A Blizzard of New Taxes in the Wings
May 12, 2014
For years revenue-hungry states and local municipalities have salivated over the prospect of taxing the life out of the internet. Now a move by a small but dedicated minority in Congress may result in the scraping of the Internet Tax Freedom Act and usher in a new era of exorbitant taxation, according to The Wall Street Journal.
In a few months, the newspaper reports, “customers may begin receiving notices from their Internet providers that new taxes are on the way. Even though nearly everyone in Congress opposes slapping all of America’s heavy traditional telephone taxes on Internet access, a renewal of this successful policy is being held hostage by lobbyists for giant retailers.”
So persuasive is this minority, it has managed to convince both Democrats and Republicans that an extension of the Internet Tax Freedom Act – that has forbidden bit taxes, bandwidth taxes, and email taxes since 1998 – should be loosened up to allow 9,600 governments to shape rules for ecommerce. Specifically, states want additional authority to reach beyond their respective borders to collect sales taxes on items purchased online or they will pressure Congress to punish all Americans with new prohibitive taxes on all internet communication.
The Supreme Court decided in Quill v. North Dakota back in 1992 it is too great a burden to force a mail order merchant to collect taxes in states where it has no physical presence. Retailers interested in undercutting smaller and more agile competitors and their allies in state government want to skirt the decision and write new rules for interstate commerce.
A brave new world of taxation threatened destruction of small online business when the Marketplace Fairness Act was proposed. It will force online retailers to collect taxes for state and local government across the board. Considering the huge number of state, local and tribal governments in the United States, the burden imposed for the collection of taxes would be, to say the least, significant. As of April 24, the bill was pending in the House Judiciary Committee.
It now appears the internet will ultimately be burdened with taxation, an imposition that will undoubtedly result, as does all taxation, in squelching innovation, discouraging prosperity and narrowing consumer choice. As the economy continues its slow motion collapse, federal, state and local governments will desperately seek new venues for taxation and wealth confiscation. The internet, so far unmolested, and thus allowed the freedom to innovate and grow, appears to be the next juicy target for the statists.