Where I Stand — Mike O’Callaghan: A taxing problem for us

Friday, Oct. 24, 2003 | 8:58 a.m.

ON NOV. 1, 2003, the Internet Tax Freedom Act will sunset and there is a scramble in Congress to make it permanent. This law prevents a state or a local government from levying a tax on Internet access. States that had taxed access to the Internet prior to 1998 are protected from this federal statute.

Again, Sen. Ron Wyden, a Democrat from Oregon, is leading the charge with S.52, which would make the moratorium permanent and remove the protection given states that had acted prior to 1998. This is a no-brainer for the Oregon senator because his state doesn't have a sales tax. Therefore, his state's tax base isn't threatened by sales made over the network that avoid tax collection.

The shortage of state tax dollars have created an urgency to plug up the loss of sales taxes to Internet buyers. Some of the state shortage of taxes have resulted from acts of Congress cutting into inheritance and other taxes. Also, legislation creating unfunded tasks for states to perform has increased.

Four years ago Business Week magazine told readers that, "To compensate for the loss in tax receipts, which contribute about 40 percent of state revenues, governments may have to raise sales taxes. The burden would fall most heavily on people who don't shop online: The poorest 20 percent of Americans -- those earning less than $25,700 per household -- who already pay about 3.5 percent of their income in sales taxes. By contrast, the top 20 percent earners, who make $75,000 or more, pay just 1.3 percent. The more these upper-income shoppers buy at the virtual mall, the less they'll contri- bute to the cost of running public schools, hospitals, and police departments."

Last week The Wall Street Journal countered in an editorial saying, "While early adapters to the Web tended to be male and affluent, the fastest-growing segments of the Internet population today comprise women and middle- and low-income earners. Among people who began shopping online in 2002, 57% were women and the average household income was $52,000. In other words, letting the moratorium lapse would set the stage for a slew of new regressive taxes on Web access."

Putting all other arguments aside I have always contended that we can't overlook the damage and hurt small retailers can suffer from their business losses to the non-taxable Internet purchases. These are the people who raise families, support schools, churches and other community groups. They both collect and pay sales taxes necessary to build and support services we expect from our government.

A good bill in Congress, S.1736, written by Sen. Mike Enzi, R-Wyo., empowers states, which implement a streamlined sales tax and remote tax collection authority, to require remote sellers to collect state and local taxes on interstate sales.

What people must realize is that paying sales taxes on goods purchased over the Internet is not a new tax. These are taxes supported by voters and legislators that are going uncollected. The results are a steep loss of revenue for states like Nevada and probably total $10 billion to $15 billion nationally. This loss will only grow as time goes on and the Internet thrives. In reality the Internet will continue to expand even with the legitimate collection of sales taxes.

Until now, only Assemblyman David Goldwater and Sen. Mike Schneider, both Clark County Democrats, have fought to plug the Internet sales tax loophole that hurts every Nevada taxpayer.