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

From: Declan McCullagh (declanat_private)
Date: Tue Nov 13 2001 - 08:03:15 PST

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    From: "Dave McClure" <dmcclureat_private>
    To: <declanat_private>
    Subject: RE: More on Senate voting soon on Sen. Mike Enzi's Net-tax bill
    Date: Mon, 12 Nov 2001 11:19:02 -0500
    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.
    Dave McClure
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