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NEA Statement on Market Fairness Act

April 25, 2012

Submitted to the Committee on Finance
United States Senate 

Chairman Baucus and Members of the Finance Committee.  On behalf of the 3.2 million members of the National Education Association (NEA), we thank you for the opportunity to submit these comments in support of the Marketplace Fairness Act for the record in conjunction with the hearing on “Tax Reform: What It Means for State and Local Tax and Fiscal Policy.”

NEA strongly supports the Marketplace Fairness Act.  This bipartisan legislation would remedy a long-standing inequity and finally allow states and local governments to collect sales tax from remote sellers.  In so doing, it would help states stop the erosion of their tax base and provide needed resources for education and other critical priorities.

States face an unprecedented fiscal crisis worsened because they have limited authority to collect taxes on sales into their states.  As a result, schools, police, firefighters, health care, emergency responders, roads, public transportation, and parks are being deprived of critical revenues.  These uncollected revenues could help offset growing budget gaps in almost every state – over $27 billion in much needed revenues is not being collected.

In most states, brick and mortar stores are placed at a competitive disadvantage because they must collect sales taxes while sellers located outside their states do not.  The U.S. Supreme Court (Quill Corp. v. North Dakota) said that Congress has the authority to allow states to require remote sellers (a retailer that does not have a physical presence in a state) to collect taxes.  Small businesses have historically always been one of the main engines of job creation.  In fact, during the past decade, small businesses created more than 60 percent of net private-sector jobs.  We need to ensure that they not only survive, but thrive and help rebuild the economy.

The Marketplace Fairness Act will also help provide an alternate source of local revenue to counter dramatic losses from the housing crisis.  Local property tax revenues, which account for 40 percent of public education funding, continue to suffer from the foreclosure crisis.  Combined with federal and state spending cuts, these losses have resulted in substantial reductions in core education programs and services.  The Marketplace Fairness Act will help offset these losses.

The bill will not impact the Internet Tax Freedom Act, nor will it create new taxes or increase existing taxes.  It does not require any state to collect sales and use tax.   Consumers are required under existing state laws to pay sales and use taxes on the goods they purchase.  Consumers can be audited and charged with penalties for failing to pay sales and use taxes, but too often states are unable to enforce this requirement.

The Marketplace Fairness Act will allow the forty-four states and the District of Columbia that collect sales tax to better address fiscal shortfalls.  The bill will help ensure desperately needed resources for education.  We encourage your support for this important legislation.

Thank you for your consideration of these comments.