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Capitol
Comment 264 - The Internet: Do the Candidates Get It?
The Republican debates have always provided an ample opportunity for
voters to learn where candidates stand on tax issues. What is new this
year is an emphasis on taxation of the Internet and electronic commerce.
It appears the candidates are just beginning to hear the message from
voters: We need a new tax code that respects the modern family and
encourages the emerging digital economy. For a politician, support for the Internet is akin to support for Mom,
apple pie and baseball. For voters in the early primary and caucus states,
where political discussions demand more than a sound bite, the fight
against Internet taxation goes to the heart of how we talk to one another.
The underlying infrastructure of the Internet is quickly becoming the
means by which Americans communicate with one another and the rest of the
world. Polls in Iowa show that more than three out of four voters think that
the revolution in information technologies is having an impact on the
agricultural economy. The Granite State ranks fifth in the nation for
adults online. On the national scene, one only need to look at the
magazine covers on the local newsstand to get a hint of the Internet’s
impact in our lives. To date, the central point of contention is a candidate’s commitment to
extend the federal moratorium on new or discriminatory taxes on the
Internet. During televised candidate forums, Gary Bauer endorsed a
permanent moratorium. The morning after the New Hampshire debate, George
Bush told a breakfast crowd that he would "would remove any taxation on
access to the Internet," and that "it is important to extend this
moratorium for a time." While this is encouraging, Bush stopped short of a
public declaration against undue taxation of the Internet and electronic
commerce. Most of the other Republican candidates have endorsed a permanent
moratorium on taxes that single out consumers who use the Internet.
Lately, John McCain has been the most outspoken candidate on the issue.
During the Manchester debate, McCain said "The Internet is the greatest
thing that’s happened to the world. It is somewhere between a combination
of the invention of the printing press and the Industrial Revolution. It
has unlimited potential to spread knowledge, information and freedom
throughout the world." Four days later at the Phoenix debate, he
challenged Senate colleague Orrin Hatch to oppose efforts by many of the
nation’s governors to impose new taxes on the Internet. Orrin Hatch and Steve Forbes have been the only candidates to sign an
E-Freedom declaration. Oddly enough, McCain has yet to sign the
declaration that calls for a permanent ban on taxes especially designed
for the Internet as well as the repeal of the federal excise tax on
telecommunications. While signing the declaration in Des Moines earlier this month, Forbes
echoed familiar refrains from his stump speech. His columns and speeches
have followed the Internet tax debate through Congress and into the
presidential campaign. The debate is headed toward a more thorough explanation of Internet
taxation. Sales taxes on electronic commerce already exist. What is on the
table are new proposals to allow taxation from an out-of-state government
in addition to the myriad of taxes imposed on basic telecommunications
services from all levels of government. Our current tax system makes no
sense in an economy driven by information technology. Four of the most highly taxed products in the United States are
tobacco, alcohol, gasoline – and telecommunications services. There are 38
different kinds of taxes paid by telecommunications companies for the
telephone industry alone. In effect, consumers are punished for communicating. Quick, easy,
efficient and inexpensive communication is the foundation for both a
healthy economy and a nation of free individuals. Taxing communications
services makes no sense in a modern digital economy. It is time for the presidential candidates to address where Internet
taxation really hits consumers. In addition to a pledge against new
Internet taxes, American voters need to hear how a president would
eliminate existing taxes on the growth engine of our economy:
telecommunications.
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