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One of the main lessons
of microeconomics is that price-fixing cartels among businesses always
collapse eventually because of cheating by one or more members of the
conspiracy. Once one conspirator is revealed to have given secret discounts,
the rest know that theyd better follow suit or they will become
bankrupt the price
cutter will capture the entire market if they dont.
A second lesson is
historical: Having failed over and over to increase profits with price-fixing
conspiracies, many industries have historically recruited the heavy hand of
government to enforce the price-fixing conspiracy. The Interstate Commerce
Commission enforced a railroad and trucking industry cartel; the Civil
Aeronautics Board enforced the airline cartel for more than half a century;
and state and local regulatory commissions have enforced cartel pricing in
the "public utilities" industries for generations.
State and local
governments also conspire to fix tax prices at the highest levels possible,
but are often foiled by federalism. Citizens who are unhappy with the high
taxes of one jurisdiction can shop in another jurisdiction, if possible, or
"vote with their feet" and move there. A case in point is how every
state government in America has been salivating over the prospect of taxing
internet sales from such companies as Amazon.com that do not have a physical
presence in their state. The U.S. Supreme Court ruled such taxes to be
unconstitutional in 1992 but Congress is attempting to override that decision
with the "Marketplace Fairness Act." Whenever Congress starts
talking about "marketplace fairness" its time to hold on to your wallet.
This proposed Act would
have the federal government become the price-fixing cartel enforcer for the
state governments that would then tax all internet sales from any source. As
is the case with most federal intervention, such a law would likely be
enforced in such a way that there would be little or no tax competition
between the states
the federal government will strive to enforce one single (high) rate of state
sales tax for internet purchases.
Any private businesses
that attempted such a scheme would be sued by the Federal Trade Commission
and/or the Antitrust Division of the Justice Department, fined millions of
dollars, and jail sentences would be handed down to the price-fixing
conspirators. No such thing will happen in this case, of course, because
politicians have exempted themselves from liability from price/tax-fixing
conspiracies.
If Congress was really
interested in promoting "the public interest" during a time when
the economy is extremely weak, to say the least, it would be cutting taxes,
not orchestrating state government price-fixing conspiracies. Even John
Maynard Keynes called for tax cuts, not increases, during recessions and
depressions. But government is not the least bit interested in helping the
public; it is only interested in helping itself to the publics
hard-earned dollars and to use those dollars to buy votes from various
political parasite groups. Americans long ago became the servants rather than
masters of their government, and their role here is to pay more and more to
finance the pay, perks, and pensions of politicians and bureaucrats and to
subsidize their special-interest supporters.
The Commerce Clause of
the U.S. Constitution prohibits the imposition of state taxes on interstate
commerce because the founders understood that free interstate trade was
essential to prosperity. But as I have said, the government is no longer
interested in the well-being of the public (if it ever was): It is interested
in its own pay, perks, and pensions, and the more the merrier. Hence its
never-ending quest to tax anything and everything. Internet commerce has been
a rare bright spot during the "Great Recession" so naturally, the
government is attempting to cut if off at the legs with onerous new taxes.
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