Art Imitates Life: Senator To Propose New Internet Sales Tax

Today is Tax Day, and Atlas Shrugged is out this weekend. It’s a tale of what happens when government tries to be all things to all people (and, in consequence, grows in proportion and negative effect). True to form, one politician is expected to propose a tax on one of the most popular business models coming out of the rise of the internet: AmazoniTunes, and other online retailers.

Sen. Dick Durbin (D), is the culprit of this deficient idea.

Durbin, from Illinois, complained in February that out-of-state businesses (again, like Amazon and iTunes) were essentially freeloading off the taxes that local brick-and-mortar stores pay. Why should Amazon be able to sell you a Blu-ray disc without having to collect tax, but if you were to buy that same disc from the local Walmart? Exactly.

via Senator To Propose New Internet Sales Tax. The simple answer is that they don’t cost the state anything or avail themselves of the state the way brick and mortar stores do. They don’t use roads, utilities,  police, etc, etc. What expense they do cause are covered by the postage paid by the customer. It’s not free-loading if the online retailer isn’t making use of any local services.

In fact, they do the customer a lot of good. They save the customer the costs of driving to stores and the wear and tear on their cars. They allow the customer to buy the best priced and the most competitive item without traveling to a mall or several locations. And they allow the customer a larger choice.

So why tax it? Because “it isn’t fair.”

Online retailers, with a business model that customers love, have fast become a staple of our economy. So why get in the way? Why slow it down? The tax will only result in increased costs for consumers.

I can’t help but wonder if Durbin ascribes to the governmental philosophy well articulated by Ronald Reagan: “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Allow this tax, and Durbin will only slow and hurt a great business model that is good for consumers and, ironically, good for the environment, too. That’s right. All those shoppers don’t have to go to the mall, now, every time they want to buy a new book, and they don’t have to buy a new book. They just buy it from some other consumer who read it last week, is ready to sell it, and is glad to drop it in the mailbox at a steep discount. The seller is happy, the buyer is happy, and Amazon, who gets a small cut, is happy. Even the Earth is happy.

Everybody wins. Except the IRS. They don’t get a cut. And Durbin wants to give them their cut. It’ll hurt the business model, increase the costs, and decrease the number of people who will buy  online.

It’s the economy, stupid. And you’re trying to hurt it.

Back to Atlas Shrugged. Durbin’s attempt to make it “fair” for his brick and mortar buddies in Illinois really don’t help anyone, in the end. They just end up being more government meddling in the economy, something the politicians should not do, not the least because they aren’t very good at it. It never ends up well.

It reminds me of one scene from Atlas Shrugged when one such hapless government official turns to John Galt (yes, THAT John Galt) to ask him to become something of what we would today all a czar on the economy. They thing that Galt, because he has been so successful in business, will know what to do to fix the economy and get it back on track again.

Galt: “You want me to be Economic Dictator?”

Mr. Thompson: “Yes!”

“And you’ll obey any order I give?”

“Implicitly!”

“Then start by abolishing all income taxes.”

“Oh no!” screamed Mr. Thompson, leaping to his feet. “We couldn’t do that . . . How would we pay government employees?”

“Fire your government employees.”

Oh, no!”

That’s right. Government is the cost that taxes pay for, and the best way to decrease the cost of government is to decrease government’s reach in the first place.

Government doesn’t need to fix the economy. It’ll fix itself, if you give it a chance. When you tax a successful and beneficial business, though, for costs that are not its own, you just hurt it, slow it. And you hurt the economy. People start to ask themselves: “why innovate? Why start a new business? The government will just attack me. It’s just too expensive.” And so we stagnate, instead.

If you want to make the economy breath, individuals to innovate, and businesses (small and large) to flourish, get out of the way. Taxation is appropriate, when it supports limited government. Taxation that supports a government that tries to be all things to all people, though; that is something that will drive out all the John Galts our country needs right now.

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2 responses to “Art Imitates Life: Senator To Propose New Internet Sales Tax

  1. I would be interested in an actual analysis of the impact shipping online purchases has on the environment and economy versus when people leave their homes, drive their cars and go to the stores to purchase the items rather than buy them online. Because there is some impact as a result of shipping online purchases, I just don’t know if it’s actually less or more than if I run to Walmart instead.

    • The impact is covered by postage costs. You can pay for it in gas, or you can pay for it in postage. Either way, it’s covered. When we tax it, though, you will pay for it twice.

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