Americans for No Taxes, Period

Wednesday, Nov. 17 —

A group calling itself Americans for Tax Reform is one of many parties sending out scare-story press releases about how the nation’s governors want to tax us all to death. The governors at issue are the ones who see the threat of an eroding tax base as more and more commerce goes online.

The anti-tax organization is welcome to its view, but it’s grossly misrepresenting the facts, which comes as no surprise. Here’s a little context.

Let’s at least agree on this: Nobody likes to pay taxes. Everybody wants government services.

The Internet industry is the beneficiary of what can only be called a national industrial policy. The policy takes many forms, but best-known is the one that allows Internet businesses to give customers a better deal by not charging sales taxes on out-of-state orders – a massive expansion of a loophole that catalog shoppers and businesses have enjoyed for years. It’s an unfair advantage that ultimately will cause big trouble.

The sales-tax break attacks businesses on Main Streets and in malls — in communities everywhere. Is that really what we want to do as a national policy? Why isn’t anyone talking about this?

The tilted playing field also will erode state and local tax bases. You don’t have to like sales taxes — I’d like to see them replaced, because they’re so regressive — but the anti-tax crowd refuses to say what should replace the lost government revenues or what government services should be cut if this favoritism continues, never mind the impact on Main Street.

In its press release, Americans for Tax Reform twists the truth past recognition. It complains, for example, that a $750 TV set bought online would cost $812 if customers had to pay sales taxes. “That’s definitely not a good deal for consumers,” it says. This warning takes the prize for dishonesty, as it implies that sales taxes are nonexistent in every venue.

Some anti-tax people are raising legitimate questions about a tax plan offered by the chairman of the National Governors Association. This proposal is rife with problems, including its potential to grossly abuse consumers’ privacy.

But let’s at least focus on the central issue. This is about whether we keep giving an unjustified, unfair break to one kind of merchant or whether we move to a rational, fair tax system. Based on its record so far in this debate, don’t look for candor from the anti-tax militia.

Buyer Beware

Wednesday, Nov. 17 —

The people who populate the executive suites in Silicon Valley are not, by and large, dishonest. But sometimes you have to wonder.

The San Francisco Chronicle, in a series of articles this week, is taking the covers off some egregious business conduct. Your blood should boil when you read these stories.

A certain amount of corporate misbehavior should come as no surprise. Human nature is human nature. But as the second article in the series shows, regulators and prosecutors have almost completely abandoned tech investors to the wolves.

I wish the articles hadn’t made such heroes of lawyers who file civil fraud cases against companies. Plaintiffs’ lawyers do necessary work, given the failure of law enforcement to do its duty, but they’re also prone to excess. Critics say, with some justification, that at least some tech-related lawsuits have resembled legal extortion — designed to coerce a settlement that’s cheaper for the company than defending itself, even when no provable wrongdoing has occurred.

Those excesses have given the tech industry a handy weapon to persuade lawmakers, in Congress and state governments, to make it more difficult for investors to sue. But when regulators and prosecutors don’t do their jobs, curbing civil lawsuits has a predictable effect: It makes fraud even more likely.

Federal law enforcement is so preoccupied with other matters — such as the idiotic, debilitating War Against Some Drugs — that corporate sleaze gets insufficient attention. Until the Securities and Exchange Commission, U.S. Attorneys and other responsible officials enforce the law against securities fraud, there will be many more ugly tales to tell. A bull market has been shielding some of the worst outlaws, no doubt — but when the next bear market arrives there will be hell to pay.

Eventually, when enough investors have been cheated, the markets themselves will suffer. Rational investors will conclude that the game is rigged against them. Scaring buyers out of the market is a sure way to kill the golden goose, but it looks like the people who’ll be responsible won’t be the ones who suffer.

There’s more to come in this series. I’ll keep reading with interest.

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