just go to cspan.org/connect and sign up for the email. the program guide is a daily email with the most updated primetime schedule and upcoming live coverage. word for word gives you the most interesting daily video highlight. in their own words. with no commentary. the book tv newsletter sent weekly is an insider's look at upcoming authors and book festivals. and the american history tv weekly newsletter gives you the upcoming programming exploring our nation's past. visit cspan.org/connect and sign up today. >> today the supreme court is hearing oral argument in south dakota vs. wayfair. a case dealing with internet sales taxes on out of state purchases. we'll have the audio of the oral argument on friday. but yesterday the heritage foundation held a discussion on the case with scholars and attorneys. the discussion is about an hour.

>> good afternoon. welcome to the heritage foundation. we of course welcome those who join us on our heritage.org website and those who are joining us on c-span tv. for those in-house, we ask a courtesy check the mobile devices have been silenced or turned off in those watching online are welcome to send comments or questions at any time by e-mailing speaker@heritage.org. leading our discussion today is elizabeth slattery who serves as legal follow that the advocacy program manager and our ed wynn center for legal and judicial studies. she of course focuses on the supreme court's separation of powers, judicial nominations in a variety of other

constitutional issues. she also manages heritage sessions to prepare litigators for oral arguments in cases pending before the supreme court. please join me in welcoming elizabeth slattery. elizabeth. [applause] elizabeth: tomorrow, morning the supreme court will hear oral arguments in south dakota vs. wayfair, dealing with whether states can require out-of-state retailers to collect sales tax on sales tax on the residents make an online purchase. the court previously held versus north dakota the retailers must have a president such as a storefront for employees in the state in order to be subject to heir taxing authority. justice scalia explained that congress has the final say over regulation of interstate commerce and it can change the rule by simply saying so. he quill case dealt with mail-order retailers and was decided before online shopping existed. states argue now they are missing out on billions of dollars in lost sales tax revenue has south dakota decided to challenge the case and the law requiring out-of-state

retailers to collect and remit sales tax if they make 200 transactions or $100,000 in sales in the state per year. wayfair and other retailers refuse to comply and now their cases at the supreme court. what will the court deciding how my congress and the states respond? to unpack these issues we are fortunate to have what does the panel but earth who will discuss the constitutional policy implications of this case. first up will hear from david solomon, partner at morgan lewis when he had that the firm's appellate pack is. david focuses on complex constitutional and regulatory matters a range of legal subjects. he started 14 cases before the supreme court and other federal and state court.

david previously served as assistant to the solicitor general and law clerk to judge eugene davis of the federal circuit. he's a graduate of brigham young university and university of chicago law school. then we will hear from jonathan william, chief economist and vice president for the center for fiscal reform at the american legislative exchange council. jonathan worked with congressional leaders and members of the private sector to develop fiscal policy solutions for this day. she previously served as staff economist at the tax foundation. jonathan's work has appeared in "the wall street journal," "forbes" and many other publications and is frequently appeared as a guest on the "pbs newshour" another tv programs produce a graduate of northwood university. then we'll hear from michael greenwood, professor of law at my alma mater company antonin scalia law, administrative law and federal court. previously a scholar at the american enterprise institute, chairman of the competitive enterprise institute and founder of the center for individual rights. michael has written nine books including "sell globally, tax locally" which is particularly

relevant to today's discussion. it's also read numerous articles and provided testimony at the state and federal level. michael studies political science and philosophy at the university of hamburg in germany and received a ph.d. in government from cornell. last but not least, we will hear from a colleague at heritage party policy analyst at the institute for policy studies. his research focuses on the economics of taxation, international tax competition in the federal budget. his work has appeared in "the new york times" and "the wall street journal" and many other news outlets. he previously worked at the competitive enterprise institute. he has a bachelor's degree from wittman college and he's currently pursuing a ph.d. in economics at george mason university. so with that, we will start out with david. david: good afternoon. i will start with a history of the commerce clause issue that is at the heart of this case and then i will discuss the competing theories about how it should apply in this case and lastly i'll talk about congress'

role and the specific actions it has already taken and should be taking that should preclude the supreme court from overturning its prior precedent and endorse doersing south dakota's statute. first the history. they say the only thing short of the slave are death and taxes through the history of this case and its predecessor suggests another candidate for the list. states that impose use taxes on the resident out-of-state purchases inevitably will try to conscript out-of-state marriages -- merchants into collecting and remitting those taxes. precisely because they are out-of-state have no recourse to the ballot box. without fail, states will always choose to impose the tax collection duty on out-of-state merchants to whom they are not politically accountable rather than trying to collect the tax directly from in-state purchasers to whom they are politically accountable. forcing out-of-state merchants , especially those engaged in

ecommerce, to collect and remit its unpopular use taxes is exactly what south dakota seeks to do in this case. south dakota is hardly the first state to do so. both south dakota and others have tried this many times before. it seems about every 25 years or so another set of state concocts a new regime to test these laws. to date, the supreme court has rejected every such attempt, holding true to the principle that a state can only impose such tax collection obligations on merchants that have a physical nexus to the state. the supreme court announced this rule in 1967. the court recognized the sharp distinction between retailers with outlets, solicitors or property within a state and those who do no more than communicate with customers in the state by mail or common carrier as part of a general interstate business. the commerce clause the court

held barred illinois in that case from imposing tax collection duties on out-of-state merchants who lack a meaningful physical nexus to the state. the court emphasized that he reaches any other result, the outcome would be virtual welter of complicated obligations on nterstate sellers. so the issue was quiet for a while. in 1992, the supreme court was faced with another attempt to conserve out-of-state merchants, this time by north dakota who tried to force out-of-state catalogue retailers to collect use taxes for goods shipped into the state. north dakota argued that the supreme court's decisions interpreting the dormant commerce clause had evolve and become less rigid and more permitting of state regulation, at least in the absence of express prohibitions by ongress. the same evolution of supreme court doctrine of south dakota

mason in the state. -- makes in this case. so the state in quill asked the supreme court to overturn and the supreme court refused. again emphasize the negative impact it would result on interstate sellers, but more mportantly they held that it must apply and follow its prior precedent in this area because under our constitutional scheme, congress and not the supreme court has the final word as to what regulations in interstate commerce are permissible and by maintaining a consistent interpretation the court explained congress is now free to decide whether, when and to what extent states may burden concerns with the duty to collect interstate taxes, close quote. that brings us to the competing theories at issue in this case. as a threshold matter, the idea that today's court should stand

by yesterday's decision even has a different or better rule could be devised. justice brandeis once put it this way. t is more important that the applicable rule of law be settled than it be settled right. the court has recognized two types for strengths in constitutional cases the supreme court has the final say. stare decisis has relatively low strength. stare decisis concerns must be balanced against the fact that the court retains an important duty to correct erroneous constitutional interpretations precisely because it the only entity to do so. in cases of statutory interpretation, stare decisis has more strength because congress remains free to alter what the court has done. therefore, the constitutional order in the context is best

served when courts adhere to their prior holdings and leave it to congress who alone possesses the legislative power under the constitution to correct any mistakes concerning statutory language. this case presents an interesting opportunity for the court to test its adherence in terms of constitutional interpretations f the dormant commerce clause. on one hand, and south dakota emphasized the commerce clause is in the constitution and so they claim the supreme court should feel more free to overturn prior precedents in this area when the current court believes they are mistaken. on the other hand, just as in the case of statutory interpretation, because the -- constitution asigns to congress, not the court, the final word on how to regulate commerce in this area. congress can bless state regulation that would otherwise violate the commerce clause and prohibit state actions affecting interstate commerce that would not otherwise be

unconstitutional. because congress is the final arbiter of all interstate ommerce regulation, the better view is the court should give the highest level of stare decisis respect. that is exactly what the court in quill said when asked to overturn ballot test and whether they were right about the commerce clause and i think there's a very strong case that they were right about the commerce clause. they surely were right that congress had the institutional capacity in constitutional authority to finally resolve all issues of interstate commerce. the last point i will make for now is congress' power in this area is not just theoretical. congress authority taken important legislative action in eliance on ballot test -- any decision by the supreme

urt that overturns quill and endorses south dakota's legislation would be an end run around congress' authorities and would undermine congress' actions in this area. south dakota argues 25 years of inaction proved that congress cannot fix quail. -- quill. there were at least two things wrong with that assertion. first, south dakota begs the ultimate question, which is whether congress believes quill needs to be fixed at all in the -- at all? and second, congress has been and remains very active in this area. most importantly, congress did the internet tax freedom act in 1998 and it just made the statute permanent in 2016. as the legislative history to the itfa makes clear, congress relied and incorporated quill's nexus principles into that statute and that legislative history states that its objective was to provide certainty that that nexus --

those nexus principles would remain in place just as they apply to mail order commerce, unless and until a future congress decides to alter the current nexus requirements, closed quote. the itfa does a few important things worth remembering. first is prohibiting commerce and defined a discriminatory tax to include any imposed on internet commerce that is either not generally imposed or legally collectible on transactions involving similar property goods, services or information accomplished by other means or that imposes an obligation to ollect or pay the tax on a different person or entity then in the case of similar transactions. in many ways, most importantly it prohibits any tax in which he state or local tax is based in the obligation solely on the

act that instead of purchasers access a site on a remote seller's out-of-state computer server. so it's the only connection to the state are the only nation the state is using to impose the tax collection obligations the fact that in state users can access out-of-state sellers, the statute prohibits that is a discriminatory tax. the itfa shows the supreme court is no longer able to interpret this clause. congress relied on quills nexus requirement has now established legal principles that must be taken into account. i would just mention the solicitor general suggestion in its brief that the supreme court should consider limiting quill's nexus requirement to interstate catalog sellers and adopt the notion that internet sellers are virtually present in every taxing jurisdiction, is flatly inconsistent with the itfa.

both because it would classify in-state purchasers assessing an internet seller's out of state computer servicers and because it would discriminate against internet commerce versus other forms of commerce. congress has rejected both of those principles and that should be the end of the matter. lastly i mentioned briefly several other proposals for additional legislation in this area. congress is the right forum for this request. it is far better suited than the supreme court in a case like this to resolve policy uestions, including the impact on effects on interstate commerce of state and local regulation, whether free or low-cost software can eliminate or mitigate the costs on internet sellers. and how to account for the fact that nearly all large internet sellers are already collecting these taxes. so the cost of overturning quill would fall disproportionately on

small businesses. thank you. >> good afternoon, everyone. i have to warn you first off i'm not a lawyer, but i did stay at a holiday inn last night. i'm an economist and i will make a few brief points from our perspective on the state side of things. i represent the american legislative exchange council where we have about two dozen -- 2,000 state and local elected officials who are members of our small 50 states, both republicans and democrats who are devoted for free market by many government and the guiding principles. they've caused us to be skeptical of the idea beyond their borders. of states or nations taxing eyond their borders. back to the history of our members have felt on this issue going back all the way to the 1990's.

we have a long institutional view on this issue and i think it's an important one. you hear a lot of mention around town these days or around the news stories that the states want and need this new authority. the important thing to point out is that an organization epresenting 2000 elected officials at state and local levels, our members feel differently. we feel constitutional protections ought to be treated with the utmost respect. we really appreciate the leadership of chairman bob goodlatte here in washington, d.c. and his work on the house judiciary committee looking at ways to address these issues while protecting interstate commerce, while protecting important principles that alec members have valued for these 45 years of our organization and certainly since the quill decision in the early 1 90's. as someone who's been to all 50 states now working with our members, i can tell you many conversations with state legislators. i'll boil down a few main points

i think we've taken away but i encourage to you take a look at the brief that alex filed in this case. the authors did a remarkable job tracing through our position on this issue. to the point that often is out there as i mentioned that states want and need new revenue. if you paid attention to news stories recently, you'll know that state and local revenue just hit an all-time high for the seventh year in a row. this is not talking about a shortage of revenue. perhaps if uribe government advocated to spend more. that is not why alec is here. we're talking about solutions to problems out there. we encourage states to live within their means, even if they ere coming out of the 2008 economic downturn when times are very difficult. they did take real steps within their means and that's an

important function to protect taxpayers and prioritize government services. also, the fact of the all-time revenue being high is not just income taxes driving this. income tax revenue is up, property tax revenue is up, it's important to note the sales tax revenue is up specifically. in 2012 until 2017, state sales tax revenue is up roughly 25% so there's not a gaping hole in the state sales tax systems because of the supposed end quote, unquote loophole that some refer to as the remote seller provision in state sales tax law. also, a very under discussed element of this debate and certainly one of the untold stories as a successor federal ax reform has been empowered states to make a lot of new decisions at their own level of government. we have seen about 30 states issue official reports on what the tax cut in jobs asked me for their state budgets. similar to what we saw after ronald reagan's tax reform of

1986, 31 long years ago when you broaden the tax is at the federal level, you see a huge influx of unexpected revenue for state and local government. the story of the 2018 legislative session for many states has been unexpected revenue coming in and whether they want to use the revenue to cut tax rates and certainly has a limited government organization, encourage them to look for ways to make state more ompetitive with the money. the vast majority of the states reported to have shown unexpected revenue with federal ax reform. you add that economic growth that we've seen a strong all-time record in 2017 for state and local tax revenue to the effect of the tax cuts and jobs act in a scenario where states are in good shape when it comes to revenue. in fact two of the discussion is what he do it the revenue sitting around during the legislative session. first question. second question now should states be able to tax outside of

their borders and should they be able to regulate outside of their borders? even south dakota has had a brief with the idea california would be zero to supply their environmental regulation to south dakota and subject businesses to those types of regulations so they can be ympathetic in the sense that you can have some sort of protection from states trying to tax and regulate outside of their borders. that is why we have commented on taxation without representation before congress or regulation acts. that was the important point to delineate on the tax and regulatory framework what states can do outside of their borders. take a look at also the idea of the benefit principle. look at the idea that political influence. the political economy piece of this is very important that when states are having the ability to tax individuals are regulate individuals that are not

constituents, what kind of political influence to the out-of-state entities have, could they have. when you talk to state legislators across the country like i have over the last decade, it is a big alluring factor of policies and how you export your tax burden. how do you spread out the cost of your government services to out-of-state residents who then are not going to complain and be involved in the political process and if they are involved to have a whole lot less weight around the state capital than in homegrown and state business. certainly that aspect as well. of course then you have the idea of companies being subject to out-of-state auditors who potentially much less on an ut-of-state company as well. my mind goes to the new york example. we've all talked about new york's aggressive tax department, how they go after an income tax basis as well. that is something we supported that the mobile workforce idea before congress, which is to set

some reasonable standards on what states can do to tax nonresidents. begins with things like athletes coming into the state send unlimited time and not date and of course nullified by new york's aggressive tax department o business travelers going through the connection to europe been sending a few work e-mails. imagine that scenario where the new york tax department has empowered the small businesses from around the country with no physical footprint whatsoever in new york and applying that kind of aggressive revenue collection regime on sales and use tax. that is a scenario that should keep most small business owners that want to sell online up at night if they were looking to sell to new york residents. finally from a fairness give them and this is the other thing we talked to state legislators about and is certainly a concern. there's no doubt about it there's fairness issues at play regardless of what the system

ooks at with internet taxation of remote sales and sales tax collection of in-state businesses. that being said, according to the gao report which i encourage to dig deeper into the issue to look at because we have amazing statistics they have found, only about 2ers had to 4% of all state and local sales tax goes on tax through sales. we are talking about a very small piece of it now that amazon collects in every single state with the sales tax and a huge movement towards states collect 10 what perhaps was -- collect that piece that was perhaps untaxed before. you look at the idea that the p retailers, 87% to 96% of their sales get taxed currently. this issue that there is a huge gaping hole in sales tax codes is not run by the facts. i would argue it shows physical presence works. when a company like amazon has

been successful at providing goods and services to so many americans out there and they want to expand same-day delivery which i take advantage of common -- of, they wanted -- to buy whole foods. when they wanted to expand and become the juggernaut company they are today, that means they've developed a physical presence nearly everywhere. and when a business gets to that level, they really would have a physical presence in those cases. let me just conclude with the idea of patrick byrne, founder of overstock, when he was testifying in front of house judiciary a couple years ago and he made a statement that really stuck with me ever since. it talks about how this otential tax collection regime , 12,000 tax jurisdictions, perhaps more across the united states could stop the next amazon, could stop the next overstock and that is something we all worry about. when mom and pops expand or not -- they're not looking at

perhaps expanding to a second location. they're looking to expand by selling online. this could keep them from selling online with compliance costs. in 1999, we had 18 employees, patrick byrne said. had $1.8348 in revenue. if we'd been required to administer and collect sales taxes on behalf of remote state governments without any meaningful simplification, indemnity and compensation, our chances of employing 1,5 hub american workers would have -- -- 1,500 american workers would have been small. that for me is the issue going forward. that's why people are skeptical of new regimes with potentially 12,000 to 13,000 taxing jurisdictions across the united states. >> thanks. i have to admit i wrote that book that was mentioned in eons ago before some of you here were

born. in preparation for this, and then let the topic alone in preparation for this event i ave flipped through some blogs and stuff and there's not a single new argument in all these years. the up question -- the unquestioned premise of the entire debate is sales and use tax should be destination based. that is to say, based on the purchasers' location. and then the only question is who is going to collect that and how many ties or contacts do you have to have for that particular jurisdiction to be subject to collection obligations? i think as a policy matter if this is not a good system. think we should have an origin based system of taxation so that it's the seller's tax location that determines the tax base and he tax rate.

that could even be the principal place of business for retail location, whatever. there are a number of reasons for why that makes sense. i'll leave one off which is a political responsibility and accountability idea which both previous speakers have mentioned. it's very important to my mind to online political -- align political responsibility with tax authority. there are other reasons. one of them has to do with the enforcement and administrative costs of system. other recent have to do with tax competition and the territoriality principle. i'll make this very brief. if you don't know what a tax system should look like and what would be efficient or not, one good first cup is figure out a system that minimizes the administrative and enforcement costs, have single tax collector

and the single-payer or who is in charge of or who already possesses all the information that is needed to figure out what the tax is. how do i know this makes sense? because every single state in -- [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2018] >> you can find the rest of this discussion online at cspan.org. the house gaveling back in for debate, working today on tax-relt measures. mr. curbelo: madam speaker, i move the house suspend the ules and pass h.r. 2901, the volunteer income tax assistance perm assistance act, as amended. the speaker pro tempore: the clerk will report the title of the bill. the clerk: h.r. 2901 a bill to amend the internal revenue coid of 1986 to make permanent the volunteer income tax assistance matching grant program. the speaker pro tempore: pursuant to the rule, the gentleman from florida, mr. curbelo, and the gentleman from illinois, mr. davis, each will control 20 minutes. the chair recognizes the gentleman from florida. .