FC: Dave McClure on why Net-taxes aren't exactly a fabulous idea

[Declan McCullagh <declan () well com>]

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From: "Dave McClure" <dmcclure () usiia org>
To: <declan () well com>
Subject: RE: More on Senate voting soon on Sen. Mike Enzi's Net-tax bill
Date: Mon, 12 Nov 2001 11:19:02 -0500

Declan:

A few points to make in the discussion of Internet taxation:

1)  One of the key points of the Quill decision was the assertion by
North Dakota that sales taxes were the primary funding mechanism for
essential government services that include fire and police as well as
upkeep to the highways and streets.  It was essentially the old
"Football" dodge (wherein the school district claims that without an
increase in property taxes they will have to eliminate the very popular
school football team) -- inferring that without the ability to tax
anyone they wished people would die, crime would run rampant and the
roads would go to hell.

The ploy backfired when the Court then asked why out of state vendors
should be forced to pay for services they could and would never use.  If
the tax was the mechanism with which to fund government services, the
Court reasoned, it should be paid for by the people who use and benefit
from those services.

No service = No tax

Hence, nexus.  Businesses should be required to pay taxes in any
location in which they are provided government services.  That is what
the law provides for today, and the way it should remain.

2)  People and businesses that choose not to pay taxes they are not
required to pay are not tax cheats.  They are exercising their perfectly
legitimate right under US law.  The rather bizarre concept that we "owe"
an ever-increasing share of our hard-earned revenue to the government
simply because that government wants more to spend is nonsense.
Companies (and individuals) can and should as a responsible management
policy seek to reduce their tax burden by any legal means possible.

3)  When governments are forced to levy taxes on the people who vote
them in and out of office, a balance is achieved.  If government becomes
excessive in it spending, the people vote in new representatives to curb
spending.  Increasingly, governments in this country are seeking ways to
increase tax revenues without facing that balance -- through "hidden"
taxes and by taxing people who cannot vote them out of office.  Lost in
the discussion of taxation of remote sales is the fact that it is a de
facto case of taxation without representation.

4)  The idea that taxing online commerce is "fair" is patently absurd.
It could only be fair if every brick and mortar business were required
to query every customer who buys from them, then collect and remit local
sales taxes for that customer.  (John claims he would be happy to do
that, but in reality I doubt he would really be able to file tax forms
with even the 1,700 primary taxing authorities in the US each month and
remain in business.)  It is all well and good to claim that some
technology or piece of software will quickly and easily collect and
remit these taxes, but that software doesn't exist today.  So even under
the rosiest of scenarios put forth by the states, online businesses will
have to collect for and remit nearly 600 tax filings per year.

5)  Finally, this is not "lost" tax revenue.  The states can't lose what
they don't have.  Education will not be lost, widows and orphans will
not starve, the sky will not fall and the world will not end.
Governments may be required to re-assess their priorities, or to raise
taxes among the people who receive government services.  This may not be
popular, but Americans have generally been willing to pay taxes for the
services they want and need.

Regards,
Dave McClure

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