No new taxes

By Vin Suprynowicz
web posted September 20, 1999

Today's booming economy (driven in part by the cyber-revolution) has already filled tax coffers to overflowing. But state bureaucrats just can't seem to help themselves. Like the proverbial steer straining to reach the grass beyond the fence, governors and other state officials still lobby for new power to tax Internet transactions, as well.

If Internet sales reach $100 billion by 2003, an estimated $4 billion in hypothetical sales tax would go "uncollected" because no system exists to extract them under threat of force, warns Harley Duncan, director of the Federation of Tax Administrators.

"This is of profound importance to the states," Duncan told the federal Advisory Commission on Electronic Commerce, created by Congress to recommend by April a national tax policy for the burgeoning electronic marketplace, at its second meeting last week.

What is? Raising enough funds to cover the states' constitutionally mandated tasks -- or making sure no one "gets away with" a transaction without delivering a share in tribute to the lord of the manor?

If we discovered commerce taking place on Mars, would it be "of profound importance to the states" to send taxmen there in space ships to make sure each statehouse gets "its share"? Shall the water authority now measure and bill us for any "extra" water that falls on our property as rain?

Under a 1992 U.S. Supreme Court decision known as Quill, a state cannot collect taxes from companies operating outside its boundaries unless the company has some physical presence in that state, such as a store or warehouse.

Although that case specifically involved mail-order sales, it's also been interpreted as applying to Internet transactions. Congress has so far resisted repeated calls to overrule the Quill decision -- citing the complexity of any such taxation scheme, ad well as privacy concerns.

But -- its discourse dominated by bureaucratic witnesses pleading for a chance to milk the new cow -- you'd never know that from the utterances of the Advisory Commission so far.

Therefore, last week's call by three dozen Republican lawmakers to resist the urgings for some new "Internet sales tax" was timely as well as welcome.

"This idea is not a popular one in Congress or among the American people," nor is the GOP-led Congress in any mood to expand taxes on electronic commerce, the 36 lawmakers wrote in a stern letter to the Advisory Commission.

The GOP letter, signed by House Majority Leader Dick Armey and Majority Whip Tom DeLay, both of Texas, said many Republicans were troubled by indications that the panel was examining "how to tax the Internet, rather than whether to tax the Internet."

In their call for a mid-course correction, the lawmakers urged the panel to focus on how American business might be affected by "complex and excessive state and local taxes on e-commerce."

"You should also know that there are many members that will oppose any new taxes on the Internet," the GOP letter said. "An academic exercise on new ways to tax the Internet is not productive and does not reflect the intent of Congress in establishing the commission."

Good. Recent polls demonstrate that three-quarters of the American public recognize the Internet as the golden goose of our booming economy at the turn of the new century, and have no desire, as they sit at their home keyboards, to see a looming taxman peering over their shoulder, ticket-book and handcuffs in hand, hoping to extract some new, electronic Danegeld.

Here's hoping the Republican leadership -- for once -- sticks to its guns. Leave the Internet free.

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. His new book, "Send in the Waco Killers: Essays on the Freedom Movement, 1993-1998," is available at $21.95 plus $3 shipping through Mountain Media, P.O. Box 271122, Las Vegas, Nev. 89127. The 500-page trade paperback may also be ordered via web site, or at 1-800-244-2224. Credit cards accepted; volume discounts available.

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