Marketplace Equity: Government Shouldn't Pick Winners and Losers

President Obama rode into office intending to use government to create marketplaces, use the tax code to promote certain behaviors and pick winners and losers in our economy.  Government “investments” in companies like Solyndra is the perfect case in point.

On dozens of occasions Obama promised to create 5 million “green” jobs to both lower unemployment and spark a dormant clean energy sector. “We’ll invest $15 billion a year over the next decade in renewable energy, creating five million new green jobs that pay well, can’t be outsourced and help end our dependence on foreign oil,” he said.

Government’s have never been successful in these endeavors and Obama proved it.  Dozens of grant and loan recipients went belly up.  The $38.6 billion loan guarantee program, created only 3,500 permanent jobs.  In an effort to pick winners and losers, Obama flooded the green energy sector (made up primarily of campaign bundlers) while declaring a war on coal that decimated dozens of companies and put thousands on the unemployment lines.

Government attempts to promote certain behavior is wrong. Picking winners and losers in the marketplace is wrong, as well.  Yet the “green energy” sector is not the only place government intervenes.  Sometimes it does so intentionally but others times the policy comes about by accident.

Such is the case with the government’s disparate treatment of small mom-and-pop businesses that are forced to collect and pay sales tax while corporate giants like Amazon and EBay do not.  A Supreme Court decision led to the disparity one which Congress appears ready to address.

Legislation, known as the “Marketplace Equity Act,” has been introduced in the House and is supported by members on both sides of the aisle.  The bill would allow states to collect sales taxes from the purchases of goods made over the Internet.  Advocates argue it will level the playing field between Main Stret businesses and the corporate giants.

Perhaps most interesting is the support the legislation has garnered from some conservatives in the House and GOP governors like Chris Christie, Terry Branstad and Mitch Daniels.

During the hearing on the issue, Congressman Steve King (R-IA) highlighted a letter written from a business owner in his district, detailing that his online competition is not using their own money to compete with him, rather they are using the state of Iowa’s sales tax money to compete by taking advantage of the 7% difference they can get by not collecting the tax. The Congressman called for a level playing field for all retailers and a stop to this practice of undercutting in-state brick-and-mortar businesses.

Some conservatives oppose the bill on based on the “feed the beast” theory.  They argue that when government takes in more money, it spends more money.  That is true but that does not address the fact that currently government, like the Obama Administration did on Solyndra, is picking winners and losers — current policy obviously gives Internet retailers a leg up on the competition.

Unlike most tax issues, this one is more difficult.  Government should treat all businesses equally and should not use the tax code to benefit one group of retailers over an other.  That is what the Marketplace Equity Act intends to do.