There’s always money in the banana stand: why budgets don’t actually matter

UntitledThe House of Representatives is set to begin the appropriations process after Congress’ Memorial Day recess. This is much more important that the budget discussions that took place in March and April because appropriations actually play a role in how the federal government spends money. There is basically a three step process that determines levels of federal spending: 1) budgets, 2) appropriations, and 3) authorization. Step one does not matter.

That’s right, the budgets passed in both the House and Senate have zero impact on government spending. Budgets are non-binding resolutions and will never, ever become law. They are a statement of principles: “We believe this program is good, while this program is bad. Fund the first one, cut the second” etc. Each party makes their wish lists, postures and points fingers, and then votes on the meaningless documents. After budgeting comes the appropriations process.

In appropriations, committees look at all the funding requests submitted by members of Congress and decide which should receive money. These requests cover every possible thing you could imagine, and more. Literally everything. One member may want funding for a grant program for research on Lou Gehrig’s disease, while another may want to set money aside for an aircraft carrier. However, just getting money appropriated doesn’t get it spent. Things move on to Round 3: authorization.

Once funds have been appropriated to various projects, Congress then has to authorize the spending. It may come as no surprise, but it’s extremely easy to get lost in the budget process (and maybe even this post). There are a countless number of projects that have had funding appropriated but not authorized. They sit in a weird limbo and nothing ever happens to them.

So, when Democrats say Rep. Paul Ryan’s budget would end Medicare as we know it, or when Republicans say Rep. Chris Van Hollen’s budget would “put the breaks on our economy,” just remember neither will. In fact, neither will do anything because that’s not where the money is. But there’s always money in the banana stand.

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We are all tax dodgers

Ever bought anything on the Internet? If you have, I’m guessing you didn’t pay any sales tax on it. Now, that’s all well and good, except for one little thing: you’re supposed to. That’s right, states should be collecting sales tax on most online purchases, but they aren’t. Congress is attempting to change that with the Marketplace Fairness Act.

According to some estimates, states miss out on almost $23 billion a year because of the Internet sales tax loophole, and at a time when state coffers are badly in need of replenishing, it makes sense to reevaluate this policy. And since an Internet sales tax wouldn’t technically be new, it also allows members of Congress (read: Republicans) to vote in favor of what is essentially a tax increase without voting to explicitly raise taxes.

On May 6, the Senate passed the Marketplace Fairness Act (MFA), with 69 Senators voting in favor of it. This bill allows states to collect sales tax from online purchases, but exempts companies that make less than $1 million in out-of-state sales. Companies that conduct business online will be expected to use software that allows them to collect sales tax on behalf of states, though the government will pay for the development of the software.

The underlying logic to the MFA is to level the playing field between brick-and-mortar businesses and online retailers, in addition to providing states new ways to raise revenue. Since every store has to collect sales tax, physical stores are automatically at a price disadvantage compared to online retailers.

The bill isn’t without its flaws, however, and it will likely face some major hurdles in the House. Mega-online retailers, such as Amazon, support the MFA because they believe it will help push out competitors. Companies like Amazon are already so huge, it would be relatively easy to implement the new regulations and processes set up in the MFA. But that’s not the case with every business with an online presence, and Amazon stands to benefit if these small companies go under.

So, is an internet sales tax a good idea? It’s hard for me to say with 100 percent confidence, but I think so. States need money, online retailers have an advantage over brick-and-mortar businesses, and this will – in theory – level the playing field. On the other hand, critics say it may discourage entrepreneurs and/or muscle smaller businesses out of the online market. With the right legislative language, I think it could be done, but that requires an awful lot of faith in Congress.