Hidden almost entirely from the public, another tax debate is taking shape in the nation's capital. This is the latest power grab by state and local tax-and-spenders in their continuous efforts to tax. This time it's the Internet. Consumers and taxpayers, watch your wallet, as new on-line shopping taxes may be headed in your direction.

In an effort to avert new Internet taxes, the Texas Public Policy Foundation has joined the E-Freedom Tax Coalition www.e-freedom.org) to propose a permanent moratorium on sales and use taxes for e-commerce. Last year, Congress enacted the Internet Tax Freedom Act (ITFA) which placed a three-year moratorium on Internet taxes. The legislation also created the Advisory Commission on Electronic Commerce to decide whether or not to tax Internet use, as well as other forms of remote commerce such as mail and/or phone orders. The 19-member Commission will make its recommendations next spring. Dallas Mayor Ron Kirk is the only member from Texas.

Americans are paying more in taxes now than at any other time since World War II. The economy is good, we are not at war. Now is the time to give citizens tax relief, not burden them with more taxes. According to a 1999 Ernst & Young study, if Internet sales and use taxes are imposed, the already outrageous and complex state and local sales and use taxes borne primarily by retailers will increase. In addition, compliance costs for multi-state retailers produce significantly higher burdens than single-state sellers. This report sums up the goal we need: "fundamental changes in the sales and use tax system to simplify the tax system and reduce the unacceptably high costs of collecting state and local sales taxes in the more competitive, integrated national economy of the 21st Century."

Internet tax proponents explain in a 1999 Policy Briefing that "state and local officials...view the Internet as a tide that will erode local and regional tax bases with devastating consequences as more and more sales move from the brick-and-mortar retailers on "Main Street" to the ether of cyberspace." In fact, if state and local officials were really concerned about the corner hardware store, then they would be reducing tax rates. Another Ernst & Young study concluded that state sales tax revenues grew by 5.6%, three times the rate of inflation, from 1997 to 1998. Another 1999 study by Ernst & Young concluded that "although e-commerce retail sales have grown rapidly and are receiving wide-spread attention, the approximately $20 billion of business-to-consumer ("retail") sales over the Internet in 1998 represent less than three-tenths of one percent (0.3%) of total consumer spending."

The impacts of proposed Internet taxes on the Texas economy are particularly frightful. As of October 1999, the first $25 of a monthly charge for Internet Access Services is exempt – after $25, access service is taxed. Texas had the largest number of taxing jurisdictions in the country for sales and use tax in 1999 – 1,357 out of 7,458 nationally. Overlapping jurisdictions as seen in Texas will be burdensome if Internet taxes are levied. Unfortunately, Mayor Kirk believes that failing to collect taxes on Internet commerce is short-changing the nation's public education system and jeopardizing the quality of future generations of workers. We must not give the commission the impression that Mayor Kirk represents Texas thinking on this issue.

According to The Washington Times, high-tech businesses employed 781,000 Texans in 1998, about 10 percent of the state's work force, with a big chunk of the growth in the industry coming from Internet-related businesses. Despite rapid growth, tax revenues are still given to state and school needs. Crude oil, cotton and cattle are not the tax revenue generators they used to be, but Texas is seeing a boom in computers and related high-tech jobs. We need the high tech industry presence in Texas. If we don't find a fair way to reduce and simplify the tax system, those high-tech companies may just unplug their computers and go elsewhere.

As Ronald Reagan pointed out, "Government's view of an economy could be summed up in a few, short phrases: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it." Now is the time to take a long look at our tax system, specifically local and state taxes which are already so cumbersome, and simplify the system while relieving the burden on taxpayers. As technology progresses and the Internet adds productivity to our economy, we should reap the benefits -- not cripple it with taxes and stifle its growth.