The Fair Tax Act, Part XXVII
This section is very short and only sets forth the jurisdiction of the States’ governments and the Federal government for the administration of the FairTax.
`SEC. 407. JURISDICTION.
`(a) State Jurisdiction- A sales tax administering authority shall have jurisdiction over any gross payments made which have a destination (as determined in accordance with section 405) within the State of said sales tax administering authority. This grant of jurisdiction is not exclusive of any other jurisdiction that such sales tax administering authority may have.
`(b) Federal Jurisdiction- The grant of jurisdiction in subsection (a) shall not be in derogation of Federal jurisdiction over the same matter. The Federal Government shall have the right to exercise preemptive jurisdiction over matters relating to the taxes imposed by this subtitle.
So the states run the show, with the Federal Treasury being the final authority.
James,
Your brief commentary, while accurate, tends to downplay or overlook a potentially very serious constitutional question. Read 407(b) again and ask yourself if this sounds like two sovereign powers working together on an equal footing?
What it says to me is that “States, the Federal government will give you a small fee to act as our tax collectors, but if we don’t like something you do, we will step in and correct it! My way or the highway!! ” There is a lot of room for mischief in this small paragraph.
It is clear to me from this section that the states are considered subservient to the federal government, and I question if the Supreme Court will uphold this portion of the legislation should it ever become law.
I don’t think it’s such a power-grab as you make it out to be. The Federal Government delegates a lot of law enforcement to the state police for example, with Federal Agencies coordinating the efforts and generally being in charge of matters of Federal crimes.
I think this is a similar situation. If passed, this would be a Federal law, handled in a delegated manner. So long as the states aren’t forced to be the tax collectors (they can opt not to collect if they wish, leaving the Feds to do it themselves) I don’t see this as stomping on the toes of sovereignty.
James,
You certainly could be proved right. Only the Supreme Court knows!
What continues to puzzle me is that the Fairtax advocates, who seem to be mostly Libertarians, roll over for legislation that makes the central government even more powerful. Perhaps I need to examine Libertarian principles more closely?
On another site, I believe it was you who said it was a good thing that the Fairtax was not really a property tax as taxes of that kind have been historically the purview of state and local government. How then can you support a national sales tax when sales taxes are the primary source of state and local revenue? Other than excise taxes, the feds have never encroached on the primary revenue source at the state/local level–until the advent of HR25. Am I the only one to see a potential conflict here??
My point was not which streams of revenue belong to whom, because in my mind taking money is the same no matter where you get it. So long as we aren’t losing more money to the Feds than before it is not a harmful thing.
My point in that post on another site was the notion that the land does not belong to the Feds, therefore they shouldn’t have purview to lay taxes on it. The land belongs to the states and private owners in those states. The Fed owns no land save territories and DC.
Now I personally don’t think the FairTax makes the central government any more powerful than it is today. It would collect roughly the same amount of money, and would do so in a way that greatly removes the Fed from the personal affairs of most people. It is true that the Fed is the final arbiter of the FairTax, but it is a Federal tax, the same as the income tax today. I think delegating responsibility to the states is actually removing a lot of Federal activity from the day-to-day affairs of the states, and allowing the states to make their operations work as smoothly as possible without too much interference.
The argument that it is a burden on state governments is the only part that sounds like we are accruing more power to the Feds. I could definitely see some possible conflict. But excise and sales taxes are roughly the same thing (and the Feds used to use them all the time).
The FairTax is also not ‘encroaching’ on a revenue stream. Taxing the same area of consumption or income is something states and the Feds do all the time. Gasoline is taxed by both. Business income is taxed by both. Personal income is often taxed by both. And sales taxes are not the ‘primary’ revenue source for that many state governments to boot.
Local governments usually rely on property taxes and state governments spread their streams all over the place; income taxes, property taxes, excise taxes, business fees, DMV fees, etc.
But a final point. As a libertarian, I want smaller government everywhere, federal State, and Local. I don’t really mind if there is a budget pinch for one or both of them. I think deficits are the only things that really make a government think about spending less money.
Regarding sovereignty between the states and the fed….where do indian nations fit?
Currently, they tend to make ‘local’ compacts with the states they are surrounded by.
However, recognition of those tribes tend to be defined by the feds.
So, after the FT passes, will the tribes be able to negotiate a deal with the states to alter the rate, or does the fed hold the authority to overrule that deal? Can the tribes negotiate with the fed for a lower rate?
I am concerned that a tribe (or group of tribes) could broker a low tax deal with a state, and create a fairly simple ‘evasion’ option for the average retail consumer.
I am further concerned that a tribe could agree with the FT legislation, then openly and intentionally not follow it. This is the current situation in Oklahoma in regards to the state’s cigarette tax. A tribe buys a 6 cent stamp (as opposed to a 1.08 stamp) meant for a store on the state border, and sells those stamps at a store in the middle of Tulsa. Oklahoma cannot punish the tribe for openly defying the rules, because there is no enforcement language in those compacts.
Does the FT legislation address these types of issues? And if so, what safeguards are there that the evasion and defiance issues Oklahoma faces will not be repeated on a national level?
That is a very, very interesting point. I’m not exactly up on my American Indian law, but I believe that Indian Tribes are sovereign and the various Indian Reservations are like their own sovereign nations. If so, any goods or services purchased in the reservations would not be subject to the FairTax.
Now, theoretically, any (new) goods bought in the reservations would be subject to the FairTax when brought back into the United States, but I can certainly see the possibility of a lot of smuggling going on. And services could be rendered in the reservations — gambling, tax preparation, legal services, financial services – that would not be subject to taxation. Very interesting. I hadn’t thought of that at all.
I believe the Native American reservations get their own tax treaties, but that means that the FT essentially cannot be used to either tax transactions in those lands nor to enforce their playing ‘by the rules’ to not attempt to undercut prices or smuggle. No legislation could, because they aren’t subject to American law within their borders.
Only treaties with these nations, with cooperative enfrcement between the states and the Indian nations, could attempt such things.
I’m certainly no Indian expert either, but as near as I can tell, Indian tribes pay no income tax, but Indian individuals do. Purchases by Indian businesses would be tax free under the Fairtax, which is the same for non-Indian businesses. In Minnesota, tribal sales of products to non-Indians are charged the state sales tax. But the hooker is, that because enforcement of collection is very difficult, the State and the Indian tribes essentially split the tax proceeds. (The state can’t sue the tribe?)
What this would seem to indicate is that the .05% Fairtax fee may not be sufficient to ensure that the Indian businesses on the reservation will collect and accurately report the national sales tax revenue? Some other type of accomodation may be necessary.