The Tax Man Cometh

SHOULD we tax the Internet? This is a question that sets Republican governors against Republican congressmen, a question that pits traditional retailers against emerging e-businesses, a question that has been debated by commissions and journalists.

It is also the wrong question. The debate over Internet taxes does not concern whether e-businesses should get special tax treatment—almost nobody argues they should—but rather whether states should revamp their tax systems to tax e-businesses more effectively. And while most people think of this as a “high-tech issue,” in reality it has dramatic implications for both federalism and tax reform as well. State and local officials say that they want nothing more than to defend their traditional prerogatives in the Internet age. But the proposal they favor would radically expand the power of state governments.

About the Author

Ramesh Ponnuru

Ramesh Ponnuru is the editor of National Review, a columnist for the Washington Post, and a fellow at the American Enterprise Institute.

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SHOULD we tax the Internet? This is a question that sets Republican governors against Republican congressmen, a question that pits traditional retailers against emerging e-businesses, a question that has been debated by commissions and journalists.

It is also the wrong question. The debate over Internet taxes does not concern whether e-businesses should get special tax treatment—almost nobody argues they should—but rather whether states should revamp their tax systems to tax e-businesses more effectively. And while most people think of this as a “high-tech issue,” in reality it has dramatic implications for both federalism and tax reform as well. State and local officials say that they want nothing more than to defend their traditional prerogatives in the Internet age. But the proposal they favor would radically expand the power of state governments.