By Bruce Hahn
President, American Homeowners Grassroots Alliance

American homeowners are using the tools of technology to solve the many challenges that have come with the economic downturn, but new legislation could soon change that.

Ecommerce has been one of the tools that many consumers have turned to in recent years. Rather than drive to the mall, consumers are ordering more products and services online than ever before. This not only saves money at the gas pump, but offers consumers greater access to the goods and services they want, frequently at lower prices.

Additionally, more homeowners and other consumers are expanding the use of ecommerce sites as their primary or secondary source of income. According to AC Nielson International Research, 1.5 million people have generated extra cash by having garage sales online. The study also showed that even several years ago about 724,000 Americans said that eBay was already their primary or secondary source of income. The recent recession has driven both of those numbers up, as workers who have lost their jobs or seen their hours cut are increasingly turning their hobbies into small online businesses. This important income supplement is saving many homeowners from foreclosure and helping first time buyers save up for a down payment. Both are helping to stabilize housing values.

While consumers, businesses, and state and local governments all benefit from ecommerce, not everyone is supportive of its continued growth. As more consumers buy online, shopping center owners have experienced higher vacancy rates and stagnant rental rates. The oil companies are probably unhappy that consumers are driving to the malls less frequently, as well. Even though home based ecommerce businesses pay sales taxes on their local sales revenue just like other local retailers, many revenue hungry state and local governments are looking to increase their coffers by burdening out of state small home based ecommerce businesses with new sales tax collection requirements.

Unfortunately this debate has made its way to the halls of Congress. Senator Richard Durbin (D-IL) is planning to introduce a bill, ironically called the “Main Street Fairness Act,” which would increase the amount of state and local sales taxes consumers pay on Internet purchases. It will also create new complexities in the sales tax law that will especially hinder small home based ecommerce businesses. This bill does nothing to create “fairness” in the retail market. If the shopping center owners and large brick and mortar retail chains that support it can increase the cost of online purchases, perhaps they can run the small mom and pop stores off the Internet just as they continue to run them off Main Street.

The Main Street Fairness Act is completely contrary to the sentiments of American voters. A majority of Americans believe that increasing the collection of sales taxes on Internet purchases is bad public policy. A 2008 survey by Parade Magazine, asked readers: “Should Internet Sales Be Taxed?” Based on 3,125 survey responses, 85% opposed taxing ANY Internet sales. By contrast there is far less voter opposition to raising sin taxes on products like alcohol and tobacco, or temporary income tax surcharges on the very wealthy, when tax increases are the only remaining way for state and local governments to balance their budgets.

A permanent Internet sales tax holiday, similar to the temporary sales tax holidays many local governments currently provide for back-to-school or other purchases, makes a lot more sense than increasing Internet taxes. Currently most state governments don’t charge sales tax on products such as prescription drugs.

Consumers will be able to buy more online and small home-based online businesses will grow faster if there was a permanent Internet sales tax holiday. They will hire new workers, providing badly needed jobs at a time when unemployment is still hovering at close to 10%. By reducing unemployment we will also help federal, state and local governments by reducing government spending associated with unemployment benefits. More ecommerce will also reduce government costs for the maintenance and expansion of the transportation infrastructure.

The economic challenges the country is facing, coupled with rapidly changing technological advances indicate that more and more of our lives will be spent online. Before enacting policy that will impede our economic recovery, hurt consumers and home based ecommerce companies, and which is opposed by the vast majority of voters, policymakers should look to other alternatives. The Main Street Fairness Act is clearly an idea whose time has not arrived, and it should be opposed by voters and legislators alike.