Main Street Fairness Act could mean elimination of inheritance tax, says IN lawmaker

August 24, 2011

Indiana State Senator Luke Kenley, chairman of Indiana’s Senate Committee on Appropriations and president of the Streamlined Sales Tax Governing Board, last week issued a statement urging Indiana’s congressional delegation to support the Main Street Fairness Act, which was introduced on July 29 by Senator Dick Durbin. He suggested that should the bill pass, Indiana could eliminate the state’s inheritance tax:

Kenley (R-Noblesville) also said he hopes state lawmakers would agree to use the nearly $200 million in additional revenue the state would receive from the passage of the federal legislation to eliminate Indiana’s inheritance tax and reduces others . . . .

“Hoosier bricks-and-mortar businesses are at competitive disadvantages with online retailers who often do not collect sales taxes on Internet purchases, costing our state as much as $200 million annually,” Kenley said. “Though consumers are required to report and pay a ‘use tax’ on Internet purchases when they file their taxes each year, many unknowingly fail to do so, costing Indiana and other states substantial revenue—an estimated $11.4 billion nationwide each year.”

Kenley isn’t the first to suggest that improving the collection of sales tax could allow states to cut other taxes. As we blogged about a few months ago, West Virginia delegate John Doyle has said that if online retailers regularly collected West Virginia sales tax, the state might be able to end its tax on groceries.

Kenley also pointed out that the Main Street Fairness Act will benefit Indiana retailers as well as the state’s schools and other essential services:

A 1992 U.S. Supreme Court ruling, known as the Quill decision, determined retailers are not required to collect sales taxes in states where they do not have physical locations unless mandated by Congress. As a result, many consumers visit a store to compare or test products, but then make their purchases online—often avoiding payment of sales taxes, Kenley said.

If enacted, the Main Street Fairness Act would create a uniform sales-tax collection system ensuring all businesses—both online and brick-and-mortar retailerscollect uniform sales tax for purchases. The act would also relieve consumers of the legal burden to report to state tax departments the required sales tax they owe for online purchases.

“I am asking our congressional delegation to support a modern, streamlined, pro-business initiative that will help our thousands of retailers who are being discriminated against under the current policy,” Kenley said. “This is not a new tax but one that is already owed and not being collected. With sales tax serving as Indiana’s largest source of revenue, our K-12 schools, higher education institutions, public safety and other essential state services are hit the hardest by the current system. It’s time we level the playing field for our local businesses and remove this unfair burden from Hoosier consumers.”

We applaud Senator Kenley for making his support for the Main Street Fairness Act known to his state’s DC representatives. The legislation is hugely important for states, since it gives them the ability to determine for themselves how (and whether) online sales tax should be collected for the state. But since it’s federal legislation that will be enacted (or not) by Congress, state lawmakers need to make sure their representatives in DC know just how important the bill is for them.

We hope other state lawmakers will follow Senator Kenley’s lead and contact their state’s representatives in Congress to let them know that they support the Main Street Fairness Act.