.

Remember this well: “The consumer still gets his milk,” writes Ludwig von Mises in Critique of Interventionism, “only because the regulations are circumvented.”