Barrett Kalellis
Tuesday, March 18, 2003

Now that a budget crunch looms large on state political horizons, hand-wringing state officials are starting to make severe funding cuts in present levels of government services, along with the consequent headcount reductions and other measures to stem the flow of red ink.

Such cuts are tough for lawmakers, since it’s always easier to maintain popularity and re-electability with the plebs in boom years than during hard times. When we have a nervous, jittery economy — with a stalled stock market, increasing unemployment and war worries — clever politicians are loathe to increase taxes to make up for revenue shortfalls, which would only make the economic situation worse.

But while out-of-bounds at the federal level until at least November, one new tax that 33 governors are trying to ram through at the state level is a sales tax on Internet purchases. Like her Republican gubernatorial predecessor, Michigan’s newly elected Democratic Governor Jennifer Granholm has joined the chorus. Barely one week after inauguration, she affirmed that she is all in favor of an Internet sales tax collection system.

Rather than call it a tax increase, which it surely is, it is being peddled on the grounds of “fairness.” Because local businesses are charged with collecting sales taxes from their customers, why shouldn’t out-of-state retailers be also burdened with the task of collecting sales taxes on the merchandise they market over the Internet?

This is a hoary, red-herring argument, since according to a U.S. Supreme Court ruling, forcing out-of-state catalog merchants to collect state taxes would amount to restraint of interstate commerce, unless the seller has significant presence in the buyer’s state.

During the current lean times, the impetus to jam Internet consumers with forced collection of state sales taxes, instead of ignoring current “use” taxes, plays in favor of politicians who cry poormouth. Think back only three years, however, when there was a large budget surplus in Michigan, and legislators wanted to impose this tax while increasing state spending on new programs.

Very little rational discussion has appeared in the media about the appropriateness of taxing Internet purchases in the first place other than the “fairness” argument. Serious studies indicate that such a tax actually would be highly unfair to out-of-state merchants, who derive no benefit of state services for which the taxes are supposed to be collected.

From the consumers’ point of view, however, having sales taxes added to Internet shopping would be a heavy burden, since they must also pay ever-increasing shipping charges to get the merchandise to their door. Adding state sales taxes to already high shipping costs will be a disincentive to making purchases from the computer at all.

In reality, it would function as a commercial tariff between the states and, like all tariffs, it would be an artificial imposition that takes away consumers’ free choice in the marketplace. Online shopping would be reduced by 25 percent, according to some experts, stifling a growing business and putting even more people out of work.

People like to shop online not because it is necessarily cheaper, but because it is more convenient. There is a wider inventory of merchandise from which to choose, with usually more information about the products than a local clerk has in his head, and you don’t have to waste gas driving from store to store to find what you want. You click your mouse, and a few days later the product shows up in the mail.

Let me be blunt: An Internet tax is simply a crass money grab on the part of legislators. In their eyes, it’s a burgeoning source of new revenue and they want your money. Some organizations, like the National Governors Association, are even acting like cartels, pressing for a uniform U.S. sales tax, which will doubtless lead to a national sales tax.

Do Michigan residents want to be taxed like New Yorkers or Californians? It’s time U.S. citizens be made aware that government doesn’t have the right to tax whatever it wants simply because it’s not being taxed right now. In fact, according to Article I, Section 9 of the U.S. Constitution, the Internet sales tax collection scheme that these politicians are cooking up is illegal.

There’s only one sure way to keep the politicians’ beaks out of the Internet, and your wallets: Find out which of your local and state representatives are pushing for this and tell them you’re going to vote them out of office.

Barrett Kalellis is a columnist and writer whose articles appear regularly in various local and national print and online publications. You may reach Mr. Kalellis at kalellis@newsmax.com.

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