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Opinions/Editorial Preview of Coming Attractions: Regulating & Taxing the Internet Released by Ray Haynes on 12/24/99 of California State Senate |
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| They never give
up. Advocates of big government can occasionally be slowed down, but
the moment we turn our backs, they resume their steady, plodding
march. Governments will always seek to grow in size and power; it is
their nature to do so. Both bureaucrats and politicians know that
increasing the size and scope of government is the surest means of
increasing their own power and job security. Our Founding Fathers
wisely understood the nature of government and they drafted our
state and federal constitutions to limit the ability of government
to grow. However, we should never fool ourselves into believing that
we have tamed the beast; we have only slowed the rate of government
growth. In recent times, the Internet has become the most prominent target of opportunity for fans of bigger government. The Internet has fueled more economic growth than any other sector of our economy, creating new millionaires, new jobs, and many new business opportunities. The growth of the Internet has been possible precisely because of the lack of government regulation, taxes, and control. But the success of the Internet has now attracted the attention of the bureaucrats and politicians, and they are busy devising new schemes to tax and regulate the Internet. State legislators around the nation have begun to lament the "loss" of sales tax revenue from Internet commerce. The National League of Cities and the National Governors Association have made Internet taxation a priority. Congress responded to the pressure by creating the Advisory Commission on Electronic Commerce, which will soon make recommendations on Internet tax policy. Some people believe that the federal Internet Tax Freedom Act will restrict the taxation of Internet commerce. Unfortunately, this is not the case. The version of the Internet Tax Freedom Act that Congress passed (part of the Omnibus Appropriations Act for fiscal year 1999) only prohibited states and local governments from adopting NEW taxes on Internet commerce until October 1, 2001. The law had no effect on existing taxes, such as sales taxes, use taxes, surcharges, excise taxes, etc. The states and local governments that lobbied for this huge loophole have already begun to aggressively pursue small businesses that have not been collecting these taxes for them. Such Internet taxes are a bureaucrat's dream come true. They may not raise much revenue, but they require an army of civil servants to collect and administer. Imagine the difficulty of collecting a county sales tax in a transaction where the buyer is in California using an Arizona-based Internet service provider to purchase a product to be shipped from Mexico by a Delaware-based corporation advertising with a website maintained by a New York firm. It could take an army of auditors to unravel the details of even the most routine Internet transactions. Such a complex tax system would certainly convince many small businesses to avoid Internet sales altogether. Internet commerce is certainly the wave of the future, but we should never forget that America is not pre-ordained to lead the world in "e-commerce." American ingenuity may have created the Internet, but our foreign competitors will quickly dominate this new medium if we are foolish enough to let the politicians tax and regulate it to death within our borders. The automobile provides and excellent example of the fragility of new industries. Although invented in Germany, many of the first practical automobiles were designed and built in England. England quickly became the worldwide "home of the automobile," and it began to dominate the automotive industry by the end of the 1800s. However, the English automotive industry lost its lead and nearly disappeared overnight, never again to compete with Germany and the United States. It should come as no surprise that this sudden decline was the direct result of government regulations. The British Parliament passed onerous restrictions on automobiles, ostensibly to protect carriage-drivers from having their horses frightened by the new "horseless carriages," and the result was devastating. For example, one law required a man with a flag to WALK in front of every car to warn oncoming horse-drawn vehicles. Although the law was short-lived, the damage to the English automotive industry was permanent. We can learn from the mistakes of the past. We need to work together to encourage Congress to extend and expand the Internet Tax Freedom Act. We know that "the power to tax is the power to destroy." We must not let the bureaucrats destroy the potential of the Internet to improve our quality of life. Ray Haynes is a California State Senator. He is currently running for the U.S. Senate in the race to battle Dianne Feinstein. You can learn more about Ray Haynes at www.rayhaynes.org. | |
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