Treasury Secretary Lawrence Summers \nWASHINGTON - Treasury Secretary Lawrence Summers says the Internet should not be allowed to become just another tax haven, and is pushing for Internet sales taxes to thwart "entrepreneurs who do not charge sales taxes as required by brick-and-mortar merchants," WorldNetDaily.com says.
Commenting Feb. 23, Summers is trying to reflect a bid by the Clinton Administration to split the difference between those who want the Net to stay tax-free - including Republican presidential hopeful Sen. John McCain and Virginia Republican governor Jim Gilmore - and those who want to tap into revenues generated by the go-go-growing Internet, WND says.
"There should not be any penalty taxes on the Internet," Summers says, "but at the same time cyberspace should not become a tax haven that promotes evasion or avoidance of the basic taxes in our system."
For now, there's a federal moratorium on e-taxes, with the Congressional Advisory Commission on Electronic Commerce that Gilmore heads studying the issue and due to present recommendations in April. They meet again March 20-21 in Dallas, WND says. The current moratorium expires in October 2001, though legislation to extend it temporarily and permanently is now under consideration.
Summers says plans should be studied "to harmonize and simplify sales taxes among states whose sales tax schemes can vary drastically with a long-term goal of imposing sales taxes on consumers nationwide.
But WND says Summers is echoing a "mantra" of Net tax supporters: fairness. "It is unfair to require brick-and-mortar stores to collect and remit taxes to state and local governments for the exact same goods that are being sold tax-free over the Internet," says the E-Fairness Coalition of businesses and associations like Wal-Mart and the National Association of Retailers.
"Our nation's tax policies should promote equal treatment for all commercial transactions regardless of whether the sales are made in a store, from a catalog, or via the Internet," the coalition tells WND.
Net tax opponents, however, look to a Supreme Court ruling saying state and local taxes on Net or catalog sales are unconstitutional if the sellers have no physical presence in a consumer's state, thus violating the Constitution's interstate commerce clause. Opponents also say taxes are politically much more difficult to scale back than they are to create, and that with local governments "overflowing" with tax dollars, claiming e-commerce erodes tax bases falls flat, WND says
An example Net tax opponents cite is California - the home of Silicon Valley, where the Internet was all but born, California, Net tax opponents say, has run a budget surplus of $4 billion or better for five years including fiscal 2000-2001, WND says, while California has also boosted state spending every year during that windfall.
Americans for Tax Reform, a conservative public interest group out of Washington, says Net tax supporters are in effect sanctioning extortion. "It's evidence of the insatiable appetite of government to tax everything that moves," ATR's Ron Nehring tells WND.
And economist Llewelyn Rockwell of the free-market Ludwig von Mises Institute tells WND Net taxes could be just the tip of the iceberg. He compares it to the federal income tax, which began at a fraction of a percent and now can top 50 percent or more, WND says. "It's like giving the burglar one piece of your silverware," Rockwell tells WND. "They'll never be satisfied."
But Summers has indicated President Clinton is getting ready for a veto fight over various tax cut proposals, which WND says suggests a trend supporting Rockwell's position on Net taxes. "Excessive tax cuts outside of an overall fiscal framework that assures we are paying down debt and able to meet future obligations would be economically imprudent and could possibly put the economic expansion at risk," Summers says. "This is not time when it is appropriate to stimulate consumption on a substantial scale."
What about cybershopping himself? Summers admits he has tried it but is "not terribly competent on the Internet."
