Yes. For starters, simple economics dictates that if Amazon.com is required to collect a five-percent tax on its products, it will probably have to lower its prices slightly to maintain sales volumes. Even if it holds prices steady, it will sell fewer books at the after-tax price, thus suffering a loss of sales revenue. All e-commerce is likely to suffer such shrinkage in order to reach economic equilibrium following imposition of a new Internet tax.12

On the demand side, a recent study by economists Austan Goolsbee and Gordon Zittrain estimates that taxing remote electronic commerce would reduce the number of online buyers by 25 percent and total spending on Internet transactions by more than 30 percent. The study suggests that these sales would not be replaced by ordinary retail sales, since the Internet is probably a net trade creator, generating business that would not otherwise have occurred.13

As Adam Thierer states, "The explosive rise of the Internet and electronic commerce has created an unprecedented level of entrepreneurialism and innovation in America, and this technological renaissance has been the driving force behind America's recent strong and sustained economic growth."14

In other words, it is the very surge of entrepreneurialism and innovation through the Internet that has led America's unprecedented prosperity over the past decade, benefiting not only families and businesses but also state and local governments. As Raymond J. Keating, chief economist for the Small Business Survival Committee pointed out in testimony before the ACEC in September of last year, "federal, state and local governments have lost no revenues to expanding e-commerce, but have gained revenues due to economic growth driven in part by information technologies."

Yet state and local governments, their coffers overflowing with cash from the benefits of the information technology explosion, want to kill—or at least do serious harm to—the goose that's laying all the golden eggs.

One recent study estimates that taxing remote electronic commerce would reduce the number of online buyers by 25 percent and total spending on Internet transactions by more than 30 percent.

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