Saturday, October 27, 2007

Internet Service Providers Tax Ban

Congress has voted to extend the ban on state taxes on internet service providers. This is hardly a fledgling industry that needs a tax advantage. Internet service providers say the price of Internet access could rise by as much as 17 percent if the moratorium on state taxes were allowed to expire. This is sheer hyperbole. What state would contemplate a 17 percent tax on anything?
The US Supreme Court has ruled that internet retail sellers may not be required to collect state sales taxes. This is hardly equal protection under the law, giving an advantage to out-of-state retailers. The following consequences are pointed out by
 It subsidizes the growth of distant companies, which contribute little to a community's civic and economic vitality, by giving them a 6 to 8 percent price advantage over local stores.
 It undermines state and local governments by reducing tax revenue for schools, police, and other services, a revenue loss that will continue to grow as internet sales continue to displace in-store sales.
 It makes a regressive tax more regressive (only those with Internet access and credit cards are able to take advantage of the tax break).

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