02.10.16

Rounds Stands Up For South Dakota Businesses on Senate Floor

Opposes Customs Conference Report due to Inclusion of the Internet Tax Freedom Act

WASHINGTON—U.S. Senator Mike Rounds (R-S.D.) today spoke on the Senate floor in opposition to the Trade Facilitation and Trade Enforcement Act, commonly called the Customs Conference Report, because it includes Internet Tax Freedom Act (ITFA) language without the Marketplace Fairness Act (MFA) attached.

ITFA would put in place a moratorium to permanently prevent state and local entities from imposing existing sales and use taxes on internet services. Because ITFA takes away important revenue for state and local governments in South Dakota, Rounds only supports it if it is paired with MFA, which would allow states to recoup their losses by allowing states and local governments to collect sales and use taxes from online retailers. The fear is that passing ITFA without MFA attached to it leaves the MFA without strong enough support to pass the House of Representatives, reducing the chance of successfully implementing it.

“Conventional wisdom – in this body and elsewhere – has always been that ITFA, which would stop the taxing the cost of internet services, would be paired with MFA because MFA lets state and local governments recover the losses from ITFA,” said Rounds. “MFA would make certain that main street businesses aren’t at a competitive disadvantage to companies who have no physical presence, employees or investment in states like South Dakota. Brick and mortar stores are the businesses that provide good-paying jobs to South Dakotans, pay local property taxes, sponsor community baseball leagues, send their kids and grandkids to South Dakota schools and invest in the future of our state. We have an opportunity to level the playing field for them – rather than picking winners and losers – so they can continue to be successful and enrich the lives of South Dakotans.”

“If the President signs the Customs Conference Report into law – in its current form with ITFA attached to it – municipalities in my home state of South Dakota will lose $4.3 million dollars of revenue annually. That is revenue they rely upon to fund essential services such as training for firefighters and police officers, maintenance for parks, upkeep of community centers and libraries, and repairs to critical roads and bridges. Without any way of recouping that loss – local leaders will be forced to make the tough decision: to cut those important services communities depend upon, or raise other taxes.”

Link to Video of Rounds' Remarks: https://www.youtube.com/watch?v=cBEWETAoCJ0&feature=youtu.be

Rounds’ remarks, as prepared for delivery:

 

Mr. President, I rise today to voice my opposition to an upcoming cloture vote on the Conference Report to the Trade Facilitation and Trade Enforcement Act, commonly known as the Customs Conference Report.

 

This vote is expected tomorrow. 

 

While I am supportive of the conference report as it relates to customs legislation, added to the bill at the last minute is a measure known as the Internet Tax Freedom Act, or ITFA, for short.

ITFA would put in place a moratorium to permanently prevent state and local entities from imposing existing sales and use taxes on internet services.

 

In the past, I’ve expressed my support for ITFA as long as it was tied to the Marketplace Fairness Act, or MFA, which would allow state and local governments to collect sales and use taxes from online retailers with no physical presence in their state.

 

In South Dakota, this is a matter of fairness to the families who own small businesses and support our local communities. 

 

Pairing these plans would have been a net benefit for states, local governments and small business owners that are already required to collect sales and use taxes on their products and services.

 

Together, they would represent sound tax policy. But that’s not what we’re doing here with the Customs Conference Report by including ITFA and not including MFA.

 

ITFA, enacted by itself, would put in place a moratorium to permanently prevent state and local entities from imposing taxes on internet services at the state and local level – with no consideration or offset for the tax revenue lost by states and local governments.

 

I am all for cutting taxes, but I’m also a strong proponent of the 10th Amendment, local control and tax fairness for South Dakota businesses. 

 

In places like South Dakota, we’re actually good at balancing budgets.

 

Washington has no business telling states or city commissioners how to run their books. 

 

ITFA has zero impact on the federal budget.   

 

ITFA pared with MFA continues to make sense. One without the other – does not.

 

My opposition is not based on disagreement over internet access.

 

My opposition is based on the principle that we are taking away important revenue sources for state and local governments without any means for them to recoup their losses so they can continue to provide essential services to our communities.

 

Let me explain why sound and comprehensive tax policy is so important – why ITFA and MFA should continue to be a package deal:

 

If the President signs the Customs Conference Report into law – in its current form with ITFA attached to it – municipalities in my home state of South Dakota will lose $4.3 million dollars of revenue annually.

 

That is revenue they rely upon to fund essential services such as training for firefighters and police officers, maintenance for parks, upkeep of community centers and libraries, and repairs to critical roads and bridges.

 

Without any way of recouping that loss – local leaders will be forced to make the tough decision: to cut those important services communities depend upon, or raise other taxes.

 

Why is Washington making this decision?

 

In addition to municipalities losing out on important funds, the state of South Dakota would also lose out: to the tune of $9.3 million dollars annually.

 

Now that may not seem like a lot in Washington, where the federal government recklessly spends taxpayer dollars and routinely fails to balance its budget.

 

But back home in South Dakota, we don’t have the luxury of punting – we are required to balance our books each year.

 

At the state and local level, every single dollar counts.

 

Singled out – it’s not right for the federal government to dictate state and local budgets – as the ITFA part of this Customs Conference Report attempts to do.

 

It is unfair to states like ours, which operate under tight budgets and stretch every dollar to the maximum.

 

In fact, in South Dakota, we aren’t overtaxing – our state tax burden is the second lowest in the nation.

 

That is why conventional wisdom – in this body and elsewhere – has always been that ITFA – which would stop the taxing the cost of internet services – would be paired with MFA because MFA lets state and local governments recover the losses from ITFA.

 

And MFA would make certain that main street businesses aren’t at a competitive disadvantage to companies who have no physical presence, employees or investment in states like South Dakota.


Right now, main street businesses are operating under a disadvantage. MFA would level the playing field.

 

These brick and mortar stores are the businesses that provide good-paying jobs to South Dakotans, pay local property taxes, sponsor community baseball leagues, send their kids and grandkids to South Dakota schools and invest in the future of our state.

 

We have an opportunity to level the playing field for them – rather than picking winners and losers - so they can continue to be successful and enrich the lives of South Dakotans.

 

Let’s let the states and local governments decide how to manage their finances. 

 

Under MFA, South Dakota would bring in approximately $25 million in new tax revenue, which would more than make up for the losses under ITFA.

 

If we pass ITFA without MFA, it dramatically decreases the chance of MFA being passed in the years to come; a huge blow to the mom-and-pop businesses who are struggling to compete with online vendors.

 

MFA passing the Senate without ITFA is likely dead on arrival in the House.

 

ITFA would see a similar fate if not dumped into the Customs Conference Report. It would not pass the Senate alone.

 

There is simply no evidence to suggest that either measure would pass as standalone legislation.

 

But together – sound tax policy would move.

 

That is why it is so important that ITFA not be implemented without also implementing MFA.

 

Together, the two can make a real impact on the lives of South Dakotans - and all Americans - by providing permanent tax relief to South Dakota families, leveling the playing field for brick-and-mortar businesses who are contending with an increasingly competitive online marketplace and – at the same time – assure state and local governments can continue to provide essential services to their constituents while balancing their budgets. 

 

Because the Customs Conference Report includes only ITFA and fails to address MFA, I will oppose cloture on this legislation and encourage my colleagues to join me.

 

Thank you Mr. President, I yield the floor. 

How much does your community lose under ITFA? Find out here.