By: Rep. Jim Sensenbrenner
June 26, 2018
Last Thursday, the United States Supreme Court handed down a ruling in the closely-watched case South Dakota v. Wayfair. While the facts of the case narrowly focus on whether South Dakota can force businesses without a “physical presence” within its borders to remit state taxes during online sales, the far-reaching implications cut to the heart of one of our nation’s most foundational principles and the primary catalyst for the Revolutionary War: taxation (and regulation) without representation.
In light of Wayfair, Congress must now take action to preserve the rights of each state and protect the economic interests of consumers and small businesses.
By overturning decades of precedent established in National Bellas Hess, Inc. v. Department of Revenue of Ill. and Quill Corp. v. North Dakota, the high court opened the door to something feared by consumers and businesses alike: internet sales tax. Small businesses and entrepreneurs will now be forced to navigate the maze of more than 10,000 different tax jurisdictions. Large chain stores, like Walmart and Target, will survive the additional regulatory burden. However, the thousands of independent online entrepreneurs that use platforms such as eBay and Etsy to do business will experience the most harm.
Moreover, the increased cost of compliance for small businesses will likely result in higher prices and fewer options for consumers.
In his dissent, Chief Justice Roberts rightly concluded, “’The Constitution gives Congress the power ‘[t]o regulate Commerce… among the several States.’ Art. I, §8. I would let Congress decide whether to depart from the physical-presence rule that has governed this area for half a century.”
Fortunately, the majority deliberately noted in their opinion: “[…] when Congress exercises its power to regulate commerce by enacting legislation, the legislation controls.”
Now more than ever, Congress must exercise its plenary power by passing my No Regulation Without Representation (NRWR) Act. This bipartisan legislation defends the principles of federalism and reasserts Congress’s authority over interstate commerce by clearly defining when a state can tax and regulate a business. Specifically, it bars states from levying taxes or imposing regulations on businesses that are not physically present in that state, and, therefore, do not have a voice in the creation of those tax laws and regulations.
The NRWR Act prevents states from bullying out-of-state businesses by attempting to set de-facto national policies.
For example, in 2008, California voters passed a proposition that requires egg producers to use cages twice the size of a typical cage. Initially, the regulation only applied to in-state producers. However, when California egg producers complained they were at a competitive disadvantage, state legislators extended the regulation to producers from other states as well.
California’s regulatory overreach is not unique. In 2016, Massachusetts voters approved a ballot initiative to ban certain types of housing for pigs, chickens, and cows. The rule would ban the sale of out-of-state meat and eggs that do not meet the state’s animal housing standards.
California and Massachusetts are well within their rights to regulate their citizens, however, any regulations that extend beyond their borders must come, as the Chief Justice reminds us, from Congress.
While I don’t expect to see residents of Connecticut and Rhode Island storming ships in Boston Harbor to throw bacon, eggs, and veal overboard, we still must restore the principles of federalism and representative government.
Ultimately, the NRWR Act provides a common-sense solution to restore fairness and order to the regulatory free-for-all created by Wayfair. In a time of hyper-partisan disagreements and widespread concern with government overreach, the NRWR Act can bridge the partisan divide and preserve the will of the Constitution.
You can read this piece online here.