The key reason why its supporters are agitating for Internet taxes is a red herring, says a conservative think tank's analysis. The Heritage Foundation's Adam D. Thierer says, essentially, don't believe state and local officials who say e-commerce is depriving them of badly needed revenues.
"While most Americans view the Internet as a technological passport offering countless ways to get information and exchange products and services, state and local officials (including some who sit on the commission) consider it a threat to their traditional tax base, which they say will erode if "e-commerce" isn't taxed," observes Thierer. "This is ironic, since the explosive growth of electronic commerce has been accompanied by a dramatic increase in state and local tax revenues."
Thierer cites an analysis by the libertarian Cato Institute which says state tax collections grew at twice the rate of inflation between 1992 and 1998.
And he tweaks the 19-member federal Advisory Commission on Electronic Commerce for pushing Internet taxes. "Commission members are so concerned with figuring out how to tax the Internet, rather than whether it should be taxed, that they are ignoring the wide gulf separating their views from those held by the lawmakers who appointed them," Thierer says.
Republican Senator John McCain of Arizona and Bob Smith - the New Hampshire Republican who bolted the party for an independent Presidential bid but recently gave up that bid and said he'd return to the party - have proposed legislation making the Internet tax moratorium permanent. And Thierer also points out that supporters of Internet taxes must reconcile them with the Constitution's ban on interstate taxation.
