Sales Taxes on Internet Purchases

The corporate representatives on the Internet Tax Commission, which met in Dallas this week, gave a classic demonstration of how self-interest trumps good policy. They gave all appearances of trading their votes (AP) to the anti-tax crowd in return for targeted exemptions that help their industries but do little else but jumble an already idiotic mess.

Oh, and they all denied any such crass motives. Uh, huh.

The no-Internet-taxes crowd has been exceptionally smart in its tactics. In a real coup, it has managed to persuade credulous reporters to call the other side “pro-tax,” as if that’s what the argument is about.

No, the issue remains as simple as ever. Should we continue to grant an exemption from sales taxes that gives a huge advantage to catalog and Internet merchants over Main Street merchants? The answer from the anti-tax crowd (a moniker that is accurate on this side of the debate) is a loud Yes.

If we do that and watch more and more sales move to the Net, how should we make up the difference in tax revenues that inevitably will sap local services, or what services should be cut when revenues dry up? The answer from the anti-tax crowd is silence — or, rather, the so-far correct but irrelevant claim that state and local sales tax revenues haven’t yet started sinking due to the Net effect. So, they ask, what’s the problem?

The answer is that we’re in an economic boom that will end someday unless the law of supply and demand has been repealed. When that happens, the Net tax drain will be blatantly obvious. The anti-tax tactics are plain enough — to wait as long as possible so that it will be politically difficult, if not impossible, to apply sales taxes.

The issue is tax fairness. We should either replace the sales tax — a measure I would support, as the sales tax is extremely regressive — or apply it evenly. It’s totally unfair to do otherwise.

By the way, please do not write me to point out that you pay shipping charges when you buy from an online merchant but not from a local one. The goods that show up on local store shelves did not just materialize there — those goods were shipped to the store, and the cost of shipping is already in the price.

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