Copyright 1999 The Denver Post Corporation
The
Denver Post
December 27, 1999 Monday 2D EDITION
SECTION: DENVER & THE WEST; Pg. B-10
LENGTH: 948 words
HEADLINE:
Will the 'Net strangle Main Street?
BYLINE: By Bob
Ewegen,
BODY:
Two key principles of economic policy
are, 'If you want more of something, subsidize it. If you want less
of something, tax it.'
Education is usually a good thing and
wise societies thus subsidize it. A medical researcher who develops a
cure for cancer may well get rich, but her discovery also benefits
the taxpayers who wisely invested in her potential.
Other
products - most notoriously tobacco - are deemed to be bad things. If
increasing the tax on cigarettes results in reduced sales of that
deadly drug, society also benefits from less cancer, less emphysema,
less heart disease and fewer of those yuckiest of amatory adventures:
kissing a smoker.
Most products are neither as obviously good as
education nor as blatantly evil as tobacco. Thus, in most cases, the
goal of responsible tax policy is to maintain a level playing
field between competing manufacturers and retailers.
No one
except General Motors stockholders would support applying a 7 percent
sales tax on Fords but exempting Chevrolets from that levy. Society
is best served by letting rival carmakers compete on true economic
merit: price, quality, service and their ability to recruit washed-up
jocks to serve as their pitchmen. Yet, incredibly,
the federal government does impose just such a discriminatory tax
policy on local retailers in Colorado - and every other state that
levies sales and use taxes - by
forbidding the states from collecting such taxes from their
Internet competitors.
The Internet tax dodge
is big and getting bigger. Unless Congress lets the states plug that
loophole, the 'Net will deal a staggering blow to Main Street
America. Internet sales totaled $ 5 billion last year but are
expected to tally $ 20 billion this year. Next year they are
predicted to reach $ 50 billion and guesstimates are that
Internet sales could exceed $ 1 trillion annually within
a decade.
What's wrong with this tax dodge?
Well, let's consider a tale of two computers.
I'm very fond
of the Office Depot at East Colfax Avenue and Pearl Street and
recently bought a new Hewlett Packard system there for about $ 1,000.
In addition, of course, I paid sales taxes totaling $ 73: $
30 to the state, $ 35 to Denver, $ 6 to the Regional
Transportation District, and $ 1 each to the cultural facilities
district and the stadium district.
By ordering the same
computer system at the same price on the Internet, I could have
cheated the government out of that $ 73. But if I buy that computer
from, say, Texas, I cheat my community as well.
Office Depot
provides a lot of jobs for my friends and neighbors in Denver. Those
employees are active in my community - they go to the PTA, join the
Lions Club, help fix up my neighborhood. If we ship their jobs to
Texas by the Internet, we're also losing the contributions these good
corporate citizens make to our community.
Let me specify that I am not
against Internet sales as such - if they occur in a fair competitive
environment. If 'Net-based businesses really do a better job on the
quality-value-service standards, they deserve to thrive. But it's
insane to saddle the businesses that support our local communities
with this discriminatory tax burden.
The Internet Tax Dodge
Lobby in Washington counters the plea for a level playing field with
one outdated argument and two lies.
The outdated argument is that the
Internet is an infant enterprise that needs special tax breaks to
survive. That may have been true once but does anyone think that
Microsoft, America Online and Amazon.com can't compete today? If
these giants truly can't stand up to fair competition, let them go
the way of the dinosaurs.
On to lie No. 1: The tax dodge
granted Internet companies is offset by the fact that they have to
charge customers for shipping.
So what? Shipping charges,
unlike discriminatory taxes, are a legitimate cost of doing business.
You better believe Office Depot had to pay freight charges to get my
Hewlett Packard to its Colfax store. It simply included such charges
in the retail price of its products. Internet companies generally
choose to bill customers separately for shipping and handling, which
allows them to post an artificially low price. That's their privilege
but it's no excuse for letting the government tilt the economic
playing field against local retailers with a discriminatory
tax policy.
Lie No. 2: It's too complex for
Internet retailers to keep track of the thousands of
different sales taxes across the nation.
The fact is
that modern software makes that an easy task for these computer-savvy
businesses. Still, this lie has enough political force that the best
compromise would be for each state to set a single, uniform,
sales tax for Internet purchases.
In Colorado, I'd pick 6 percent - lower than that charged in
most municipalities but higher than most unincorporated areas.
Those taxes would be sent to the state by Internet retailers. The
state would split the take with local governments.
That
wouldn't make the playing field perfectly fair - I'd still save 1.3
percent by buying through the 'Net rather than in Denver. But 6
percent would make the playing field level enough to let government
work - and take a giant step toward shoring up the vitality of the
local businesses that contribute so much to our community.
Bob Ewegen (bewegen@denverpost.com) is deputy editorial
page editor of The Post. He has written on state and local
government since 1963.
LOAD-DATE: December
28, 1999 
