Economic growth in Michigan will depend, in part, on the continued
evolution of advanced telecommunications and technology. Technological
innovation also will provide citizens enormous power and convenience. There is
broad agreement that a competitive market is the best means of increasing the
availability and affordability of new products and services. That goal,
unfortunately, has been thwarted by continued federal and state regulation that
has actually secured the market position of reigning monopolies. And the market
uncertainty created by unending disputes over regulatory minutiae inhibits
investment by potential competitors.
13. Repeal the Michigan Telecommunications Act.
The Michigan Telecommunications Act has hindered market development, thereby
depriving consumers of the lower costs and higher quality services that
competition typically yields. An analysis by BBK Ltd.'s Anderson Economic Group
concluded that Michigan's telecommunications law "increases government power,
and reduces that of consumers. This increased regulation takes the form of
mandated services, fixed prices, regulation of commercial speech, barriers to
entry, and new government powers." The Legislature should repeal the price
controls and service mandates in the MTA as well as curb the powers of the
Public Service Commission to regulate telecommunications.
14. Prohibit government entry into telecommunications service markets.
Several municipalities in Michigan have launched cable and high-speed Internet
services in direct competition with privately owned firms. But government should
not be allowed to exploit its tax and regulatory advantages to undermine the
private sector. Lawmakers should enact legislation that expressly prohibits
state and local government from owning or operating any telecommunications
15. End discriminatory tax treatment of investment in telecommunications
Under current law, telecommunications property is taxed based on intangible
assets such as the income it generates. Most other personal property in Michigan
is taxed based on the depreciated value of the tangible asset. This
discriminatory tax treatment is a major barrier to private investment in
Michigan's telecommunications infrastructure and should be ended.
16. Resist the imposition of sales taxes on Internet transactions.
The U.S. Supreme Court has ruled that state and local governments cannot force
out-of-state retailers to collect sales taxes because this would interfere with
interstate commerce. States and localities may only require companies with a
"substantial physical presence" or "nexus" in their state to collect sales
taxes. That's as it should be.
But some public officials are eager to cash in on the growth of catalog and
online sales. Gov. Engler, for example, strongly supports a National Governors'
Association (NGA) proposal called the "Streamlined Sales Tax" that would
effectively deputize a third-party entity to collect and distribute taxes on
out-of-state purchases. If enacted, the proposal would open the door to a
national sales tax. The Michigan Legislature last year gave approval for
Michigan to collaborate with other states in furthering the NGA plan.
But taxes are supposed to pay for services that governments provide, such as
police protection. Out-of-state vendors with no physical presence in a state do
not consume government services. Thus, it would be unfair to tax out-of-state
The NGA plan also raises privacy concerns. When a consumer pays sales tax at a
local shop, no one asks her name, where she lives, or anything about her buying
habits. Under the NGA plan, however, the third-party tax collector could easily
collect such information.
Supporters of the NGA plan talk a lot about fairness and the need to "harmonize"
states' sales taxes. But Michigan "loses" revenue all the time to states that
tax less and tax better, and it gains revenue over states that tax more and in
more harmful ways. That's healthy tax competition, and it's one of the reasons
the states are called "laboratories of democracy."
Colorado Gov. Bill Owens, in a February 1, 2002 speech, made some revealing and
instructive comments on the Internet tax issue that bear repeating to a Michigan
When I go on Main Street to buy something at Wal-Mart in Aurora, Colo., I am
using the city street. I am protected by the city police force. If there is a
fire and I need the help of the fire department, they are there. As I am going
to that Wal-Mart or while I am in that Wal-Mart, if I drink water from the water
faucet, I am using municipal water. I am in fact receiving city services when I
go to that Wal-Mart and make that purchase.
When I buy something over the Internet from Lands' End in Wisconsin, the only
impact on any government in Colorado is the UPS truck that arrives at my door,
bringing me that package. And UPS, I can assure you, more than pays its fair
share in gas taxes for the use of that local or state road. There is no nexus
between a service rendered and a service delivered for that Internet tax that
some would want me to have to pay to Aurora and to Colorado.
Twenty states are now meeting regularly, setting up the system, so that if
Congress ever allows us to tax the Internet, there are states all ready to go
forward with the compact to make this happen. Well, let me just tell you-and I
bet Colorado is not the only state that will do this-but it is my goal, if that
day ever happens, to have Colorado be the Switzerland of Internet taxation. I
want us to be a tax haven so that these companies move to Colorado.3
Some say the effort to impose sales taxes on all Internet transactions is a
train rolling down the track. But it's a train that should be derailed.
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