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No to Internet taxes
by Editorial writer on 11/12/99
of Washington Times
Topic: Taxation, Press Coverage
I

The Internet is a symbol and vehicle of the rapidly changing new economy. That's why Republican Reps. John Kasich and John Boehner are sponsoring a bill to place a permanent moratorium on Internet taxes.

Those interested in liberty and economic prosperity should support this bill. As Messrs. Kasich and Boehner and multiple conservative groups recently made clear at an e-freedom press conference, if local, state and federal governments are not blocked from taxing the Internet, the medium of the future could also become a new web of government intrusion on personal liberty. That means this is a fight these lawmakers and other Americans need to win.

A coalition of liberal governors and mayors, Republican and Democrat, kicked off the fight by pushing a plan to tax transactions over the Internet. The plan would essentially levy a series of local sales taxes on nearly all Internet transactions. To avoid a constitutional thicket leading to confusion over which government jurisdiction will play tax collector, the plan calls for recruiting "trusted third parties" to collect the tax.

The plan is hopelessly complex for two reasons: Internet sales rarely stay within one jurisdiction and governments have little trust in anyone but themselves when it comes to collecting taxes. Local governments are therefore going to have to look over the cyber shoulder of whoever collects the tax, to ensure they get their cut. Like it or not, that means creating a mammoth database that all local governments can access. This database will contain personal information about minute purchases of all online shoppers. It could also lead to a bureaucrat's weighing in on many transactions, discouraging sales of tobacco, for example.

It is perhaps inevitable that whenever money changes hands, politicians will want a share of it, which is why they are now at the cyber gates demanding to be let in. But it isn't often the horde is actually brazen enough to make pro tax-hike statements in public, let alone put out in plain view a comprehensive plan to effect the increases. The big spenders clearly recognize how eager Americans are to avoid paying what they consider excess taxes, and they fear a tax-free Internet will shut off a large section of their revenue purse -- some estimates say current revenue lost is about $170 million or 1 percent of sales-tax revenue nationwide.

Indeed, the fight has already placed many Americans in line with supply-side economics. For example, Virginia Gov. James Gilmore has easily refuted the pro-tax claim of lost revenue. And he has done it with a very simple argument: A tax-free Internet will help businesses everywhere expand, and even a smaller tax slice of a larger prospering economic pie means more money for the government.

Another defense against taxing the Internet is equally as simple: that the medium is still an infant and taxing it now will kill it. Reps. Kasich and Boehner and like-minded Americans are acknowledging, in effect, that the power to tax is the power to destroy and that e government shouldn't have the right to destroy an emerging economic sector.

The most compelling argument pro-taxers have is that by allowing the Internet to be a tax-free zone, only goods sold online can be competitive. This argument comes clothed in concern for neighborhood stores, which are forced to sell at a higher price because of taxes. "It's unfair" to make one group of store owners pay and not another, the reasoning goes.

When confronted with this, Mr. Kasich explained he believes in lowering the tax burden, not increasing it. His point is that the government should not use one book of tax code to justify writing a second. Although the metaphor is not his, the pro-tax argument is akin to saying that someone should break his left arm because the right one is already in a sling.

This fight will determine if big government will obtain the power to follow new technologies into the lives of all Americans. It's also a fight that clearly identifies tax hikers. Conservatives therefore should welcome this fight and win it.

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