Order of Procedure

Floor Speech

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Mr. CRUZ. Mr. President, I rise today to speak out against the so-called Marketplace Fairness Act. In my view, during a time of economic challenge, as we are in today, the very top priority of every elected official, whether Republican or Democrat, should be to restore economic growth, to get our economy moving, to get back to the economic dynamism, the economic strength that has lifted so many millions out of poverty and toward the American dream. This bill, if enacted into law, would hurt economic growth and would be a mistake.

First of all, more taxes will hurt economic growth, and this bill, if enacted, would in effect create a national Internet sales tax. It would subject small online retailers to paying taxes in 9,600 different jurisdictions all across this country. At a time when so many are hurting, we should be discussing how to reduce regulatory burdens on small businesses and how to reduce tax burdens on small businesses, how to reduce the complexity of taxes on small businesses, and this bill goes in exactly the opposite direction.

In particular, those who will be hurt the most by this bill if it is passed are small mom-and-pop retailers online. The threshold for this bill is $1 million in gross online sales. That is not profit; that is $1 million in total sales, gross sales, and $1 million for a starting business is not a terribly high threshold for their gross, not their profits. That has to cover the costs and all expenses of the business. It has to cover any salary, any rent, any Web costs, communications, travel, accounting, legal services, plus the costs of goods sold.

These small- and medium-sized businesses would suddenly find themselves subject to 46 different States and 9,600 local jurisdictions. They would find themselves having to pay tax filings, potentially, in all 46 States monthly or quarterly and to be subjected, potentially, to audits from each of these local counties, each of these local municipalities.

I have with me here today a listing of all of the tax rates of these 9,600 different jurisdictions. It is truly indecipherable, that you can look and pick any State and get the county and see the different tax rates. Indeed, in a lot of counties--for example, I just opened this at random. In Colorado--which I happened to open it to--if you look in Taylor Park, if it happens to come from the 81210 ZIP Code, the tax rate is 4.5 percent, but if it is in the same county that comes from the 81230 ZIP Code, the tax rate is 8.25 percent.

Small businesses--a small mom-and-pop just getting started on the Internet would be required to comply with all of these taxing jurisdictions, to send the taxes to all of these taxing jurisdictions, and to be subject, potentially, to audits from 9,600 taxing jurisdictions. That makes no sense.

I wish to point out also that this is not fundamentally about fairness. The proponents of this act point to small mom-and-pop stores that are their bricks-and-mortar retailers. But those are not the main proponents of these bills. A small bricks-and-mortar retailer right now is losing sales primarily to two different sources: No. 1, big-box bricks-and-mortar retailers. They are losing a lot of sales to big-box large retailers. This bill does nothing about that. No. 2, they are losing substantial sales to large online retailers, the giant corporations.

But here is an interesting statistic. Nine of the ten largest Internet retailers are already paying sales taxes in all 46 States that have sales taxes. Why? Because they have a physical presence in the State.

What the Supreme Court has said is, if you are physically in a State, the State can force you to collect its tax. But if you are not physically there, the Constitution does not let you haul someone in from a distant State and force them to collect your taxes because you do not have any accountability to those individuals in a distant State.

In terms of the small mom-and-pop retailers, they are losing their sales to the big-box and big Internet retailers, all of whom are already paying these taxes.

So what do we have here? We have a bipartisan coalition, unfortunately, that it appears is going to pass this bill in this Senate. But the coalition is driven by the fact that you have big business united. You have the big business bricks-and-mortar companies and the big business online retailers all together because the impact of this bill is to hammer the small business online retailers, to make it harder for the little guys to compete. So you see a strange alliance here in Washington, but one that I think is exactly backwards of what we ought to be doing.

I think it is fundamentally unfair to ask a Texas business to collect taxes for California Governor Jerry Brown or for New York City Mayor Bloomberg and a nanny State, in particular, because they cannot hold those politicians accountable. They do not have a presence there. They do not vote there. They do not have influence there. But yet they are being dragooned into collecting those taxes. I think that is fundamentally not right.

Let me give you an example of how this will hurt small businesses. There is a woman in Texas named Ann Whitley Wood who wrote a letter to our office. She lives in Dallas and had created an online consignment store. Even though it is largely a one-person operation, she may come close to doing $1 million in sales--which, keep in mind, are not profits; those are gross sales. Her letter said:

Legislators must understand that it is both possible and common for a small seller like me to reach about $1 million in sales with a near-one person operation.

She estimates it could take her 6 weeks a year to comply with the sales tax procedures for all of the collecting States. That impact on a small business is crushing. A giant corporation has accountants, has lawyers, has people designed to deal with that. For a small business, it hits them in particular.

I point out even more fundamentally, the Internet has been this incredible haven of entrepreneurial freedom. It has enabled people to start businesses with nothing, out of their garage, and sell all over the world. It has transformed the ability for single moms and Hispanics and African Americans and people with nothing to go and start a business. Because it used to be that you needed this big distribution network, you needed warehouses, you needed trucks, you needed all of this, so it was difficult for someone to start a small business.

The Internet has transformed all of that. There are 2.3 million Hispanic small business owners. The Internet has been critical to their being able to open those small businesses because it lets them communicate with the world and get their products out.

I believe the Senate should treat the Internet as a safe haven, that it should be treated as free from taxes and regulations that would hamper the entrepreneurial spirit and make it harder for the little guy, for small business to be created, to grow, and thrive. When they become gigantic corporations, they will have a physical presence in the State, and then they will be subject to the taxes. But do not hit them when they are getting started on the Internet. I think it would be absolutely foolish to do anything to impinge on the entrepreneurial freedom of the Internet.

In conclusion, I want to say three very simple things.

No. 1, in my judgment, we should not be taxing the Internet, period. No. 2, we should not be increasing the burdens on small businesses, particularly at a time of economic challenge, period. And, No. 3, we should not be favoring politicians and big business at the expense of the little guy, at the expense of the single mom trying to start a small business to feed her kid, at the expense of the Hispanic immigrant trying to start a small business and work toward the American dream.

We should not be standing with politicians looking for more tax revenue and big businesses looking to make it harder for their competitors to survive. Instead, we should stand up with the little guy, the small business, with the American people.

I urge the Senate to reject this bill. If the Senate does pass it, I would urge the House to listen to the American people and reject the bill as well.

I yield the floor.

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