Michael Choate Associates CPA

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Congress at Work for August 2013

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Internet, Immigration and Health Incentives

The Marketplace Fairness Act

Currently, federal law requires that retailers only have to collect tax if they have an established nexus in the consumers’ home state. Nexus refers to offices, manufacturing facilities, or employees physically located in a state. As it stands now, if an Amazon or eBay does not have physical operations in a state, that state cannot require the retailer to collect sales taxes from a local resident buying goods from the company.

However, the Marketplace Fairness Act, which has been passed by the Senate and is awaiting a vote in the House, would allow states to require that all retailers levy sales taxes on goods sold to consumers within their state. While supporters of the bill say it would generate much-needed revenues, many online retailers oppose the bill because it would require greater administrative burden and increase the cost of online purchases, making them much less competitive. Amazon has decided to support the legislation because it has the size and volume to offset the administrative expenses; furthermore, Amazon understands that such a burden would send many retailers offline (out of business).

The Act has been long in coming as it levels the playing field between online retailers and traditional brick-and-mortar stores. If passed, the law would not force any state to charge a sales tax; however, each state will be required to simplify sales tax laws, giving them the option to compel virtual retailers to collect and remit sales taxes on goods sold within the state. This means consumers would likely have to start paying taxes on Internet purchases, so many might just assume shop at local brick-and-mortar stores. The impact could be significant as, according to a 2011 survey of online shoppers by Forrester Research, 25 percent said they would’ve purchased from a different retailer had sales taxes been charged.

Immigration Act

Compared to the current law, the hotly debated immigration bill is projected to prevent between 33 percent and 50 percent undocumented residents from entering the United States. If the bill is passed, fewer immigrants entering the country could help conserve the cost of government entities such as public schools, infrastructure and social programs. However, the money that would need to be spent on border patrol agents, fencing and other high-tech security measures might offset any savings.

Opponents of the bill would rather see a path created for immigrants to become U.S. taxpayers to help pay for government services. Recent research has shown a strong trend of immigrants starting up new businesses when they enter the country, in addition to filling unskilled labor roles. These jobs have been vacated by the vast number of Americans who can now receive government assistance to help them attend college and seek higher-paying positions.

With so many pros and cons working on both sides of this debate, passage of any version of an immigration bill will likely have little impact on government spending.

Medicare Better Health Rewards Program

The proposed Medicare Better Health Rewards legislative act would offer incentive rewards to seniors who meet health and fitness goals. In an effort to lower Medicare bills, the program is designed to help Medicare beneficiaries get and stay healthy via planned, achievable goals (i.e., tobacco usage, body mass index, diabetes indicators, blood pressure, cholesterol, up-to-date vaccinations and screenings).

The program would be 100 percent voluntary and participating seniors who save Medicare money would have the opportunity to share in the savings – up to $200 by the program’s second year and $400 by its third year.

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