Tax competition, as I have explained to the point of being a nuisance, is an important restraint on the greed of the political class. Simply stated, politicians are less like to over-tax and over-spend if they know that geese with the golden eggs can fly across the border.
This is mostly an issue in the world of international tax policy, but the same principles apply for sub-national governments inside a nation.
State and local governments should compete with each by offering the best fiscal climate. Sadly, just as high-tax nations such as France and Germany are trying to hinder global tax competition, high-tax state governments are seeking to undermine fiscal rivalry inside the United States.
More specifically, they want to create a state sales tax cartel that would allow governments to force out-of-state businesses serve as deputy tax collectors. Greedy politicians are fearful that online shopping deprives them of revenue, so they are pushing for a privacy-threatening database that will enable them to track and tax these transactions.
I explained this issue last week for a standing-room-only audience on Capitol Hill.
The entire discussion is posted online, including the very astute observations of my former Heritage Foundation colleague, Adam Thierer, now at the Mercatus Center.
Investor’s Business Daily also has opined on why this is a bad idea, but if you want to get really worried, the clowns at the United Nations want to power to tax and regulate the Internet.
