The Market Ticker
Commentary on The Capital Markets- Category [States]

No, really?  smiley

“The debt is not payable,” Mr. García Padilla said. “There is no other option. I would love to have an easier option. This is not politics, this is math.”

Well I'll be damned.

On the other side of the table, of course, are hedge funds that bought the debt when Puerto Rico got in trouble at a deep discount and expect 100 cents on the dollar.  They're not inclined to bargain, and will now (of course) look to the government to hand them a gun to use on Padilla.

Unfortunately that doesn't change the math either.

You cannot spend more as a government than you can take in via taxes -- period.  That's a fact, and while we seem to think we can here in the US when it comes to various governments all such attempts are short-term answers that must invariably lead to spending less than one takes in via taxes so as to pay the debt off.

If now, well...


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Governments are not going to cut the crap.  A big part of what is driving this rapacious horsecrap, which I remind you was settled in the infamous Quill mail-order casevery long time ago (1992 to be exact, when I was following such events very closely), is outrageous medical monopolist practices that are literally destroying federal, state and municipal budgets.

The Permanent Internet Tax Freedom Act is set for a vote as early as Tuesday. The bill, which would permanently prohibit states from taxing Internet access, passed the House by voice vote last year and it's expected to win overwhelming approval again.

The agreement in Congress on Internet taxation is likely to end there.

As soon as next week, House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah, will introduce the Remote Transaction Parity Act, which would allow states to require remote Internet retailers to collect sales taxes on online purchases.

Quill won because the Constitution provides exclusive federal authority over interstate commerce.  Absent a federal law acts that take place in Interstate commerce cannot be taxed by a state, because such would be functionally equivalent to a tariff between states and this is Constitutionally prohibited.

The state whining is not only misplaced it's factually bereft of logic.  Amazon has discovered this; they are exempt from tax only if they don't have "nexus", which is quite simple to figure out.  You know that Amazon warehouse?  That's nexus.  Stand one up and voila -- you're exposed to state taxation.

That's as it should be, and as businesses grow they find the benefits from being in a given state (locality of transport, etc) are preferable -- and thus elect it all on their own.

The problem with "allowing" state collection is two-fold -- first, a remote state has an entire body of law that someone in another state likely has no conscious knowledge of.  This may be wildly divergent from where the business is located, and requiring them to honor that law for items shipped there is, once again, functionally equivalent to a tariff as it is the imposition of a cost that is distinct predicated on the act of interstate commerce.  This again is prohibited.

Second, it is virtually impossible for a "non-store" retailer to have any idea what the tax rates and conditions are for any of the various taxing jurisdictions.  It is not, as is commonly believed, simply a matter of a state rate.  There is registration required in states where you sell goods and have a sales tax, there are returns required, typically monthly, and in many states there are county and even municipal override sales taxes that apply.  A given state may have literally dozens of different sales tax rates and what is taxed and the rate varies not only from state to state but by city within some states!

How the hell are you supposed to comply, as a practical matter?

The wailing from our state and local governments needs to be met with a upturned middle finger from we, the people.  This is not about "fairness" or anything of the sort; it is about the very real fact that a local business receives services from the state and local governments in which it resides while a "non-store" retailer half a nation away does not.

The bottom line here is that, as I keep pointing out, we need to kill the medical monopolies that are causing the budgetary destruction, not do things that will instead destroy small businesses that are trying to operate in an increasingly competitive world, both online and otherwise.

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