Should we tax purchases made over the Internet?
Of all the issues we will face in the upcoming elections, few will have the long-range importance of the Internet sales tax. The battle lines are drawn and they make for some interesting bedfellows.
Some are fairly predictable.
If you feel that taxes are already too high and that not all government services are necessary, then you probably oppose taxing purchases on the Web. If, on the other hand, you feel that the government needs more revenue to continue its good works, then you probably favor taxing purchases made on the Internet.
Some are opportunistic.
Folks who make their living selling things over the Net are likely to oppose taxing those sales. The people they compete against -- those who own and operate traditional brick-and-mortar stores -- are more likely to favor the tax.
Then there are the politicians, who often seem to view strategic issues in terms of two-year increments. Everyone is looking for the short-term advantage, being able to go “one-up” on the other guy, whether that “other guy” is a political opponent or a business competitor.
Some miss the point entirely.
Rather than pitting “us against them,” trying to extract short-term tactical cost advantage, shouldn’t we be looking at the broader picture and the ultimate impact this taxation decision will have on our communities.
Let me say up front that I believe that taxes are too high and that government wastes a lot of money in areas in which it has no business.
That said, I also believe that purchases made over the Internet should be taxed the same as purchases made from a traditional brick-and-mortar store. To me the issue is not over the wisdom of the tax, but rather over the rate.
If you’re willing to accept the concept of taxing the sales generated by the local mom-and-pop store (or the local Wal-Mart), what’s so special about the sales generated over the Internet? Why should those purchases be exempt from the government’s reach? Why should Internet-vendors be given a cost advantage over their competitors?
Or, more precisely, why should government place store-front vendors at a disadvantage by taxing their sales when they don’t tax the sales of their web-based competitors?
It doesn’t take a rocket scientist to figure out where that policy is going. With typical sales taxes running in the 5-to-8 percent range, companies operating on tight margins just won’t make it. That means empty storefronts. More than that, it probably means that most sales will shift to the Internet in order to avoid the taxes.
For communities that rely heavily on sales taxes to fund local schools and infrastructure, that’s not really good news. And when the local tax base begins seriously eroding, what next? Raise sales taxes even higher on the businesses that are still in existence?
And remember, competition won’t have been the cause of this situation -- selective taxation will be.
If you believe taxes are already too high, why not lower the rates for all sales taxes, not just those generated over one particular venue (the web)? If you don’t believe in sales taxes, they why not eliminate all sales taxes? Why just pick one medium, unless your goal is to eliminate traditional face-to-face sales. I just don’t get it.
There’s no question that commerce over the Internet is the wave of the future. No, it’s the wave of the present. Sales over the Web are increasing exponentially, and show no signs of abating. It would not be a stretch to say that, within the next five years, a significant percentage of all purchases made in the United States will be made over the Internet.
As Justice John Marshall once said, “The power to tax involves the power to destroy.” Politicians would be wise to think about the implications for local businesses and communities before they fall in love with the idea of no Internet taxes.
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