tax till it hurts

[Dave Farber <farber () central cis upenn edu>]

SHOULD GOVERNMENTS PUT A TAX ON INFORMATION?
> Walter Truett Anderson
>
>        A Canadian economist, Dr. Arthur Cordell, has come up with an
> intriguing idea about how governments may be able to survive the Information
> Age, and perhaps deal with some of the massive problems -- such as mounting
> deficits and huge numbers of people thrown out of work by automation -- that
> seem to come with the territory of this brave new high-tech world.
>
>        Cordell calls it a bit tax.  He proposes that every digital bit of
> information flowing along the electronic highways be taxed at an amount of,
> say, .000001 cents per bit -- that's five zeros, meaning one-millionth of a
> cent.  Since all information is rapidly becoming digitalized, the tax would
> take a miniscule chunk of revenue out of every piece of data, every voice
> message, every visual image that passes through the system.  The tax would
> be automatically calculated by the trunk carriers and remitted to the
> appropriate national tax-collecting agency.
>
>        Cordell is a well-known expert on information-communications
> technology (commonly known these days as ICT or IT).  He edits a newsletter
> on information society trends, and describes himself as an "unabashed
> technophile."  So his proposal isn't a Luddite effort to slow or reverse
> technological change.  On the contrary, he declares that ICT is "wonderful,
> liberating and amazingly productive," but that we can't manage it with the
> ideas and theories of the Industrial Age -- definitely not with the standard
> ideas about how to raise public funds and finance social services.
>
>        He says:  "We have to think about a world where, as a vice-president
> of Microsoft put it, ICT has made routine tasks automatic and complex tasks
> routine.  The quality and quantity of work has changed, and the new wealth
> of nations is to be found in the digital information pulsing through the
> global information networks, where fewer and fewer people are needed to
> create more and more wealth.  Only by getting at the productivity that is
> now in the networks -- all those displaced bank clerks, gas attendants and
> store clerks -- can we maintain the social and physical infrastructure and
> develop new ways of gaining revenues to pay for all the new jobs that will
> be needed in teaching and caring areas."
>
>        Cordell says the idea originated out of a number of conversations
> with T. Ran Ide, a communications specialist, in which the two wrestled with
> the question of what is going wrong, economically, in the Information Age.
> They were particularly puzzled by the twin problems of chronic unemployment
> and high deficits that bedevil so many advanced industrial countries.
> "Information technology was supposed to make us all wealthier, and we seem
> to be be getting poorer.  We kept asking ourselves, what happened to all the
> wealth?  We began batting that around, and we realized that a lot of the
> productivity of information technology is kind of evaporating, or going into
> networks."
>
>        Using the popular "information highway" metaphor, Cordell compares
> the bit tax to "a gasoline tax or a toll on a bridge or toll road or licence
> plates on a car.  These payments, which are really taxes, apply by the
> weight of the truck or the amount of gas used."  And although a millionth of
> a cent per bit may not sound like much, economists who have taken a
> preliminary look at the bit tax idea agree on one thing:  It would generate
> a huge amount of money.
>
>        Cordell admits to feeling "a certain missionary zeal" about his
> idea, but at this point the zeal is aimed at getting it discussed and
> evaluated rather than getting it passed into law.  He floated it at a recent
> economic conference in Belgium, and is currently shopping it around in
> on-line computer conferences -- giving it a test drive, so to speak, on the
> information highway.
>
>        The first responses to the idea have been guardedly favorable from
> various economists and tekkies who have had a look at the idea, but at this
> point there has been nothing like the huge public debate that generally
> accompanies new tax proposals.  Cordell plans to convene a roundtable of
> fiscal types to go into the proposal in greater depth, think about how it
> might work in practice, and begin to "tease out the salient issues" that
> need to be explored.
>
>        One of those salient issues is likely to the question of whether the
> tax will simply get "passed along" to end users -- people paying for cable
> TV services, for example -- and thus be vulnerable to the charge that it is
> really a "user pay" tax.  Cordell thinks it won't, or that the amount that
> does get passed along will be so diffused as to prove more or less painless.
> But he acknowledges the possibility that certain affected interest groups
> -- such as telephone and cable companies -- may take a strong dislike to the
> proposal.
>
>        Another question is what would be done with the revenues.  Since the
> bit tax idea grew out of a concern about the employment impacts of ICT,
> Cordell hopes that any revenues it generates will be used in that area --
> not just for the conventional public-works and job-training programs that
> are routinely proposed, but for a radically new exploration of how to "plan
> for a new world of work and working," moving from "an educational system
> where people are trained to make a living to one where people are trained to
> cope with living."
> ---################