As E-Commerce Flourishes, Taxman Becomes Impatient

At the same time a new study by Nielson Media Research and CommerceNet showed that the number of women making purchases online is skyrocketing, elected officials at two separate meetings held last week called for the taxation of the Internet.

According to the Associated Press, Ron Kirk, Dallas mayor and chairman of the U.S. Conference of Mayors city economic task force, bluntly told his colleagues it was time to begin the fight to collect millions of dollars in lost taxes from e-commerce.

“We don’t have a persuasive argument before the public,” Kirk said during a panel discussion at the annual mayor’s meeting held in New Orleans, Louisiana. “But we have to explain that when you are sitting at home in your virtual world and you have a short (circuit) and a fire breaks out — do you want us to send a virtual fire truck or a real big fire truck (to save you)?”

In his corner are brick-and-mortar merchants who say they can’t compete with e-marketers because of the slew of local, state and federal taxes they are forced to collect. Along with Kirk they oppose the Internet Tax Freedom Act, which was passed last year by the U.S. Congress putting a three-year ban on taxing online sales and service. The politicians oppose it because they say it is cutting deeply into their jurisdictions tax revenue used to build schools, streets and parks.

A few days later at a convention of the Idaho Association of Commerce and Industry, Utah Governor Michael Leavitt voiced similar concerns to 100 industry and state government leaders that attended the meeting held in McCall, Idaho.

“This system will not work in the 21st century, Leavitt said Friday. “It’s fundamentally unfair”

Meanwhile last Monday, IBM Chairman Louis Gerstner Jr. cautioned Congress against hastily enacting legislation to govern the high-tech industry.

“It’s a grave error to think the Internet and e-business will develop under the kind of regulation we applied to the phone system back in the days when coal and steel were determinants of a nation’s greatness,” Gerstner told the AP.

But some economists go much further than Gerstner. They say taxing and regulating the Internet would in effect shut down the savior of the U.S. economy. They argue that the burgeoning online commerce is creating unprecedented wealth in jobs, income and services — because it is unbridled. In fact, some are convinced that tampering with this “virtual free market” could possibly plunge the U.S. economy into a deep recession — or even depression.

Free marketers also say it’s time for elected officials to stop using merchants to collect their taxes for them. They contend that prosperity brought about by the new economy will enable people to pay for new schools and roads — if they want them — directly, not through the back door.

Last week’s meetings seem to prove the adage that a politician could screw up paradise. Moreover, they just don’t get it — and won’t be content until they’ve killed the golden goose.