Look Who Wants To Tax E-Commerce!

Journalists make a big to-do whenever a politician breaks a campaign promise, but often breaking the promise is the right thing to do. We should all be grateful that the fiscally irresponsible economic stimulus package that Bill Clinton promised during the 1992 election never came to fruition and that instead Clinton applied himself to reducing and, eventually, eliminating the budget deficit. That effort received some assistance from the budget agreement of 1990, in which George Bush pere famously (and, perhaps, fatally) broke his ill-considered “read my lips” promise not to raise taxes. George Bush fils this week earned a well-deserved “Whopper of the Week” citation for promising, during the 2000 campaign, that he would start moving the U.S. embassy in Israel to Jerusalem “as soon as I take office” and for mocking Al Gore when Gore backed away from the same promise. Retrospectively, Dubya’s promise became a whopper on June 11 when he signed a presidential memorandum that puts off any consideration of moving the embassy. Still, signing that memorandum was the responsible thing to do. Chatterbox believes one should curse the making of stupid campaign promises, not the breaking of them.

In that same spirit, Chatterbox congratulates John McCain for abandoning his irresponsible promise during the 2000 campaign never to impose a sales tax on the Internet. McCain’s stance didn’t get a lot of attention, mainly because it conflicted with the widely held (and probably correct) view that McCain was a more cautious steward of the federal budget than Dubya. In this instance, though, it was Dubya who declined to sign a moronic pledge to ban sales taxes on the Internet forever (to read the text, click here) and McCain who signed it. McCain also demagogued the issue in the debates. A permanent ban on taxing Internet sales is a bad idea because it would be glaringly unfair to “bricks and mortar” retailers, who do pay taxes. And, considering the comparatively high incomes of those who shop on the Web, it would also be regressive. (Chatterbox laid out the arguments last year in this “Net Election” piece and this Chatterbox item.) This was all easy enough for McCain to perceive last year.

Fortunately, it remains easy for McCain to see today. That probably explains why McCain is helping various Democratic senators to draft a bill granting states the authority to tax electronic commerce provided half of them agree to simplify their sales taxes. The bill is modeled on a scheme developed by the National Governors Association and the National Council of State Legislatures. That scheme had been outlined in detail well before McCain started mouthing off about the horror of Internet taxes during the 2000 campaign. But let’s not dwell on that. Nor should we dwell on the bizarre irony that Congress only got interested in taxing Internet commerce when Internet commerce was flat on its back. (What would Keynes say?) The main things to keep in mind are that Internet commerce won’t remain on its back forever and that McCain is right to break an idiotic campaign promise. Let’s hope that McCain’s new advocacy of Internet sales taxes doesn’t cause Dubya to change his mind and decide that he’s agin ‘em.