The Wall Street Journal-20080215-Virtual Steamroller

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Virtual Steamroller

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New York recently finished 50th in Chief Executive magazine's survey of the best states to do business. Respondents cited high taxes, regulation and Governor Eliot Spitzer's "hostile image toward business." The Governor, for his part, seems to have decided that if he can't convince companies to move to the Empire State, he'll simply have to govern them from a distance.

Eager to fund his proposed 4.8% budget increase this year (last year's was 6%), Mr. Spitzer is attempting to force out-of-state retailers such as Amazon.com to collect New York state sales taxes. Readers of this page know that a 1992 Supreme Court decision called Quill prevents exactly this type of money grab. The Supremes ruled that forcing such obligations on companies with no physical presence in a state could cripple interstate commerce. Absent Quill, even small Web merchants would have to answer to literally thousands of state and local tax collectors.

The Governor argues that he can get to companies like Amazon through New Yorkers who run ads for Amazon on their Web sites. Nice try. If non-employees with some business relationship with a company were enough to establish physical presence, then Quill would be meaningless.

Rather than competing for the title of most-taxpayer-unfriendly state, Mr. Spitzer would be wise to consider ways to attract more taxpaying businesses. A good start would be improving New York's overall business tax climate, which the Tax Foundation ranks 48th among the states, just ahead of New Jersey.