Capitol to Capitol | April 23, 2018

Sales Tax Wars: The States Strike Back

DYK?

Richard Nixon was so good at poker that most of his first campaign for the House of Representatives was funded by poker winnings from his time in the U.S. Navy.

Last Tuesday, the U.S. Supreme Court held oral arguments for South Dakota v. Wayfair, which could very well be the largest tax case of this millennium. The long-awaited online sales tax case will determine whether states can require out-of-state retailers to collect and remit a state’s sales taxes. Predicting how justices will vote has never been an easy thing to do, and following Tuesday’s arguments, many legal experts are even more unsure of how the court will rule. Regardless of what the court decides, the decision will have a profound impact on interstate commerce.

Uncertainty stems from whether the court’s 1992 decision in Quill v. North Dakota, which prohibits a state from requiring out-of-state sellers to collect and remit the state’s sales tax, stands the test of time. Some of the justices last week stated that this ruling failed to predict the rise of internet shopping, which hurts both state governments’ bottom lines and the brick-and-mortar businesses that are forced to collect sales taxes, while their competitors are not. Justices Anthony Kennedy and Neil Gorsuch strongly suggested the court had erred in the 1992 case that was originally meant to deal with only mail-order companies. Gorsuch even went as far as to say the ruling was “antiquated.”

Meanwhile, some of the justices expressed annoyance with Congress’ failure to address the issue in the previous 26 years. Chief Justice John Roberts and Justice Stephen Breyer questioned whether overturning the Quill decision would burden smaller online retailers by requiring them to comply with state sales tax collection requirements. While many observers of the case believed South Dakota had a good position heading into arguments, some thought that the line of questioning from a few of the justices raised doubts about the court’s willingness to overturn Quill. The Supreme Court is expected to issue its opinion in mid-to-late June and it is likely the court will rule in one of three ways:

  1. In favor of South Dakota with a full repeal of Quill v. North Dakota.
  2. In favor of South Dakota, upholding solely the state’s law forcing out-of-state retailers to collect taxes if they meet certain thresholds.
  3. In favor of Wayfair, which would uphold the precedents set by Quill v. North Dakota.

Whichever way the court rules, there will most definitely be lasting effects on how states will need to think about how to structure their tax codes. The decision could mean tens of billions of dollars of revenue for the states, or, on the flip side, could mean that sales tax collections will continue to decline as more consumers shop online. In the end, it comes down to the Supreme Court counting to five votes.

NCSL Contacts: Max Behlke, Jake Lestock

White House Looks to Freeze Federal Funding

The White House is looking at $30 billion to $60 billion in rescissions from the $1.3 trillion omnibus bill passed last month. Rescission bills are congressional procedures in which the president proposes to withdraw funding from certain agencies and programs that were previously included in an appropriations bill, but must be approved by a simple majority of Congress

Senate GOP leaders already have said it has no shot of passing, but introduction of the bill could still put a freeze on federal funding for weeks. White House budget director Mick Mulvaney boasted this fact to opposing lawmakers last week saying, “If we send you a rescissions package, then the spending on whatever we propose is already stopped for 45 days.” The programs targeted are still unknown, but could cause major problems for agencies that are looking to spend their allocated funds before the Sept. 30 deadline.

NCSL Contacts: Max Behlke, Jake Lestock

Potential Road Block with New NAFTA Deal

While news of negotiations on a new North American Free Trade Agreement (NAFTA) are said to be close, Republican aides on Capitol Hill are becoming increasingly concerned they will not be able to find the support to pass it.

DYK?

On April 18, 1930, the BBC reported, "There is no news." Instead they played piano music. Must be nice …

This will prove to be an especially difficult task in the middle of an election year, and with trade politics proving to be an increasingly thorny issue. It isn’t clear whether the Trump administration is planning to work with Congress to prepare for a trade vote as the president has gestured he is willing to pull out of NAFTA entirely if a deal isn’t reached and approved by Congress. One strategy revealed by U.S. Trade Representative Robert Lighthizer is to withdraw from the existing pact even before the new one is ready, forcing congressional action. Congress would then have to approve the new agreement quickly, or suffer losing trade from its two largest partners.

Members, including Republicans, have made clear that they are not pleased with the administration trying to force Congress to act. Senator Pat Toomey (R-Pa.) who has been working with White House officials has stated, “I have advised them very unambiguously that would be a very bad strategy for the administration to pursue.”

NCSL Contacts: Jon JukuriMiranda McDonald

House Agriculture Committee Approves 2018 Farm Bill

DYK?

On this day, April 23, in …

  • 2005, the first ever YouTube video, titled "Me at the zoo, was published by user "jawed."
  • 1985, Coca-Cola changed its formula and released New Coke. The response was overwhelmingly negative, and the original formula was back on the market in less than three months.
  • 1908, President Theodore Roosevelt signed an act creating the U.S. Army Reserve.
  • 1914, the first Major League Baseball game was played at Wrigley Field, then known as Weeghman Park, in Chicago.
  • 1789, President George Washington moved into Franklin House, New York. It was the first executive mansion, located on 3 Cherry St., New York.
  • 1635, the first public school in the United States, Boston Latin School, was founded in Boston.

On April 18, the House Agriculture Committee passed, 26-20, H.R. 2, the “Agriculture and Nutrition Act of 2018” more commonly known as the House’s 2018 Farm Bill. The bill reauthorizes several key agriculture and nutrition programs for five years. It is unclear when it will come to the House floor. The Senate Agriculture Committee is expected to release its bill later this spring. Current authorization for farm bill programs expires on Sept. 30, 2018.

For a complete breakdown of the major farm, crop insurance, conservation and other producer programs, read NCSL’s Info Alert.

Additionally, please be aware that the committee adopted an amendment during markup to include the Protect Interstate Commerce Act of 2018. The amendment, strongly opposed by NCSL, would introduce a new type of federal preemption where state laws and statutes would not apply to out-of-state sellers if another state or locality had enacted a different law or statute covering the same agriculture production process. For more information, read NCSL’s letter of opposition.

As a reminder, registration is open for the first webinar in NRI’s 2018 Spring Webinar Series, The Next Farm Bill: A Primer. Join us on May 3, at 3 p.m. ET/ 2 p.m. CT/ 1 p.m. MT/ Noon PT, to learn about some of the key programs included in the Farm Bill affecting farmers and agricultural production, and what can be expected for the rest of 2018 and beyond.

Register Now

NCSL Contacts: Ben Husch (Agriculture), Kristen Hildreth (Agriculture), Abbie Gruwell (Nutrition)

House Expected to Take UP FAA Reauthorization on Wednesda>

The House is expected to vote, beginning Wednesday, on a full five-year reauthorization of the Federal Aviation Administration. The bill would largely increase funding for key aviation infrastructure programs. However, the bill currently includes a provision, Section 45510, that if enacted, could fully preempt states and localities on drones likely nullifying numerous provisions within existing state law.

The Senate is expected to take up its version later this spring with the hope of a conference bill before the end of September, the end of FY 2018.

NCSL Contacts: Ben HuschKristen Hildreth

Student Loan Discharge Process Changes for Disabled Veterans

The U.S. Department of Education (ED) and the U.S. Department of Veterans Affairs (VA) recently announced joint efforts to simplify the federal student loan discharge process for disabled veterans. Changes include proactively identifying eligible veterans with federal student loans. This month, utilizing the National Student Loan Data System, ED will begin matching borrowers who have federal student loans, or aid through the Teacher Education Assistance for College and Higher Education Grants Program to the VA’s database. Borrowers deemed eligible will receive a letter detailing the discharge process and a total and permanent disability (TPD) application.

Find more information on the process.

NCSL Contacts: Joan Wodiska, Miranda McDonald

DeVos and Mattis Meet to Discuss School Vouchers for Military Families

On April 19, ED Secretary Betsy DeVos met with U.S. Department of Defense Secretary James Mattis to discuss and request support for an education savings account for military families. The account would be utilized at the disposal of military families for resources such as tutoring and private schools. The account would also prompt the redirection of federal funds from the Impact Aid program. Currently, the Impact Aid program funds education programs and schools on military bases and Native American reservations.

Though met with opposition from within and outside of the military community, a spokeswoman for DeVos stated “the secretary continues to meet with members of the administration and Congress who want to find new and innovative ways to ensure all children in America, particularly our nation's military-connected students, have access to the world class education they deserve."

NCSL Contacts: Joan Wodiska, Miranda McDonald

Also of Note…

  • President Trump to Host France’s Emmanuel Macron for First State Visit – NPR
    President Donald Trump will welcome French President Emmanuel Macron to the United States for an official state visit on Monday, in the latest sign of good will between the two leaders and the first state visit from a foreign leader for President Trump.
  • Supreme Court to Hear Travel Ban Case on Wednesday – Wall Street Journal
    The Supreme Court on Wednesday will consider whether Trump can legally restrict entry to the U.S. for travelers from several Muslim-majority countries, tackling a central issue of his presidency.
  • The world’s oldest person died at 117 – Washington Post
    She was the last known person born in the 19th century. Nabi Tajima was among a remarkably exclusive group of “supercentenarians,” or people who lived past the 110-year threshold. Out of just 36 supercentenarians reported worldwide, all but one of them are women, and 18 are Japanese.

Read the April 16, 2018, Capitol-to-Capitol.

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NCSL's Advocacy in Washington

NCSL's Washington staff advocate Congress, the White House, and federal agencies on behalf of state legislatures in accord with the policy directives and resolutions that are recommended by the NCSL Standing Committees and adopted by the full conference at the annual NCSL Legislative Summit Business Meeting. As a result of the advocacy that is guided by these policies positions, NCSL is recognized as a formidable lobbying force in state-federal relations.

NCSL Staff in Washington, D.C.

  • Neal Osten | 202-624-8660 | Molly Ramsdell | 202-624-3584 | Directors
  • Max Behlke | 202-624-3586 | Budgets and Revenue
  • Danielle Dean | 202-624-8698 | Communications, Financial Services
  • Susan Frederick | 202-624-3566 | Law, Criminal Justice, and Public Safety
  • Abbie Gruwell | 202-624-3569 | Human Services
  • Ben Husch | 202-624-7779 | Natural Resources and Infrastructure 
  • Jon Jukuri  | 202-624-8663 | Labor, Economic Development and International Trade
  • Haley Nicholson | 202-624-8662 | Health
  • Ethan Wilson | 202-624-8686 | Commerce and Financial Services
  • Joan Wodiska | 202-624-3558 | Education