Internet Tax Is Still A Bad Idea

As with many things, Ronald Reagan said it best when he observed that many liberals’ actions could be succinctly stated with these three sentences: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”  For the purposes of this blog, the first sentence will do.  In fact in the case of what seems to be a perpetual debate over taxing the internet, the sentence could be modified slightly with the addition of: “The faster it moves, the greater the tax.”  Though not quite as elegant as the Gipper said it, you get the idea.

Fortunately, a few Members of Congress recognize the detrimental, wide-reaching effects that an internet tax would have on our economy.  In an attempt to end a debate over implementing an internet tax before the debate gets fully underway, two Senators, Kelly Ayotte (R-NH) and Dean Heller (R-Nev.) introduced new legislation that “would extend a law banning federal, state and local governments from taxing Internet access.”  Congress should act quickly to pass this important piece of legislation.  As The Hill reported, the “Internet Tax Freedom Act, originally enacted in 1998, is set to expire in November 2014. The bill from Ayotte and Heller would extend the ban indefinitely.”

The Ayotte/Heller legislation is a great place to start, but the issue and threat of internet-related taxes don’t end once this bill is made law.  Members of Congress must also enact legislation to prohibit implementing a sales tax on online purchases. The Hill offered insight into just exactly who free-market groups are up against in this fight.  The Hill article explained “Sen. Dick Durbin (D-Ill.) and others are pushing legislation that would allow states to tax online purchases from other states.”

This is a very bad idea; one Taxpayers Protection Alliance (TPA) has written about extensively. It’s not “fair” to ask a business operating outside of a state to pay a sales tax, in part because the company will receive no benefits from the services the state will supposedly provide from a new stream of revenue.  Unlike the hometown brick-and-mortar stores, the online companies do not benefit in any way from state services.  Such remote businesses have nothing to gain from services of the police, maintenance of roads, sanitation services, things right down to street lamps.  So why would Congress insist that online retailers pay taxes to a state government that not only does not have (and should not have) jurisdiction over them. TPA has and will continue to be a strong voice in leading the effort to stop Congress from taxing online shopping purchases.

It’s of vital importance that Congress does not wait until 2014 when the Internet Tax Freedom Act is set to expire to begin addressing this problem.  It’s a lot easier to prevent things from being enacted than trying to eliminate the flawed policies once they’re in place.  (Obamacare, anyone?)  For this reason and others, TPA will keep up the pressure on Congress and state legislatures across the country to squash any type of internet-related tax before it gets enacted.

As TPA has explained before, taxes like these internet-related ones not only harm consumers, and in this case internet users, they also harm small businesses that will be forced to pay additional taxes as a result of these online-purchase tax schemes.  The harm and financial hardships imposed do not stop with consumers and small business.  Like all taxes they also negatively affect the economy as a whole.