Oh, Illinois politics, you will never cease to infuriate me.The Illinois state legislature has recently passed what is being called the Internet Tax Bill. While Governor Pat Quinn has yet to sign the bill, it is already creating quite the controversy among major entities, from businesses across the state to Internet-behemoth Amazon.com.

First, let me provide a background on an important-but-often-ignored-and-therefore-silly Illinois law that already exists. For some time, Illinois residents have actually been required to pay a use tax for Internet purchases. A use tax, not to be confused with a sales tax, is a tax that is not charged at the time of purchase. Instead, consumers are to take responsibility to pay the tax directly to the state. A sales tax, on the other hand, is applied at the time of purchase, such as already exists at places like clothing stores and other such outlets. [Source of explanation.] At present, the Illinois use tax for online purchases stands at 6.25%. It is worth noting that the use tax law was never thoroughly enforced (nor very often followed), and the state granted amnesty to all violations (which includes basically anyone who has purchased anything tax-free online in the state of Illinois) on December 31st, 2010.

The bill, which would go into effect on July 1st, 2011, would require retailers like Amazon.com and Overstock.com–who have long been selling products tax-free–to start collecting this tax, essentially changing it from a use tax to a sales tax.

This would certainly be a major disappointment to consumers such as myself. As a college student with few affordable stores around me in the north side of Chicago, I often resort to places like Amazon for cheaper products, oftentimes cheaper specifically because they do not include any such tax at the moment.

However, if signed into law, the bill would provide an even greater immediate threat to small businesses and members of Amazon’s Affiliate Program. In turn, the state will ultimately suffer as these businesses leave for places without such a regulation. Numerous companies rely on Amazon, Overstock, and other online retailers for the functioning of their businesses, which are oftentimes affiliates of Amazon such as CouponCabin.com and FatWallet.com. New York, Colorado, North Carolina, and Rhode Island have all passed similar measures and have suffered these kinds of results. Such laws do very little if anything to actually raise state revenues, and any potential gains are offset as companies leave the state, taking jobs with them.

Most shockingly is that, despite the aforementioned failures of similar laws in other states, the Illinois legislature passed this bill by an 88-29 vote. To me, that signifies an overwhelmingly ignorant body of lawmakers. This is not an issue that should be consider in regards to political party affiliation. Seriously, why vote on something just because your political buddies are despite it already having been proven a failure? There is concrete evidence from past legislation in other states that measures like this do not work, and some Illinois businesses are already making plans to exit the state if necessary. While consumers may just have to learn to stomach an enforced Internet tax, businesses will certainly suffer.

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Send a message to the author of this post at andy@aneconomictheory.com.