TAX FREEDOM ON THE WEB ENSNARES THE WEB-LESS
BY JULIANNE MALVEAUX
While the Dow dithers about Internet stock, recent Congressional
action
suggests that many of our legislators still see the ‘net as one of economy’s
primary engines. While states depend on consumer taxes to pay their bills,
Internet sales have been exempt from taxation for the past three years. AS
the tax moratorium on Internet sales winds down, there has been a “bipartisan
agreement” to extend the moratorium for five more years. That means that
states will continue to see their revenue stream diminished by the almighty
Internet, and bricks-and-mortar retailers who invest in structures and
provide jobs in states will operate at a disadvantage from their competitors
who exist solely on the web.
Did you ever wonder why Amazon’s prices are so much more attractive than
those of your local bookstore? They have less overhead, but the same volume
discount, as some of the chains. No wonder independent bookstores are
closing almost as rapidly as the NASDAQ is dropping. If you buy books by the
numbers, these folks just can’t compete. Here’s another cost net merchants
don’t have to shoulder – they don’t have to deal with the red tape associated
with paying state taxes. Thanks to the moratorium, they can keep skirting
taxes, and keep offering better prices than others, both because they can
afford to discount deeply, and because their buyers have the implicit
discount that comes when they don’t have to pay taxes that would range
between 4 and 9 percent were they to pay them in a store.
The Senate, now led by Democrats, is unlikely to take a position
different from the one that Republicans take. President Bush has said he
supports a five-year freeze on new Internet taxes. Vice-President Cheney
would go further, supporting a permanent ban on such taxes. But just like
all people are (theoretically) created equally, shouldn’t all purchases be
taxed equally? Should net shopping have an advantage over other shopping?
Why?
From a personal perspective, let me confess my own weakness for net
shopping. While I cleave to a local bookstore, SisterSpace and Books, which
specializes in books by and about black women, I buy at least half of my
books on the Internet. I’ve managed to snag some great black history classic
volumes on e-bay, and have done some bulk vitamin purchasing on the net,
saving that guilt-inducing trek to the health food store. The last three
wedding gifts I bought took no more than a point and a click. My aversion to
baby stores barely bubbled to the surface when I purchased a shower gift on
BabysRUs. Not a tax dollar was put onto my credit card, and though delivery
charges were hefty they were diminished by the convenience of the sale. If
you took my eshopping tools away, at this point, it would make me want to
holler.
But even as I take advantage of the net, I’m mindful that many don’t.
The digital divide is alive and well here, with white households nearly twice
as likely to have home computers and Internet access as households of color.
If we don’t pay taxes on our Internet purchases, these folks will end up
shouldering our burden. Poor households, already overly taxed in terms of
time and inconvenience, are taxed even more when they can’t take advantage of
the same deals that others have access too.
These poor households are invisible participants in Senate deliberations
about e-taxes. The discussion has centered on whether or not states should
simply their tax collection processes to make it easier for Internet
retailers to pay. Instead, it ought to center on the consequences of their
nonpayment. While many favor the continuing Internet tax moratorium, others,
in the name of fairness, say that online and on street purchases ought to be
taxed the same way.
Analysis by the Center on Budget and Policy Priorities makes the case for
equal taxation strongly. They note that sales taxes supply nearly a quarter
of all the taxes that states, cities, counties and school districts use to
support the programs and services they provide. Eleven states -- Tennessee,
New Mexico, Louisiana, Nevada, Hawaii, Washington, Arizona, Arkansas,
Mississippi, Florida, and South Dakota – use sales taxes to cover a third of
their revenue. Economists consider sales taxes regressive because the poor
pay more of them than others do. If the middle class and wealthy flock to
the internet for their purchases, the poor are the ones stuck paying.
There are four versions of the Internet Tax Freedom Act that are snaking
their way through the House and the Senate. Freedom for some creates a tax
burden for others. But few in the House or the power-shifted Senate are
sensitive to those who will take the weight for so-called Internet tax
freedom.