Not Clicking

They met for the first time in 2009, when Warren, a former Harvard Law School professor, needed Congress' support for a new Consumer Financial Protection Bureau. The idea had not been finding wide support.

Merkley says he gave her a different reception. "I said to her, 'This is a great idea, and I’ll do everything I can to help make this happen,’” Merkley tells WW. 

Warren, whose Senate career was built on her fight for the consumer bureau, will return the favor. She's coming to Eugene on Oct. 6 to campaign for Merkley's re-election.

If they have time for private conversation, Warren may buttonhole Merkley about why he's not backing her and other key Democrats on a bill they say will create greater tax fairness across the country.

The bill, the Marketplace Fairness Act, would require big online retailers to collect sales taxes for state and local governments just like brick-and-mortar stores already do. U.S. Sen. Al Franken (D-Minn.), who along with Warren is one of the measure's 29 co-sponsors, calls it a "common-sense measure that brings our sales tax into the 21st century."

Only five Democrats voted against the bill, including Merkley.

That stance puts Merkley in an unusual place.

Since his election to the U.S. Senate in 2008, Merkley has carved out a reputation as a reliably liberal lawmaker. He's fought to make college more affordable for students, given victims of discriminatory wages more power to recoup fair pay, and made threats against corporations that outsource jobs unions want to protect. He's railed against Wall Street, Big Tobacco and predatory lenders.

"My reputation comes from taking on the powerful," he says. "There are so many people in Congress who are ready, willing and able to help the most powerful. Ordinary folks need their champions…. That's what I'm fighting for."

Merkley says he doesn't want to place burdens on companies to collect taxes for states and jurisdictions all over the country—including Oregon retailers that are not set up to collect sales taxes.

But that also puts Merkley on the side of online giants like eBay and Overstock.com, as well as anti-tax conservatives like Grover Norquist. 

The exemptions deny money for local schools, health care and other social services—causes that Merkley champions in his re-election material. The Center on Budget and Policy Priorities, a fiscal policy think tank in Washington, D.C., puts the figure at $23 billion annually.

"We desperately need that money to support infrastructure projects and fund police," said Tom Martin, a spokesman for the National League of Cities. "We see it as a significant revenue source."

Merkley's response? "I am firmly determined to fight this bill in any way I can," he says. "Keep your hands off the Internet."

What sounds like a rallying cry for Internet freedom from Merkley is a position that shadows that of Oregon's senior senator, Democrat Ron Wyden.

Wyden has for years championed an Internet free of state and local taxation. In 1998, for example, Wyden led the fight for the so-called Internet Tax Freedom Act that blocked states and local governments from imposing taxes on Internet access.

Wyden pitched the ban as protection for a fledgling industry. The Internet was still new at the time, and Americans were far from becoming as wired as they are now. Only 41 percent of adults surfed the Internet, and the most sought-after information on the World Wide Web was the weather forecast, according to a 1999 survey by the Pew Research Center.

The ban—intended to be temporary—has since been extended three times. Wyden wants to make it permanent.

"[The Internet] is clearly this century's shipping lane and history's most powerful communications tool," Wyden said in congressional testimony in July. "Part of the reason the Internet has revolutionized American life is that it has been protected from discriminatory taxation."

Critics see Wyden's protections of what is now an economic giant as overly protective of such major corporations as Comcast, Cox Communications and Time Warner.

"In the year 2014, does the Internet need protection?" asks Chuck Sheketoff, executive director of the Oregon Center for Public Policy. "Is the Internet really not going to make it?"

A spokesman for Cox, Stephen Boggs, says the company is shielding consumers. "We don't want to pass along taxes to our customers," Boggs says.

The extensions of Wyden's measure have come with bipartisan support. Wyden introduced a bill last year to make the ban permanent. It has 52 senators signed on as co-sponsors, most of them Republicans. Merkley put his name to the bill in April.

He says taxes could be "a burden on a key piece of infrastructure."

But it's Merkley's siding with Wyden in opposition to the Marketplace Fairness Act that has put him at odds with most liberals and progressives in the Senate. Of the 53 Democrats in the Senate, he and Wyden are among only five who voted against the bill, all from states without a sales tax.

Merkley says states are responsible for enforcing their own laws, including sales taxes. "This is an overreach by the federal government where they're asking our companies to do the job of collecting sales taxes for jurisdictions outside of our state," he says. "I just don't think it's right for the federal government to impose that tax-collecting responsibility on the companies here in Oregon."

It's an easy argument at home, where the sales tax is unpopular and not part of the state's retail culture.

Support for the bill has come from a wide array of interests, including public employee unions and many businesses. They say the measure would help state and local governments elsewhere collect sales taxes that are due to them, while ending the price advantage Internet retailers enjoy over traditional brick-and-mortar stores that must charge sales taxes.

"All retailers should compete on a level playing field," says Jason Brewer, a spokesman for the Retail Industry Leaders Association that represents big-box stores.

James Gattuso, a senior fellow at the conservative Heritage Foundation, says the act wouldn't address unfairness. Instead it would shift the disadvantage to online retailers by requiring them to comply with rules in thousands of jurisdictions. "It's a cure that's worse than the disease," he says.

Under current rules, consumers are supposed to voluntarily pay sales taxes when they buy an item over the Internet and the retailer fails to the collect the money. Very few consumers do. The new legislation would shift the burden from the individual to the retailer.

Amazon.com supports the measure. (Despite its role as an Internet giant, Amazon maintains warehouses across the country, making it subject to many sales taxes anyway.) The company has teamed with Target, Best Buy and Costco to strip online retailers who aren't collecting sales taxes of their price advantages.

President Obama supports the measure, too. "While local small business retailers follow the law and collect sales taxes from customers who make purchases in their stores, many big business online and catalog retailers do not collect the same taxes," Obama wrote in an April 22, 2013, statement of support. "Because these out-of-state companies are able to play by a different set of rules, this disparity undermines the ability of cities and states to invest in K-12 education, police and fire protection, access to affordable health care, and funding for roads and bridges."

Under the bill, states would be responsible for providing tax-collection software to companies that want it. But Merkley and others say they worry about the burden on businesses that are forced to comply with the changing rules of thousands of taxing agencies. States shouldn't rely on companies, he says.

"Every state has the responsibility of enforcing its own laws," he says.

Advocates for sales-tax collection don't see the problem, pointing out that advances in computer technology should ease the collection process. 

"It's really not that hard to do, and having a uniform law makes it easier," says Sheketoff of the Oregon Center for Public Policy. "As sales leave Main Street and go to the Internet, states need ways to recoup that revenue."

Merkley was supposed to face a difficult race for re-election this year. Most freshman senators are put to a tough test in their pursuit of a second term, and Merkley's looked more daunting than most. 

He was lifted to victory over incumbent U.S. Sen. Gordon Smith (R-Ore.) on the tide of support for Obama in 2008. An off-year election and an unpopular president—even with a Democratic registration edge widening in Oregon—could have spelled trouble for Merkley in 2014. 

But Merkley has benefited from strong poll numbers, especially against a Republican challenger, Dr. Monica Wehby, whose campaign appears to be melting down around her. Wehby has been caught plagiarizing her position papers (including on health care, on which she claims to be an expert) and has recently dodged two campaign appearances with Merkley, including one televised debate.

Merkley is also in a better position for money: $9 million for this campaign, compared to $2 million for Wehby. (Wehby has also benefited from $1 million in attack ads against Merkley paid for by the Koch brothers' Freedom Partners Action Fund.)

Merkley has gained some of that funding from donors who align with his views on taxes and the Internet.

The political action committee for eBay known as the Committee for Responsible Internet Commerce has given Merkley $7,000, Comcast's PAC has donated $7,500, and the National Cable and Telecommunications Association has given him $5,000. Overall, the computer and high-tech industry has given Merkley $135,000, seventh among industry groups donating to the senator.

When Warren comes to Oregon next week to campaign for Merkley, voters are unlikely to hear about the senators' differences.

On the topic of Internet sales taxes, Warren stands with the majority of Senate Democrats who want states with sales taxes to be able to more effectively enforce their laws. By standing in their way, Merkley and Wyden say they are doing what's best for businesses at home. That comes at a steep cost to other states.

"This is an issue that has not been on the front page," says Sheketoff of the Oregon Center for Public Policy. "But it's an important issue for local governments and states who are seeing their sales taxes erode.” 

WWeek 2015