One of the main lessons of microeconomics is that price-fixing cartels among businesses always collapse eventually because of cheating by one or more members of the conspiracy. Once one conspirator is revealed to have given secret discounts, the rest know that they’d better follow suit or they will become bankrupt – the price cutter will capture the entire market if they don’t.
A second lesson is historical: Having failed over and over to increase profits with price-fixing conspiracies, many industries have historically recruited the heavy hand of government to enforce the price-fixing conspiracy. The Interstate Commerce Commission enforced a railroad and trucking industry cartel; the Civil Aeronautics Board enforced the airline cartel for more than half a century; and state and local regulatory commissions have enforced cartel pricing in the “public utilities” industries for generations.
State and local governments also conspire to fix tax prices at the highest levels possible, but are often foiled by federalism. Citizens who are unhappy with the high taxes of one jurisdiction can shop in another jurisdiction, if possible, or “vote with their feet” and move there. A case in point is how every state government in America has been salivating over the prospect of taxing internet sales from such companies as Amazon.com that do not have a physical presence in their state. The U.S. Supreme Court ruled such taxes to be unconstitutional in 1992 but Congress is attempting to override that decision with the “Marketplace Fairness Act.” Whenever Congress starts talking about “marketplace fairness” it’s time to hold on to your wallet.
This proposed Act would have the federal government become the price-fixing cartel enforcer for the state governments that would then tax all internet sales from any source. As is the case with most federal intervention, such a law would likely be enforced in such a way that there would be little or no tax competition between the states – the federal government will strive to enforce one single (high) rate of state sales tax for internet purchases.
Any private businesses that attempted such a scheme would be sued by the Federal Trade Commission and/or the Antitrust Division of the Justice Department, fined millions of dollars, and jail sentences would be handed down to the price-fixing conspirators. No such thing will happen in this case, of course, because politicians have exempted themselves from liability from price/tax-fixing conspiracies.
If Congress was really interested in promoting “the public interest” during a time when the economy is extremely weak, to say the least, it would be cutting taxes, not orchestrating state government price-fixing conspiracies. Even John Maynard Keynes called for tax cuts, not increases, during recessions and depressions. But government is not the least bit interested in helping the public; it is only interested in helping itself to the public’s hard-earned dollars and to use those dollars to buy votes from various political parasite groups. Americans long ago became the servants rather than masters of their government, and their role here is to pay more and more to finance the pay, perks, and pensions of politicians and bureaucrats and to subsidize their special-interest supporters.
The Commerce Clause of the U.S. Constitution prohibits the imposition of state taxes on interstate commerce because the founders understood that free interstate trade was essential to prosperity. But as I have said, the government is no longer interested in the well-being of the public (if it ever was): It is interested in its own pay, perks, and pensions, and the more the merrier. Hence its never-ending quest to tax anything and everything. Internet commerce has been a rare bright spot during the “Great Recession” so naturally, the government is attempting to cut if off at the legs with onerous new taxes.