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New York Times Columnist Misstates Marketplace Fairness Act

2 min readBy: Joseph Bishop-Henchman

Update: The New York Times has issued a correction, admitting that Egan's column "imprecisely described" the Marketplace Fairness Act.

In today's New York Times, columnist Timothy Egan criticizes Sen. Ted Cruz (R-TX) for his opposition to the Marketplace Fairness Act, which would empower states to require out-of-state businesses to collect sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es. Much of Egan's column chides Cruz for standing in the way of consumer choice about where they can purchase goods and what states that will benefit:

While buying the latest weapon accessories, he could support Texas values and purchase only from Texas-based retailers, thus ensuring that Texas taxes continue to be spent on their usual things — everything but regulatory oversight of industrial polluters. Wow: choice!

Now, should his wandering shopper’s eye drift toward some product that comes from one of the evil blue states, he would indeed have to contribute in a small way to the welfare of non-Texans.

Egan seems to think the Marketplace Fairness Act adopts an "origin-based sourcing" standard, whereby Texas consumers buying from Texas means Texas gets sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. revenue, while Texas consumers buying from California means California gets tax revenue. That is not what the bill does. In all cases, a Texas consumer buying online, from anywhere, will result in sales tax collections for Texas. This is "destination-based sourcing." Egan's several paragraphs of consumer choice about what states to benefit, about how sales taxes should benefit where businesses are located rather than more parochial standards, and so forth, are all actually arguments against the bill because it does the opposite. Egan and Cruz are actually making the same arguments; Egan just doesn't seem to realize it because he misunderstands the bill.

This is not the first time that someone musing about fundamental fairness has assumed that the origin-based standard is what the Marketplace Fairness Act adopts. Last summer, one of the proponents' witnesses at a Senate hearing was a small bookstore owner in Texas who talked about how easy it was to collect sales tax on his online sales. Turns out he was charging all of his customers the Texas sales tax rate, rather than charging the sales tax of the customer's location. Again, an origin-based standard rather than what the bill does. It caused quite a stir at that hearing when the truth came out.