TCS Daily

Don`t Let the Other Govs Tempt You on Internet Taxes

By Bill Owens - August 23, 2001 12:00 AM

August 20, 2001

Speaker Dennis Hastert
2369 Rayburn HOB
Washington, D.C. 20515

Dear Mr. Speaker:

In the coming weeks, the Congress will address an issue that is critical to the future health of the U.S. economy: the extension of the moratorium on Internet taxation.

Some - including most of my fellow governors - argue that the moratorium hinders local tax collection efforts and supercedes states' rights. These arguments, while well-intentioned, miss the point. The debate over the taxation of the Internet isn't about feeding the already well-lined coffers of government; it's about the fundamentally American idea that there should be no taxation without representation.

The Internet revolution has unleashed the power of new markets that were previously bound by geographical lines. In many cases, businesses can use electronic commerce to easily serve customers across the country and around the world. As governments begin to adapt to these changes, it's important to remember the basic democratic connection between taxation and representation. It is simply unfair to tax businesses and industries who aren't represented by elected state and local officials and don't enjoy the benefits of the services these governments provide.

Many state leaders say they oppose the moratorium on the grounds that Main-Street businesses are at a disadvantage. While there is no evidence that Main-Street firms have lost business due to tax differentials, that is beside the point. The answer to these concerns should not be to raise taxes on the Internet, but to lower taxes on Main-Street businesses.

I also object to Internet taxation for a second fundamental reason: such a tax would sever the relationship between a tax levied and a service received.

Here is what I mean. When I purchase a product on Main-Street, I am the recipient of numerous governmental services. I am protected by local police and fire professionals, I drive on local streets, and - should I need emergency medical service - I would most likely be attended to by a local government's emergency medical technician and ambulance. For these services I am willing to pay a tax in exchange for service rendered.

When I buy on the Internet, however, I receive no specific government service. In fact, the only "service" offered by government is that my purchase is most likely delivered by UPS or Federal Express, both of which pay for their use of the roadway through gas taxes. So why should a state or local government be permitted to exact revenue through an Internet sales tax when that government has provided no service?

I would ask that you extend the moratorium on Internet taxation and protect taxpayers from this latest attempt to raise taxes.


Bill Owens Governor

Cc: Members of the United States Senate
Members of the United States House of Representatives


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