In spring, a young crypto-libertarian's thoughts turn to government
oppression in the form of taxation. So is it any surprise that online
media is filled with dire warnings about the idea that government could
tax the Internet?
"If
tax-hungry politicians get their way, the days of ordering items over
the Internet and not paying sales tax may become just a fond memory," declares C-Net with its usual breathlessness. On C-Net,
politicians are always "tax-hungry." Never mind that the Internet,
which has its roots in a government initiative, is yet another example
of your tax dollars at work. If Ron Paul's supporters knew this, his
campaign would spontaneously combust.
Two bills in Congress
would tax out-of-state online retailers, which C-Net says "amounts to a
declaration of war against Amazon." Of course, there's another way to
say this: It would simply remove an unfair advantage that Amazon now
enjoys over traditional stores, which create more jobs.
In the
early days of the Internet, it was exempted from various forms of tax
so that it could grow and help expand the economy. It did, and it did.
At this point, however, Amazon's effective exemption from sales tax
amounts to permission for it to sell goods cheaper than any physical
retailer is allowed to. For its first products – books and CDs – this
doesn't provide much disincentive for consumers to shop elsewhere. But
that's not true of all the goods it sells now, including computers and
televisions. Tax on a thousand dollar television could come to $80.
Traditional retailers can't offer a further $80 off to compete. The
Internet economy no longer needs this advantage. And it's ridiculous
that the high-and-middle-income consumers who tend to shop on the
Internet should be the ones who get out of paying their fair share of
taxes.
Politicians are also considering ways to tax digital downloads.
And why not? Depending on what source of data you use, iTunes is the
biggest or second-biggest music retailer in the U.S. It obviously
doesn't need any help from the government to grow. In fact, if anyone
needs help from the government, it's traditional record stores, which
have been devastated by the government's reluctance and inability to
enforce the intellectual property rules that are supposed to protect
them from piracy.
Of course, this argument doesn't fly on the
reality-distortion zone that is the Internet, and comment threads are
filled with Paulist tropes about how the government should get its hand
out of peoples' pockets. This is the height of silliness. As long as
Internet users partake in government services – and I presume they'll
still drive to work on state roads until their Segways get back from the shop – they should pay the taxes that support them.
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