State Taxation of Internet Businesses

The Supreme Court is hearing a case, South Dakota v Wayfair Inc, that seeks to overturn an older precedent that prevents States from taxing businesses doing business in the State that don’t have a physical presence there.  South Dakota is claiming that

…the 1992 precedent harms state treasuries and disadvantages taxpaying home-grown businesses.

That argument might hold water if the States were powerless. They’re not. There’s nothing at all preventing them from lowering the tax rates they impose on the brick-and-mortar and home-grown businesses resident in those States so they can compete. There’s nothing at all preventing the States from lowering their spending rates and thereby protecting their treasuries.

There’s nothing at all preventing the States from taking advantage of the increased economic activity that would result.

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