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July 29, 2002
Interstate Internet taxes a bad idea
An older piece but worthwhile by Tom W. Bell, a visiting professor at the University of San Diego School of Law and an associate professor at Chapman University School of Law and an adjunct scholar of the Cato Institute, on how the attempt at creating Internet taxes out of "fairness" is really unfair and opportunism. An important distinction is made here between equality of results vs. equality under the law. Excerpt:
Now compare Alan and Beth. Alan drives on police-patrolled streets to a mall protected by the local fire department, buys a shirt and drives back home. Beth stays in the comfort and safety of her den and purchases a book online. Should Alan and Beth pay the same sales and use taxes? No. Alan places far greater demands on state and local government operations than Beth does.True, Beth enjoys some police and fire protection even as she sits at her computer. But Alan consumes those same services once he brings his shirt home, in addition to the extra services he consumes during his real-space shopping trip. Fairness here calls not for equal taxation, therefore, but for equal treatment. No one should be forced to pay for services that go unwanted and unused.
Politicians who propose new interstate taxes on Internet retail sales thus seek the wrong sort of equality, the sort that would level not the playing field but the players. Internet consumers deserve better treatment. Because they use retail channels that impose fewer burdens on state and local government services than traditional retailers do, Internet consumers benefit their communities and our environment even as they benefit their own pocketbooks. Politicians should encourage that sort of shopping, not target it for special taxes. Neither should they try to implement such taxes by putting Internet retailers to work for states' revenue collection departments.Principles of equality and fairness hardly explain the call to impose new interstate taxes on Internet retail sales. Fear and opportunism do, though. State politicians openly worry that the increasing popularity of Internet retailing will cut into the revenues generated by their sales and use taxes. It may turn out that online commerce generates enough overall economic growth and government cost savings to compensate for any lost tax revenues. Politicians who suspect as much probably worry, however, that this latest and greatest cash cow may escape them if they do not start taxing it soon. Some, sadly, seem just as willing to butcher Internet commerce as to milk it.
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