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December 3, 2014

To Grow The Economy, Reject New Internet Taxes

 

It’s down-to-the-wire time on whether Congress will raise taxes on the Internet before the end of the year.

Yes, believe it or not, this Congress might choose to raise your taxes as it rides off into the sunset, and there’s more than one vehicle available for them to do so.

The first threat is the so-called Marketplace Fairness Act (MFA), which would give states a means to charge sales taxes on your Internet purchases in a way that violates the Constitution. And while that should be argument enough against the MFA, there are plenty of further arguments against it.

Imagine Congress passing a law that would subject your small Internet business to being audited by the other 49 states in which you don’t reside in their greed for more revenue from business owners who can’t vote them out of office. The MFA would enable cross-border tax predation, which is exactly the sort of thing that would have made the Founders recoil.

Especially at this time when the economy is still struggling and the distinction between on-line and brick-and-mortar retailers is blurring, the last thing Congress should do is pass the misnamed Marketplace Fairness Act.

The second threat is that Congress might fail to renew the moratorium against new and discriminatory Internet taxes: the Internet Tax Freedom Act (ITFA). If Congress fails to extend ITFA, new taxes on Internet access would raise the costs of Internet access for millions of Americans.

A stunningly biased piece in National Journal sought to undermine support of ITFA by pointing out that extending the Internet tax moratorium would cost states like Texas some tax money, $358 million according to the author. But the author entirely fails to understand that would also represent a tax savings of $358 million to Texas taxpayers. Isn’t that a good thing? Since when do we evaluate tax policy based solely on whether it results in more money for government? Don’t taxpayers matter?

So MFA bad, ITFA good.

Here’s the rub: Some in Washington think the way to compromise is to combine ITFA with MFA in a single piece of legislation, under the false impression that somehow adding something bad to something good results in something even better. But that’s not so: ITFA is necessary, and the MFA is harmful. It’s as simple as that.

Especially after the results of the November election, it’s clear that voters want a different direction from Washington, and that different direction certainly doesn’t include higher taxes on the Internet. Taxes are high enough as it is.

P.S. – Don’t forget that you can gain some tax savings of your own by making a tax-deductible contribution to support these TaxByte commentaries from the Institute for Policy Innovation (IPI).


 

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