The Greedy Capitalist

Opposing Online Sales Taxes is futile and counter-productive

Mike has published an editorial in the Batt deriding the proposed tax on Internet sales. His argument is that “if the government break[s] the barrier of taxation into the realm of the Internet, there is no reason for them to stop… Rather than seek new areas to tax or increase old ones, the government needs to cut back its current spending and programs.”

Mike fails to point out that consumers already pay taxes on the Internet whenever purchasing from online vendors based in state. (Or at least they are legally required to.) However, the bigger hole in his argument is that there is no essential difference between online and traditional sales. Any argument for or against sales taxes applies equally to both traditional and online sales. Given this fact, any attempt to carve out an exception for online taxes is bound to fail in the long run, just as any attempt to defend hunting on the grounds that they animals don’t suffer when they die is bound to fall apart.
The fatal flaw in both cases is that in arguing that the Internet should be *excluded* from sales taxes one implicitly acknowledges that there is nothing wrong with sales taxes per se. This turns the question of taxation into merely a question whether online commerce deserves any special treatment over traditional commerce. It does not.

Excluding online sales from taxation in effect amounts to giving special favors to a particular industry, and as such, is unjustified. Its exactly equivalent to giving tax breaks to politically nimble industries. In fact, that is exactly what is happening. Online-based companies are lining politician’s pockets and lobbying Washington in a hopeless attempt to carve out an exception for their industry. Because there is no rational reason why the tax law should apply to one group and not another, their effort is bound to fail. Besides, income taxes collected by the IRS, not sales taxes or the state tax agencies actually represent the most heinous and destructive form of taxation.

I say this as a partner of a web hosting service that has a lot to lose by the imposition of e-taxes – the service has a very low margin, and I’d rather close our doors than pay the accounting costs of charging taxes for the tiny transactions we deal with, since our current business is entirely under the table. There are thousands if not hundreds of thousands of similar micro - e-tailers who exist only because running a small business on the internet carries little or no bureaucratic overhead. Even a 1% tax would carry enough regulatory baggage to either shut them down, or discourage new ventures from ever starting up.

In short, if any protest against taxation is going to succeed, it will not be by carving out exclusions to popular or powerful industries. One must attack the root of the disease – the collectivist premise that theft is justified for the “common good.” If you wish to keep more of what you make, I suggest that you start by questioning the moral premise of taxation, not by jumping on the libertarian “less” or republican “more efficient” government bandwagons.