Ed Wood "The Right Stuff" Published Nov. 20, 2002

Let's take a good look at taxes

Is that all there is? Is the whole business of government one of taxation? Before the ink is even dried on the last election, our legislators, both new and old, are involved in how to raise more tax money. Locally and nationally.

Our state legislators are already talking of how to again present and pass a state income tax, and offer as evidence a new poll showing that 58 percent of us really do want it. This, in spite of the fact that 15 of the 45 House members who voted for it the last time got defeated!

Nationally, there is a call to repeal the meager federal tax cuts sponsored by the president and passed into law last year, even though most of its provisions haven't even become effective yet.

Many other tax plans are under consideration: A consumption tax, a flat-rate sales tax, reduction of exemptions under current tax law. Anything to obtain more funding without reducing spending.

For years the federal plan was very simple. Tax the few in order to gain the support of the many. And the tool to get it done? The federal income tax. Easy. Here are the latest figures.

The top 1 percent of the nation's earners pay 37.42 percent of all income taxes.

The top 10 percent of the nation's earners pay 67.33 percent of all income taxes.

The top 50 percent of the nation's earners pay 96.09 percent of all income taxes.

But now there is a problem. The earnings level keeps dropping for each category until now the level for qualifying in the top 50 percent is only $27,682 per year. And that ain't exactly striking it rich!

So it is becoming more difficult to further expand the federal income tax. What to do? They must come up with additional tax schemes. The latest is a plan to tax Internet purchases. This idea has been around for some time, and since the election is over, it seems like a good time to crank it up again. How much would this benefit the state of Tennessee? Who knows? Prior to the state general election, one of our representatives said the state is losing $300 million in annual taxes to Internet sales. Governor Sundquist this week pegged the loss at $1 billion! They don't know. But if they can make it sound big enough, it will sell.

Sales taxes have been the exclusive province of the various states, not the federal government. But since the Internet is national and international in scope, how to do it? With a "voluntary" program, of course. At a recent meeting in Chicago, 30 states, plus the District of Columbia, endorsed a plan to impose such a tax on Internet transactions, regardless of the location of the seller. The "voluntary" program would take effect when at least 10 states amended their laws to implement the program.

Of course, this is a victory for tax-collecting main street businesses, who have complained for years they are at a competitive disadvantage vs. Internet businesses who collect no such tax. One problem though. A major portion of the local taxes collected is to pay for local service requirements for these local businesses, such as fire and police protection, sidewalks, roads, snow removal, etc. Internet business, who may be located anywhere, require no such local services. When you order over the Internet, you have no idea where the company is located, or where the shipment originates, nor do you really care. So would such a local tax penalize them unfairly?

If a tax is imposed on Internet purchases, I doubt very much if local merchants would benefit. Most of us support Internet purchases because they offer a greater variety of products than can a local dealer, and many of us are learning that it is simply more convenient to order from home and have the product delivered than fight the traffic and the congestion just to go "shopping." I believe it is called "progress."

Mr. Gore did us a great favor when he invented the Internet. I hope our current elected officials will think long and hard before they mess it up. Besides, as soon as they come up with a scheme to tax U.S. Internet businesses, the businesses will simply pull up and move offshore - to Canada, Mexico, or elsewhere. Then who administers the tax collection? The Banana Republic thugs at the United Nations have been waiting for just such an opportunity!

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Ed Wood is a resident of Sparta, TN. His column is published each Wednesday in the Crossville Chronicle.