The taxman cometh
I have posted already about the desire of the IRS to levy income tax on transactions at auction sites like eBay. Now local governments are after your money. Always looking for new ways to tax people, the states have been unhappy about all the sales tax that slipped through their fingers because of Internet transactions. ZDNet reports that the good old days of tax-free buying may be ending:
The era of tax-free e-mail, Internet shopping and broadband connections could end this fall, if recent proposals in the U.S. Congress prove successful.
State and local governments this week resumed a push to lobby Congress for far-reaching changes on two different fronts: gaining the ability to impose sales taxes on Net shopping, and being able to levy new monthly taxes on DSL and other connections. One senator is even predicting taxes on e-mail.
The part about taxing purchases is something that has been lurking around the corner for some time. As the volume of commerce on the Internet keeps growing, there is no way that legislators wouldn’t try to cut the local governments in for a piece of the pie. Also, local merchants have been screaming about the disadvantage from having to charge sales tax while online vendors did not. I regret it, I’m not happy about it, but I have become resigned to the idea of sales tax for online purchases becoming a reality sooner or later. Many of the states (like NJ, where I live) have been fiscally irresponsible and have blithely promised all sorts of services and benefits without understanding their actual cost or how they were to be paid for. Huge retirement and medical costs are looming in the near future and the states are going to be scrabbling for every dime and nickel that they can extract.
And here’s a new wrinkle. The legislative types want more than sales taxes out of the Internet. They want to tack on all sorts of new “fees”. When I look at my cable or my phone bill, I already see all sorts of strange taxes and fees. But that’s not enough. The tax sharks scent blood and they want more. The ZDNet article says:
At the moment, states and municipalities are frequently barred by federal law from collecting both access and sales taxes. But they’re hoping that their new lobbying effort, coordinated by groups including the National Governors Association, will pay off by permitting them to collect billions of dollars in new revenue by next year.
The article also says:
If the temporary federal moratorium is allowed to expire in November, states and municipalities will be allowed to levy a dizzying array of Net access taxes–meaning a monthly Internet connection bill could begin to resemble a telephone bill or airline ticket with innumerable and confusing fees tacked on at the end. In some states, telephone fees, taxes and surcharges run as high as 20 percent of the bill.
These fees that states levy on mobile phones, cable TV and landlines run far higher than state sales taxes at an average of 13.3 percent, cost the average household $264 a year, and total $41 billion annually, according to a report published by the Chicago-based Heartland Institute this month. Landlines are taxed at the highest rate, 17.23 percent, with Internet access being virtually tax free, with the exception of a few states that were grandfathered in a decade ago.
(I apologize to the ghost of Eugene O’Neill for borrowing and paraphrasing one of his titles for this posting.)
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