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Problems with a Tax-Free Internet
There are three very good reasons for opposing a tax-haven for internet purchases.
Discriminatory Tax Policy
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. 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. Singling out Internet sales for tax exemptions while either maintaining current tax levies or shifting greater tax burdens to in-store retailers is clearly discriminatory. The federal government should not create an elite class of merchants just because the transaction takes place on the Internet.
Eroding State and Local Revenues
Sales taxes currently make up 33% of state revenues providing critical funds for police, fire departments, education, and other essential governmental services. If sales taxes are not collected on electronic commerce, state and local governments will be forced to offset the lost revenues by either:
- (1) increasing existing property taxes, income taxes, and sales taxes on in-store retailers, or
- (2) significantly cutting back on essential public services.
Widening the Digital Divide
According to the U.S. Department of Commerce, personal computers are present in 80 percent of homes in which families make $75,000 a year or more, but in fewer than 16 percent in which families make less than $20,000. Clearly, higher-income Americans who can avoid the sales tax by shopping on-line will benefit from an Internet tax moratorium at the expense of lower-income residents who lack access to computers and the tax-free online sales. Instead of tax breaks, lower-income residents will face higher taxes or fewer services to offset the lost revenues from online sales.
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