If the Internet, which now accounts for less than 1 percent of all retail sales, becomes a favorite way for Americans to shop, it will provoke a greater revolution than most of us imagine.
States and localities face a devastating loss of revenue if Internet sales, as seems likely, continue to go largely untaxed. Sales taxes, which are levied in all but five states, provide about one-third of all state tax revenues, and in a state such as Texas, where there is no income tax, they provide half.
But that's not all the damage waiting to be done. The landscape and character of thousands of American cities and towns could be radically altered. No longer would it be a question of whether the main street store and small shopping center can survive the onslaught of the super mall or the Wal-Mart. All retail stores could face the frightening possibility that half their space will become obsolete, prey to blight and decay and vulnerable to abandonment.
This could knock another huge hole in state and local finances. Commercial property assessments would have to be adjusted downward. Property taxes would most likely be shifted even more unevenly onto the backs of homeowners. None of it is a pretty sight to contemplate, either the fiscal chaos or the depressing vision of so many abandoned and peeling commercial structures, a lot of them ugly to begin with.
Whether it should be allowed to happen or whether it is merely inevitable may be the subject of legitimate debate. But the only debate getting any attention is the phony one of whether Internet sales should continue to escape most state and local sales taxes.
It ought to be a no-brainer that the Internet is one institution that does not need a tax subsidy -- loophole, ripoff, government handout might be better terms -- to encourage it to come into our homes, addict our children, spread cybercrime and social isolation, distort the stock market or, for that matter, make our lives more convenient and satisfying. If it is going to take over our lives, it
does not need or deserve the head start of a tax exemption that places bricks-and-mortar retailers at the low end of a tilted playing field and threatens the very existence of many of them.
Defending sales taxes has never been something liberals do with much enthusiasm, because, unlike most income taxes, they are regressive, falling most heavily on the poor and middle class, who pay exactly the same tax rate as the wealthy. But defending a free tax ride for Internet users, who tend to be better off than most of the population, is something even sensible conservatives ought to gag on.
Some conservative proponents of the Internet tax exemption act out of a hostility to any form of taxation, which they view as synonymous with distant and wasteful federal programs. They are misguided. Sales taxes tend to pay for routine state and local functions, for stuff that is as tedious and uncontroversial as snow removal.
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