MORRIS: Losing Democracy
Little by little, our democratic rights are being whittled away by the Supreme Court. And no national politician has said a word about it.In a democracy, citizens have the right to make the rules that govern their behavior and that of their businesses. For example, virtually all state legislatures enacted usury laws to prevent banks, and later credit card companies, from gouging their residents. These laws applied equally to all residents, whether they borrowed money from inside or outside the state. Virtually all states enacted sales taxes to support public purposes. And those taxes also applied equally to all residents, whether they purchased goods from outside the state or inside the state.Then the Supreme Court stepped in. In 1967 and 1992 the Court told states they had no right to impose sales taxes on mail order firms. Mail order sales are over $250 billion a year and soaring. Mail order firms compete against the neighborhood merchant who must pay an average sales tax of 6 percent. In effect, the Supreme Court prohibited states from protecting their businesses against unfair competition.In 1976 the Supreme Court effectively abolished a community's right to protect its residents against high interest rates. The Court ruled that a national bank located in Nebraska could charge Minnesota credit card customers higher interest rates than were allowed by Minnesota law.A year later, South Dakota repealed its interest rate ceiling on credit cards. Delaware and several other states followed suit. In 1980, after Citibank failed to convince New York State to follow South Dakota's lead, it moved the nation's largest credit card operations to South Dakota.Two weeks ago the Supreme Court stopped California from imposing the same consumer protection laws on credit cards issued to its citizens by Citibank as it does for credit cards issued by local banks.These Court decisions have been lopsidedly decided. Yet they rest on a remarkably flimsy foundation. The credit card rulings rely on the National Bank Act of 1864, a law enacted during the Civil War to nurture the newly enfranchised national banks as a way to finance that War. The law prohibited states from discriminating against national banks. That that law would be relied upon to establish the rules for the modern world of electronic finance and credit cards is absurd.The Supreme Court did concede that its decisions might "impair the ability of states to enact effective usury laws". But it argued that if democracy were allowed to work, then banks would have to comply with the laws of each state. Which would "throw into confusion the complex system of modern interstate banking." Hogwash. Haven't Supreme Court Justices heard of computers? Computers manage complexity. That's what they do. Banks already charge different interest rates for different customers. For the Supreme Court, a minor inconvenience to big banks was sufficient for them to deal a devastating injury to citizenship and local authority.Allowing a state to impose taxes on mail order items, the Court argued, would burden interstate commerce. It didn't explain how. Every mail order firm has computers perfectly capable of calculating state and local sales taxes at the push of a button.More than 20 Attorneys General submitted briefs in favor of California's right to control credit cards. The vast majority of state legislators and governors favor allowing communities to treat local merchants and out of state merchants alike. One would think that even if the Supreme Court doesn't get it, Congress would. Think again.In February 1994 Senator Dale Bumpers(D-Arkansas) introduced the Tax Fairness for Main Street Business Act. It gives states the right to impose sales taxes on mail order items. The Act has the support of neither political party. Why? Well, back in 1989 a Texas Congressman introduce a similar bill. The Direct Marketing Association spurred 750,000 pieces of mail from its customers. On the other side of the issue were the neighborhood retailers. They were not well-organized and certainly weren't as "computer powerful" as direct marketers or credit card companies. When the International Council of Shopping Centers organized a letter writing campaign to support the bill, it generated a paltry 1,000 letters.In an age when electronic finance and electronic commerce supersede our laws, why should it comes as a surprise when electronic politics supersedes the will of the people?This is an election year. We will hear politicians dutifully mouth their support for democracy, for, in Bob Dole's words, giving "power to the people". But that's a meaningless phrase if the rights of citizens at the local and state levels, where democracy means the most, no longer extend to making rules that govern the financial and commercial world.