Should states be able to tax outside their borders? The question of what taxing powers states have over internet commerce will arrive soon at the Supreme Court in the case South Dakota v. Wayfair. South Dakota (and many other states) want to be able to force out-of-state retailers to collect sales taxes and remit them back to the state. The state argues that internet commerce has made the Court's physical presence rule—which says states can tax only companies that are physically present in the state—unworkable.
But, as Adam Michel and Elizabeth Slattery explain, abandoning the physical presence rule would undermine both the democratic accountability of our federal system and create an even greater inequality in the tax treatment of retail sales:
Proposals to overturn the physical presence standard in Quill and expand state taxing powers risk undermining foundational principles of competitive federalism while increasing compliance burdens on small businesses.
Permitting interstate tax collection would undermine local business owners' ability to vote on tax laws that affect them. Without a physical presence standard, local Oregon e-retailers would suddenly have to comply with every sales tax law in over 10,000 state and local taxing jurisdictions. If states wish to impose costs on retailers within their borders, they should be able to do so. However, retailers should not be subject to mandates from states with which they have no physical connection—and whose policymakers face no accountability for the tax and regulatory costs they impose.
Interstate taxation would also introduce a new disparity. Local brick-and-mortar stores have only the compliance burden of their state and local tax systems. Expanded interstate taxes would subject remote sellers to tax systems in every state in which they have a customer. The compliance burdens for online retailers could be prohibitively expensive. Even with new technology solutions and simplified state sales taxes, the cost of new tax software, compliance and liability costs, claims by tax-exempt customers, inquiries from tax authorities, and time to address the inevitable glitches are overwhelming costs to small businesses.
The physical presence standard preserves the natural limits of state revenue collectors and protects out-of-state retailers from undue compliance burdens. Internet vendors should be taxed on an equal footing with brick-and-mortar retailers—at the "origin of sale." Because legislators have enlisted businesses as their tax collectors, the tax collection is best tied to the business location. [Internal citations omitted.]
[Adam Michel and Elizabeth Slattery, "Do Borders Matter? The Supreme Court Review Internet Sales Taxes," The Heritage Foundation, April 12]
Are private schools less likely to experience a mass shooting? Corey DeAngelis surveys some suggestive data:
Hyewon Kim—a Cato Center for Educational Freedom Intern—compiled information on school shootings in the United States from 2000 to 2018 using the Tribune-Review database. The database is limited to legitimate school shootings; that is, shootings that occurred on or near a K-12 school campus while classes were in session or when students were present. The list also excluded suicide-only incidents.
Hyewon found 134 school shootings from 2000 to 2018. Only eight of these occurred in private schools while 122 occurred in public schools. The type of school could not be definitively classified for 4 of the shootings. […] [A]bout 94 percent of the shootings that could be classified occurred in public schools while only about 6 percent occurred in private schools. […]
The most recent data from the National Center for Education Statistics show that around 25 percent of U.S. K-12 schools are private, while about 10 percent of schooled children attend private schools. In other words, the data suggest that children that go to private schools are disproportionately less likely to experience a school shooting than children in public schools.
Of course, considering the difference in the number of students across the two sectors does not account for differences in the types of students. After all, at least some of the divergence in school shootings found are likely due to other factors such as household income and parent education levels.
However, a recent study by Danish Shakeel and me, presented at the International School Choice and Reform Conference, finds that private schools experience better school culture than public schools even after controlling for several characteristics such as school size, location, racial composition of students and teachers, and the percent of students from low-income families. We find that private schools are significantly less likely than public schools to experience problems such as student fighting, bullying, and, perhaps most importantly, weapon possession.
[Corey A. DeAngelis, "Are Shootings More Likely to Occur in Public Schools?" Cato Institute, April 11]
Blue-state lawsuits are more about politics than the law. Lawsuits emanating from Democratic attorneys general against Trump administration policies "are unprecedented in scale and detrimental to constitutional government," writes John York:
By the end of Trump's first year in office, Democratic states had already brought 35 lawsuits against his administration. Over the course of his eight years in office, Republicans brought only 46 lawsuits against Obama's administration.
Democratic attorneys general, pundits, and plaintiff's lawyers claim that the reason for this dramatic uptick in legal obstruction is President Trump's supposed disregard for the Constitution. But this is not the case. Many of the lawsuits emanating from blue-state capitals are not based on any tenable interpretation of the Constitution or any relevant federal statute.
For instance, several blue-state attorneys general claimed that the president lacked authority to bypass environmental regulations to expedite the construction of a border wall, even though a 2005 law gives the Homeland Security secretary authority to do just this. The case was dismissed.
Right now, three Democratic governors are preparing to bring a federal lawsuit challenging a provision in the recently passed tax overhaul that would limit the deductibility of state and local taxes. They claim this deduction limit violates the equal-protection rights of people living in blue states, since no red-state government has imposed taxes that surpass the deductibility cap. This is an absurd reading of the 14th Amendment. According to the Tax Foundation, this shot-in-the-dark case "will almost certainly fail."
These threadbare legal arguments are a thin veil for the actual motives of Democratic lawmakers and lawyers. These state officials apparently see themselves as part of the resistance. Burying the president's agenda under a mountain of paperwork is job No. 1. Defending the Constitution is not only subordinated to this goal, but actually sacrificed in service of it.
[John York, "Progressive 'Federalism' Makes a Mockery of the Founders' Vision," National Review, April 13]
Public pensions are in bad shape. Eric Boehm reports:
According to a new report from the Pew Charitable Trusts, the states collectively carry more than $1.4 trillion in pension debt—and only four states have at least 90 percent of the assets necessary to meet their long-term obligations to retirees. The Pew paper, which is based on states' 2016 financial reports, shows that pension debt increased by about $295 billion since the previous year, making 2016 the 15th consecutive year in which state-level pension debt increased.
The really scary part is that pension debt keeps increasing despite the fact that taxpayers' contributions to state-level pension plans have doubled as a share of state revenue in the past decade. Also worrisome: Pension plans are chasing increasingly risky investments. The gap between returns on safe investments and state pension plan investment assumptions was the highest in decades, the Pew researchers note, leaving pensions more vulnerable to market volatility and raising concerns that another downturn could drive already deeply indebted systems over a cliff.
Switching from a defined-benefit to a defined-contribution system is part of the solution, writes Boehm:
Adequately funding pensions is expensive, and politicians would rather spend limited tax dollars elsewhere. […] Removing politicians from the equation is a major benefit of transitioning away from traditional defined benefit pension plans and into 401(k)-style plans where individual workers control their retirement accounts. That also helps get taxpayers off the hook for having to make up the difference when markets or political will falls short of pension plans' expectations.
[Eric Boehm, "America's Sinking Public Pension Plans Are Now $1.4 Trillion Underwater," Reason, April 13]
The federal fiscal hole is getting deeper quicker. James Capretta writes:
The Congressional Budget Office's latest forecast makes a convincing case that fiscal complacency is now dangerous for the U.S. economy. CBO projects the federal government will borrow an additional $12.4 trillion over the next 10 years. At the end of 2028, the federal government will have outstanding debt of $28.7 trillion, or 96 percent of GDP. Ten years ago, federal debt was equal to 39 percent of GDP.
In fact, CBO's official projection is an optimistic scenario. It assumes Congress will let many of the tax-cutting provisions enacted in the recently passed tax legislation expire after 2025. It also assumes, even more implausibly, that the caps on defense and nondefense appropriations for 2020 and 2021 contained in the Budget Control Act of 2011 will remain in place, thus forcing deep cuts in federal spending. However, Congress just enacted a bipartisan agreement to raise the caps in 2018 and 2019 by nearly $300 billion over that two-year period. If the tax cuts are made permanent, and if discretionary appropriations grow with the rate of inflation after 2019, then the budget deficit over the next decade would be $15 trillion instead of the $12.4 trillion contained in CBO's baseline forecast. In 2028, the annual budget deficit would widen to 7.1 percent of GDP, while total federal debt would reach 105 percent of GDP.
CBO has not yet updated its long-term budget forecast, but when it does the projection will show federal debt exploding at an alarming rate, as population aging and health-care costs push entitlement spending up at a rapid pace. Last year, CBO projected that federal debt would reach 150 percent of GDP by 2047. An updated forecast will show federal debt reaching that level much sooner.
[James C. Capretta, "CBO Forecast Leaves No Room for Wishful Thinking," American Enterprise Institute, April 13]
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