The Corner

More On Caldwell

I agree with Clyde Wayne Crews Jr. that private-sector approaches to combatting spam should be thoroughly tried before we even talk about federal regulation. But my biggest objection to Caldwell’s piece is his discussion of Internet taxes. Caldwell writes that “it is. . . a social necessity that the principle of taxing the Internet be established soon. This will mean retiring the (in retrospect) absurdly named Internet Tax Freedom Act of 1998, which placed a moratorium on certain Internet taxes, and was extended in 2001 until November of this year.”

He continues, “It was always unfair not to tax business on the Internet, of course. There is no reason that should enjoy a pricing advantage (a de facto government subsidy) over a corner bookstore. But the most damaging part of the moratorium turns out to have been the most innocent-looking: that it banned charges for Internet access. Something like e-mail “postage” will be required if we are going to change the economic incentives that have invited pornographers, snake-oil salesmen, and other social predators into Americans’ living rooms. . .”

The clear implication is that the Internet tax moratorium bars taxes on online sales. It does not. Chris Cox, a Republican congressman from California and a leading sponsor of the moratorium, emphasized this point in a conference call today on his efforts to make the moratorium permanent. (He also expressed some annoyance with Caldwell’s failure to contact him before writing the piece.) The moratorium touches online sales taxes only insofar as it bars “multiple and discriminatory” taxes on online sales. There has to be an offline analogue to any sales tax levied on Internet purchases. (The moratorium also let existing taxes that violate the bill’s principles stand.)

The real issue on Internet taxes has always been whether Congress should authorize the states to work together to tax one another’s citizens. That’s what Walmart (which is the real lobbying muscle behind that “corner bookstore”) wants: An Internet sales-tax cartel of the states, in which Amazon would have to help every state in the union collect sales taxes and in which a Maryland resident could no longer avoid Maryland’s sales-tax rates by shopping somewhere else.

Cox confesses that he cannot makes heads or tails of Caldwell’s tax-against-spam proposal. Nothing in his moratorium would seem to bar an Internet service provider from imposing such a levy if it thought customers would find the trade-off acceptable.

Cox thinks that there is a 90 percent chance that the Internet tax moratorium will be made permanent this year. Limited though the moratorium is, that’s a good thing.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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