A Tax is a Tax is a Tax
May 23, 2013
It was perplexing last week to hear a conservative commentator express modest enthusiasm for an Internet sales tax. Governor Walker, who has no part in the eventual decision, indicated he’d use the revenue to cut income taxes if Congress turns Internet merchants into tax collectors.
More income tax reductions would be good. But there’s more to consider.
First, remember Wisconsin has a sales tax solely because it was sold a half-century ago as a way to relieve other taxes. There’s nothing unique to Wisconsin in the fact that creating or increasing one tax to relieve another produces not tax relief, but more and higher taxes.
A second objection, we’ve mentioned before: An Internet sales tax is recognized as unworkable unless 9,000-plus U.S. taxing jurisdictions simplify and harmonize tax policies. Here, “simplify” means “increase rates,” unless, for example, the City of Chicago might consider imposing fewer and lower taxes in order to “harmonize” with Wyoming.
And finally the biggest objection, that being taxation without representation: Every customer of an Internet business would become subject to taxes enacted by officials of other states and localities who owe them no accountability. It’s one thing to drive across the state line and pay seven different and unfamiliar taxes because you decided voluntarily to have dinner in Chicago. It’s quite another to have Chicago alderpersons reach across the line and take money out of your pocket.
It’s easy to fall for the argument that an Internet tax would “level the playing field” and make things fair for brick and mortar merchants. The truth is it would make the playing field profoundly uneven by facilitating “the power to destroy”—as Daniel Webster characterized the power to tax—to an unprecedented degree.