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[P]
No taxation without representation.

By codepoet in Op-Ed
Thu Oct 18, 2001 at 06:04:55 PM EST
Tags: Politics (all tags)
Politics

But who represents the Internet?

Sunday the moratorium on taxes for goods purchased on the Internet will lapse, unless the Senate gets it into gear and passes a bill to extend the deadline. There are bills on the floor of the House for a nine-month extension, a two-year extension (that has passed in the House), and a five-year extension (which Bush wants, but has not passed). One of these, the two-year extension, is on its way to the Senate, but nothing has happened yet, and many suspect that nothing will happen and the ban will lapse.


Would this be fair to the reta ... e-tailer? The e-tailer would have to then handle taxation, something that many custom-made storefronts are not ready to do since there was no need at the time they were written. Even more worrying is that they would have real and honest fear of states passing Internet-specific laws for taxing goods sold on this medium, removing their price advantage in many cases since shipping on medium-sized orders can sometimes come out to lower than the taxes a retail store would have to add, especially on CD/DVDs and software.

Death to the E-Tailer?

I would not, personally, call this anything more than a scare. State governments (of which only four are in session at the moment) have more to worry about than taxing Internet sales. This opens up the future to taxation, and it will be hotly debated as Reuters reports Representative Chris Cox as saying, "Many, many special tax districts, utilities commissions, regulatory agencies and excise bureaus, 30,000 of them, are lying in wait, ready to pounce. I don't think Western Civilization is going to end if you pass the bill on Monday rather than Sunday, but once the clock goes down on Sunday night, you're inviting trouble."

Monday could bring some government lovin', however, as even after the bill lapses it can be put into effect again with only one day of uncovered time (and taxes cannot be retroactive). I somewhat fear this as saying, though, that this measure is losing favor in the government. This issue has been discussed for the past eighteen months with no firm resolution and only now passed the House. The Senate Commerce Committee has yet to pass the bill, much less the Senate itself. The more time that passes, the more states are going to pressure the government not to pass the bill again, to let them get a cut of the sales.

Can we afford this now?

With the hit to the economy (and the e-conomy) recently, can America face higher prices? Less than one percent of sales occur on the Internet, but for some households, including mine, that comes to about half of all goods purchased (software, electronics, DVD/CDs, even furniture, once) and a noticeable increase in expenditures, even a change of plan and movement to local stores. If that one percent gets lower we could see the closure of even more Internet stores, many on the brink of existence already. This, in turn, would mean more lost jobs and a second, albeit much smaller, recession. We've already started one recession because of a lack of planning in the Internet arena; can we afford to let this happen again, especially now when we are experiencing a moderate to severe recession?

Write to your Senators. Get them to push this bill (HR 1552 [PDF]) through the subcommittee and out onto the floor.

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Poll
Internet Taxation?
o Hell no. 29%
o Federal tax only; make it easy. 18%
o State taxes at brick and mortar rates only. 9%
o What the hell, tax 'em all. 9%
o Tax spammers. 32%

Votes: 85
Results | Other Polls

Related Links
o Senators
o HR 1552
o Also by codepoet


Display: Sort:
No taxation without representation. | 53 comments (41 topical, 12 editorial, 0 hidden)
would someone kindly explain a few things to me? (4.22 / 9) (#1)
by Anonymous 242 on Wed Oct 17, 2001 at 04:00:10 PM EST

1. Explain to me how exempting Internet businesses is fair when non-Internet businesses are subject to local tax?

2. Explain why the federal government should have the authority to determine whether or not Internet businesses are subject to local taxes.

3. Explain how the result of Internet businesses having a hard go of it, more dollars spent in the local economy, is a bad thing for our society.

Regards,

Lee Irenæus Malatesta

The big problem (4.80 / 5) (#2)
by physicsgod on Wed Oct 17, 2001 at 04:07:32 PM EST

With local taxes and the internet is which locality? With brick-and-morter businesses it's pretty easy: the location of the store. But with the Internet you have some options:
  1. Location of server, closest analogue to the store.
  2. Location of the purchaser, how could you determine this?
  3. Location of recipient, what about gifts?
  4. Location of business headquaters/incorperation, could you avoid tax-shelter locals?


--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]
Imagine this scenario: (5.00 / 3) (#9)
by Merc on Wed Oct 17, 2001 at 04:39:25 PM EST

A citizen of Australia, living in Britain, dials up to an ISP in Canada which uses a proxy server in Denmark. This person orders a widget off a server running in Egypt from a company incorporated in France. The company in France is owned by a German holding company, whose owners are all from Hong Kong. The item is found in a warehouse in Italy and shipped to the address the customer gave in Japan. Meanwhile the buyer's credit card (issued by a company in Korea) is charged for the purchase by a processing company in Laos.

Who pays taxes to whom here?

It might be possible to determine the physical location of the company that received the payment, and the physical destination it was originally shipped to. But that's about it. If that were the basis for the taxation, all that would be necessary is a re-shipping place located somewhere where taxes wouldn't apply to bounce the item to the final destination.

The only way I could see this working is if the taxes are small enough that nobody bothers to try to avoid them, or if the additional cost of shipping the product twice is higher than the taxes.



[ Parent ]
your scenario (5.00 / 1) (#30)
by ajf on Thu Oct 18, 2001 at 03:45:18 AM EST

Australia doesn't have anything to do with it, because none of the parties involved in the transaction are there. Britain, where the person making the purchase happens to be located, doesn't seem to have any interest in the transaction either. The location of the ISP and its proxy server are no more relevant than the owner of any cable or satellite you might use to order something over the phone, thus eliminating Canada and Denmark. I'll get back to the server in Egypt. The company selling the product is in France, so they should pay whatever taxes France demands for international widget transactions. McDonald's in the United States doesn't pay a tax every time an Australian franchisee sells a hamburger, nor do its shareholders in other countries, so I don't see anything for the German holding company or its Hong Kong based owners to worry about. Taxes relating to the shipping of the widget out of Italy are no different to how a non-Internet transaction would be taxed. The recipient pays any import taxes relevant in Japan. The credit card issuer in Korea and its processing company in Laos pay the same taxes they already do for any other purchase.

As for that server in Egypt, I think the best solution is for there to be no tax for the sale there. The parties to any kind of transaction are people and corporations, not web servers, bricks or telegraph poles, and I think it would be just as absurd to tax the sales going through that server as it would to tax pizza delivery services by the length of the telephone cables through which the order travelled.

Instinctively, I'm not entirely satisfied with my response regarding Britain. But, since the credit card is Korean, neither goods nor money appear to be changing hands "in" Britain (apart from phone and possibly ISP charges, which are separate transactions), so I can't see how they could reasonably demand a cut. But that doesn't mean it would stop them wanting some...



"I have no idea if it is true or not, but given what you read on the Web, it seems to be a valid concern." -jjayson
[ Parent ]
What about going for a simple transaction first? (5.00 / 2) (#34)
by craigtubby on Thu Oct 18, 2001 at 06:20:37 AM EST

Somebody living in Britain buys something over the Internet from the US which is then shipped to them in the UK.

Who pays British VAT (I suppose the equivelent of Sales Tax)?

The way I see it, the buyer does. If it sneaks through customs, well so be it, if customs see it then the buyer will get a note saysig "We have your parcel, you must pay us 17.5% of the value to get it."

It should not be up to the seller to collect the 17.5% VAT and then give it to the UK goverment, should it.

try to make ends meet, you're a slave to money, then you die.

* Webpage *
[ Parent ]

Option 4 (4.00 / 2) (#13)
by squigly on Wed Oct 17, 2001 at 04:48:31 PM EST

Location of server, closest analogue to the store.

Logical, but I really don't think lawmakers quite "get" the idea that the internet exists on physical equipment. Hell, even I don't perceive it like that unless I think about how it works. This also causes a problem when a server is moved. It is extremely easy to copy all data to a different machine.

Location of the purchaser, how could you determine this?

Location of recipient, what about gifts?

And this would be a nightmare for the business. 5% of all sales were from State X, 6% from state Y, 12% from country A. It might not even be possible.

Location of business headquaters/incorperation, could you avoid tax-shelter locals?

I think this is the only workable solution. You simply don't avoid tax shelters. Allow a free market approach for locations to optimise their taxes to be low enough to encourage businesses, and high enough to make it worth collecting.

[ Parent ]

Under that option. (5.00 / 1) (#14)
by physicsgod on Wed Oct 17, 2001 at 04:55:49 PM EST

You'd probably end up with something akin to Delaware, where the locals are bought^H^H^H^H^H^Hconvinced that zero taxes are good and every e-tailer(ugh how I hate that word) reincorperates there, depriving everyone of internet tax revenue. Much like the situation today. I love politicians, they're so good at thinking things through to their logical conclusions ;).

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]
Well (none / 0) (#25)
by PhillipW on Wed Oct 17, 2001 at 07:17:44 PM EST

In order for an Internet sale to not qualify as interstate commerce(and therefore be open to local taxation), there isn't one determining factor, there are 2. Location of purchaser and location of business. They have to be in the same state.

1. Probably not. This just defines the medium the business is done through, though a case could be made. Since, technically the sale was made at the location of the server. I would think that the location of the business, or maybe the ship from address, would be a sensible option for deciding this.

2. Location of the purchaser would be the Bill To address.

3. Location of the recipient is probably irrelevant. If I buy a gift in a store in California, but it is intended as a gift to someone in Iowa, California sales tax are still applicable.

4. This is probably what determines the equivalent of store location.

-Phil
[ Parent ]
This explains nothing to me (none / 0) (#36)
by Anonymous 242 on Thu Oct 18, 2001 at 08:47:33 AM EST

You present a very real logistical problem, but one that is solveable through either legislation, practice, litigation or a combination thereof.

You also failed to address any of the questions I asked.

Regards,

Lee Irenæus Malatesta

[ Parent ]

ok (none / 0) (#45)
by physicsgod on Thu Oct 18, 2001 at 06:20:51 PM EST

The problems I listed go to why internet business' are exempt from local taxes. Every locale is going to have an argument for taxing as many transactions as possible: They'd want taxes if the seller, buyer, server, backbone, etc. went through their jurisdiction. So it's up to the federal government (for reasons I'll get to in a bit) to set the circumstances for local taxation, in this case they decided to excempt internet business. This is the simplist solution, and it encourages internet shopping.

This is a case for federal regulation because in 99% of the cases the transaction is interstate, thus falling under Article I, Section 8, clause 3.

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]

okay, but . . . (none / 0) (#53)
by Anonymous 242 on Tue Oct 23, 2001 at 10:11:28 AM EST

My questions are still unanswered. Perhaps I should clarify and drill down a bit to help put them into perspective.

How is Intenet retailing qualitatively different from mail order? Every single aspect of Internet retailing has an entirely comparable parallel in mail order. The web server would be the order processing department. Transit of an order over the wire is not qualitatively different than placing a telephone order over copper or sending an order over USPS. As with ordering online, the warehouse from which the goods are shipped could be anywhere in the world.

And yet, to my knowledge, the US congress has seen no reason to eliminate sales taxes from mail order on a systemic basis. It seems to me that doing so is simply pandering to well financed lobbyists who want preferential treatment for one type of business over others.

Hence my request for someone to explain the need to exempt on type of business from sales tax laws while other types that are qualititatively identical are not exempt.

Why does it matter? The fact that the tax ban on Internet sales encourages Internet shopping is a non-sequitor unless it can be proven that Internet shopping is more beneficial to the overall economy than local bricks and mortar shopping. It seems to me that the opposite is true, that (all other things being the same) that spending money locally has much more of a positive impact on the economy in general. I'm willing to believe otherwise if the proponents of excluding Internet retailing can demonstrate otherwise, but until they do it is a non-issue.

Again we come back to the same point, we have the US congress pandering to well financed lobbyists who want preferential treatment for one type of business over others.

Finally, I still dispute that Article I, Section 8, clause 3 applies to local taxes concerning Internet businesses. Interstate commerce deals with what happens to goods in transit, not at their point of origin or at the point of sale.

Regards,

Lee Irenæus Malatesta

[ Parent ]

Explanations (none / 0) (#12)
by roystgnr on Wed Oct 17, 2001 at 04:47:31 PM EST

Well, a couple, anyway:

1. non-Internet businesses are not necessarily subject to local tax, and Internet businesses are not necessarily exempt from local tax. If you buy something over the internet from a retailer in your state, you are still supposed to (and I have seen net retailers enforce this based on shipping address) pay state sales tax. If you buy something via mail order from a retailer outside your state, I'm told you can usually get away without sales tax.

2. Because this is one of the few instances where Congress isn't abusing the "interstate commerce" clause. They're essentially prohibiting interstate tariffs, which IIRC was one of the main justifications for that clause in the first place.

[ Parent ]

My apologies, but your explanations don't work (4.00 / 1) (#35)
by Anonymous 242 on Thu Oct 18, 2001 at 08:40:57 AM EST

If you buy something over the internet from a retailer in your state, you are still supposed to (and I have seen net retailers enforce this based on shipping address) pay state sales tax. If you buy something via mail order from a retailer outside your state, I'm told you can usually get away without sales tax.
If we use mail order precedent, purchase of any item through the mail obligates the purchaser to pay any sales tax that may or may not apply. The same state 'law' for mail order is merely a practical convenience. State legislatures can not require businesses located out of state to file taxes on items sold and shipped to their state.
Because this is one of the few instances where Congress isn't abusing the "interstate commerce" clause. They're essentially prohibiting interstate tariffs, which IIRC was one of the main justifications for that clause in the first place.
Sales tax is not an interstate tarriff. A tarriff is a fee charged for simply moving goods across the state line. If I order a retail item from someone in another state, I only pay a tariff if the state has a law on the books that states something to the effect of: "retail sales where the goods are shipped to another state will be taxed at five percent of the retail price of the goods".

The only arguments I've seen that have any weight at all are arguments of practicality and they only hold weight because so precious few have spent any energy in dealing with the issues.

Regards,

Lee Irenæus Malatesta

[ Parent ]

Yeah, right... (4.50 / 12) (#3)
by trhurler on Wed Oct 17, 2001 at 04:14:19 PM EST

I'm against taxation. However, I'm not in favor of tax discrimination. You should not get a break from taxes that others do not merely because you sell goods using a web server instead of some other front end.

You say this will hurt the economy. My ass. The total amount of money spent online is so dwarfed by the amount spent via other channels that the impact will be unmeasurable. "One percent of all sales" do not occur on the internet by value, but rather by transaction quantity, and the average transaction on the net is tiny. You still pay taxes when you buy a car "on the net." You can't buy real estate on the net. You aren't buying large appliances on the net. Yadda yadda.

You say this will hurt the people who didn't design their software to handle taxes - in a world where there are taxes, if you based your business on there being no taxes just because you were exempt for the moment, then you clearly are not very bright. Stupidity is a valid reason for a business to fail.

You talk about how this will hurt, say, your household's current methods of buying. Well, that may be true, but in what way does your existing practice justify discriminating among businesses based on their method of sale?

Finally, and most importantly from the standpoint of addressing falsehoods, the point of representation. This is total bunk. The internet is not an entity unto itself which is to be taxed. YOU are to be taxed, when you buy things - just as you already are. YOU already have representation. The medium is irrelevant; your question is akin to asking who represents "brick and mortar."

I'd be in favor of outright eliminating sales taxes nationwide. I am not in favor of discriminating against or in favor of some businesses at the expense of others depending on their business models. That's just plain wrong; in addition to the evil of taxation, it tacks on the evil of a government that does not treat everyone equally.

--
'God dammit, your posts make me hard.' --LilDebbie

Well... (3.50 / 2) (#4)
by Ken Arromdee on Wed Oct 17, 2001 at 04:23:20 PM EST

One of the problems with taxing Internet commerce is that the Internet goes everywhere. How in the world can an Internet retailer keep up with the tax laws of all the different jurisdictions in the nation with different tax codes?

[ Parent ]
International (4.50 / 2) (#6)
by codepoet on Wed Oct 17, 2001 at 04:30:27 PM EST

And the obligatory statement about international stores. What about import taxes?

"We're going to find out who did this and we're going after the bastards." --Sen. Orrin Hatch, R-Utah
[ Parent ]
Agreed (4.00 / 3) (#7)
by trhurler on Wed Oct 17, 2001 at 04:31:04 PM EST

There are certainly very real problems involved, and one way or another(I prefer my "eliminate sales taxes" method, but that seems unlikely,) they have to be dealt with. However, it is blatantly obvious that even the pro-tax crowd does not want to put people out of business; that prevents them from getting their money, after all! So, you can bet that one way or another, such issues will be hammered out. Probably by some stupid law.

I still say just get rid of all the damned taxes, and you have no problem. Except, of course, that you then cannot use my money to provide billions of dollars to McDonalds so it can open restaurants in Outer Slobolsgebovia and crap like that.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
One possible solution (none / 0) (#23)
by aphrael on Wed Oct 17, 2001 at 06:55:22 PM EST

is to base the tax on where the item was sold from (eg., where the company selling the product is located).

[ Parent ]
Already in action (none / 0) (#46)
by _cbj on Thu Oct 18, 2001 at 06:42:57 PM EST

That's how it is in Britain. Probably lots of other places too, though I have no intention to back that guess up.

So, while I'm in the thread, will this mean people outside America still don't pay tax on things bought from there? Or did we already, or what?

[ Parent ]
American Taxes (none / 0) (#48)
by codepoet on Thu Oct 18, 2001 at 10:21:47 PM EST

There are currently no taxes (except for customs in international sales) on any Internet purchase. This bill will keep it that way.

"We're going to find out who did this and we're going after the bastards." --Sen. Orrin Hatch, R-Utah
[ Parent ]
Minor quibbles (none / 0) (#22)
by aphrael on Wed Oct 17, 2001 at 06:53:57 PM EST

In general I agree with you that tax discrimination is bad and that, technical problems aside, in theory sales on the net should be taxed just like other sales.

Some minor quibbles, though:

You aren't buying large appliances on the net

On the contrary, I have *only* ever purchased computers on the net --- and those are typically close to $3K, given what i tend to purchase. On price, at least, they qualify as large appliances.

The total amount of money spent online is so dwarfed by the amount spent via other channels that the impact will be unmeasurable

With possible exceptions in Seattle, the SF Bay Area, and Boston.

[ Parent ]

Sorry thurler (4.25 / 4) (#26)
by Sheepdot on Wed Oct 17, 2001 at 10:02:16 PM EST

Sorry man, but I gotta bite a like-minded thinker.

As much as I don't like sales taxes, I hate income tax even more. Tax someone for working? Who the hell came up with that? (I guess the same goes for buying, both promote the economy)

I've seen some work done on how to eliminate taxes as a whole and by far the most intriguing would be eliminating the American income tax and raising the sales tax. This of course could only be done if the US had a libertarian or a really libertarian-minded Republican in office, but it'd be done gradually.

At a point when people are making more money, they won't feel a hit by paying more sales tax. The government, run by the libertarian, could have a 2 to 3 year window to cut the useless federal programs, (by the way, which government program is your favorite?) and slowly raise the sales tax.

At this point, those with lower incomes who spend little money on anything but food (untaxed) would see a rise in their economic abilities, they'd be able to afford more, and even the person collecting the welfare check would see how great of a life they could be living.

In the meantime, business, now free of the double-pay of the income tax, would be obligated to cut prices, offsetting the rise that the higher sales tax would be bringing.

Essentially what will happen is this:
Income tax goes away, so people take home more money.
Prices rise then fall since businesses aren't paying the double tax (translated to single since the employee's tax is taken out) for their employees.
We are now at a similar level of taxation, but it has been transferred soley to sales tax, remember a libertarian president (who is the only one that would do something like this) would be cutting programs right and left, so the sales tax itself might not be rising at the same level

Now here's the kicker. If the US does this, *so will every other country in the world*. Why? Because we dont have an export tax. American goods overseas would be horrendously cheap, and no country would sit idly buy while the US outsells their own businesses.

At this point, exporting and importing will be increasing, so excise tax and tariffs will be increasing as well. We all know the federal government can function under 100 billion a year, and it wouldn't be too hard to get there at this point.

Eventually the sales tax itself could be eliminated, and state sales tax would be the only thing left. At this point there will be some states that may eliminate income and sales tax as well, but there will obviously be some that increase it, for lack of federal funding for all their pet projects.

So in other words, I honestly think the way to solve the problem would be to get rid of income tax and the rest first, then gradually move sales tax down. I think it can be done sufficiently, and would no doubt be another thing the rest of the world will hate us over once businesses are selling goods overseas like mad, forcing other countries to implement either similar tax laws, or did their own graves with their citizens' unrest.


[ Parent ]
Lower export prices? (4.00 / 3) (#28)
by Pseudonym on Thu Oct 18, 2001 at 01:38:52 AM EST

If the US does this, *so will every other country in the world*. Why? Because we dont have an export tax. American goods overseas would be horrendously cheap, and no country would sit idly buy while the US outsells their own businesses.

Yes and no. Some American goods would become horrendously cheap, and some would become horrendously expensive. After all, presumably a Libertarian president would also stop subsidies and other forms of protectionism, right?



sub f{($f)=@_;print"$f(q{$f});";}f(q{sub f{($f)=@_;print"$f(q{$f});";}f});
[ Parent ]
Ha. (none / 0) (#37)
by Sheepdot on Thu Oct 18, 2001 at 10:37:31 AM EST

You are saying that subsidies currently keep prices low? That's about the most ridiculous thing I've heard yet. The whole idea of subsidies is to prevent a high supply, and thus a low price, which ruins the whole idea of a free market.

With no income and related taxes, the ability to produce will be greater and greater, indeed the only thing to worry about would be the gradually rising sales tax. But if you aren't paying an income tax, that's hardly a concern.

Not only that, but for the first time in a long time, selling goods overseas will not only be an option, the demand for those goods at such a low price would be great. Greater income amongst the population without the tax also means the church-going members will be obliged to tithe more, and the churches in turn will be better able to offer charity services. Many of these same services are the ones that could buy the extra cheap goods from farmers, and give them to the needy overseas.

We don't have anything to lose with a Libertarian president. And I'd place my bet on a Libertarian getting elected over a watermelon any day. If you don't get the joke, think colors.


[ Parent ]
Protectionism takes many forms (3.00 / 1) (#40)
by Pseudonym on Thu Oct 18, 2001 at 12:33:01 PM EST

The whole idea of subsidies is to prevent a high supply, and thus a low price, which ruins the whole idea of a free market.

One form of protectionism is to provide an incentive for producers not to produce, thus creating artificial scarcity. I assume that's what you're referring to here. It's not the only form.

Another is colloquially known as "dumping": subsidising exports so that the export price is lower than the domestic price in the target country. (This may take the indirect form of subsidising producers on the condition that they reach certain export quotas: effectively, you get subsidy if you export enough. What happens in practice is the subsidy pays for the dumping.) This has the effect of artificially lowering the price so that domestic producers in the dumped country are driven out of business.

Another form of protectionism (and a common approach to combatting dumping) is imposing import tariffs or other kinds of import barriers. This has the effect of raising prices on imported goods, or sometimes banning imports altogether, to give domestic producers an artificial advantage.

A Libertarian president would, presumably remove these practices too which, prisoner's dilemma being what it is, make the US domestic market ripe for dumping.

As a matter of interest, what is Libertarian policy towards the GATT?



sub f{($f)=@_;print"$f(q{$f});";}f(q{sub f{($f)=@_;print"$f(q{$f});";}f});
[ Parent ]
Dumping is long term suicide (3.00 / 1) (#41)
by trhurler on Thu Oct 18, 2001 at 12:46:36 PM EST

Let them dump. This means that:

A) They take money from people. Some is "lost" to administration costs. Actually, quite a lot. Granted, this money goes back into the economy eventually, but a significant part of it goes into retirement accounts and so on that are often invested in foriegn assets for a long term.

B) They provide the money via various programs to allow sale of products at lower prices. Again, quite a lot is "lost" to overhead, fraud, and so on. The average government program ends up putting roughly 1/10th of the money "invested" in it to direct use in whatever capacity it is intended.

C) Goods are sold "cheaper." Unfortunately, a good part of the cost that is being defrayed by the government's subsidies is the cost of taxation - not just taxes, but accountants, legal wrangles, and so on. Short term, the company may thrive if it is careful where it sends goods and when, but long term an untaxed economy will produce lower prices than a taxed economy can, even with dumping.

Government subsidies are just another way to disguise the lossage that occurs due to taxation of your citizens by trying to give them an edge over their "foriegn competitors." The carrot, if you will. (The stick being the legions of armed goons and prison guards that await you if you refuse to pay.)

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
But short term murder. (none / 0) (#50)
by physicsgod on Fri Oct 19, 2001 at 02:43:10 AM EST

One of the dangers of dumping is that it could lead to the dismantleing of domestic production. If country A is dumping steel into country B eventually all the foundries in country B are going to close. In order for country B to begin producing steel a significant capital investment would be required.

Also it seems your argument is based on the assumption that the dumping subsidy is funded by taxes on the subsidized industry. This isn't necessarily the case. While dumping one product overseas the money can be made back by taxing some other industry. The net result would be to "transfer" prosperity from one industry to another.

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]

Half true (none / 0) (#52)
by trhurler on Fri Oct 19, 2001 at 07:18:01 PM EST

Notice that for all the bs to the contrary, a modern economy is not dependent on any one industry. On the other hand, most economies that try "dumping" are dependent on either one or a small handful of such industries. In general, nobody but trade wonks seriously believes that the US or any European nation engages in government sanctioned dumping, but it is common practice in banana republics.

Also notice that even if a government taxes everyone equally and gives to some particular industry, or totally exempts that industry and then gives them other peoples' money, my scenario still holds true over the long run; that government's country will still face cheaper prices for all the stuff it isn't dumping, which over time leads to the dominance of the country not dumping, if taxes do not exist or are very, very low in the latter country. Of course, this is all in "all else being equal" mode, and hence is a simplification, but the point remains.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
Riddle me this (none / 0) (#44)
by Sheepdot on Thu Oct 18, 2001 at 04:56:50 PM EST

Another is colloquially known as "dumping": subsidising exports so that the export price is lower than the domestic price in the target country.

So the elimination of *both* kinds of subsidies isn't going to help the situation more?
1)Government spends less (eventually none) on subsidies and dumping,
2)Since government spends less, it is collecting less from income taxes (remembering this is gradual) and more from sales taxes.
3)Since farmers/companies aren't paying income tax they can spend more money on price reduction strategies (which they will essentially need to do at home)
4)Lower prices means that government dumping isn't needed.

There are some problems with the whole "income tax to sales tax" idea, but for the most part it is a good start at eliminating taxes as a whole.

I don't think subsidies are the problem at all, but rather how to move to a sales tax without screwing up the economy. It'd have to be very gradual, and a four year term as president or majority in congress probably wouldn't be enough.

[ Parent ]

To get back on topic... (none / 0) (#49)
by Pseudonym on Fri Oct 19, 2001 at 12:11:55 AM EST

Your original assertion was that having a Libertarian economy would force other countries to move to a Libertarian economy too, by virtue of lower prices for US-produced goods.

I maintain that this is not the case for the following reasons: first, it would remove protectionism which is the only thing that props up some industries, and secondly, you don't appear to understand other countries very well.

There are some industries which a given country can never compete freely in no matter what kind of economy. For example, Egypt will never be able to produce maple syrup economically. Switzerland, for example, cannot produce tomatoes cheaper than countries in North Africa, no matter what the tax situation, because of the cost of running a greenhouse is much higher than the cost of running a field outside in the sun. Without import barriers, the local tomato producers would be out of business.

Personally, I happen to think this is wrong: import barriers are un-free trade, and they prevent transitional economies from developing further. I assume we agree that this kind of protectionism is a bad thing, for whatever reason. However, moving to a Libertarian economy in Switzerland would not have the effect of boosting the Swiss tomato industry. It would kill it. Tomato producers outside Switzerland would have no incentive to become Libertarian, because their relative prices are fine as they are. I don't know enough about the specifics of the local US economy to know exactly what the US government protects via government subsidy, but I assert that transplanting your idea to countries that I do know a bit about wouldn't work.

(Note: You could, if you wanted to, assert that a Libertarian economy would be great for the US but bad for the rest of the world and I wouldn't have an argument against that, not knowing enough about the US situation. So feel free to assert that and this discussion will be over.)

Secondly, removing import barriers leaves you ripe for dumping. Thurler asserted that dumping hurts the producer, and it does, temporarily. Oversimplifying a lot: For a successful dump, all you need is for the dumper to begin with more money than the dumpee. Dump until the dumpee is out of business, or at least until enough producers have gone out of business such that they can't meet demand, at which time you are in the monopoly position and can recoup your costs at will. If a newcomer rears its head (and you'll know in advance, because most businesses take time to develop), raise prices until the newcomer hits the market, then start dumping again. If you're a clever manager, you will end up ahead.

Again, this may or may not apply to the US specifically, of course, because the US has lots of money right now, but most countries have some industries which couldn't survive a dumping attack without import barriers. Maybe the Japanese consumer electronics industry could successfully attack the US consumer electronics industry. Not sure.

Thirdly, for those industries which will survive and produce lower-priced goods (and there would be some, I do agree with that), if countries want to protect their domestic markets against cheaper US goods, of course they won't be forced to move to a Libertarian economy. They'll just raise import barriers! Simple, expedient, lucrative and politically popular. Sure, the locals may pay higher prices for goods, but who cares. At least they have jobs so they can earn money to pay for those goods. See, Libertarian economic theory depends on the market being truly free, but in the global economy, that's not necessarily true. Just like in the prisoner's dilemma, the incentive is for the non-Libertarian country to defect.



sub f{($f)=@_;print"$f(q{$f});";}f(q{sub f{($f)=@_;print"$f(q{$f});";}f});
[ Parent ]
oh, oh, pick me! (2.00 / 2) (#33)
by eLuddite on Thu Oct 18, 2001 at 04:17:07 AM EST

(by the way [,trhurler,] which government program is your favorite?)

War.

---
God hates human rights.
[ Parent ]

Mail-order companies? (5.00 / 3) (#8)
by Dlugar on Wed Oct 17, 2001 at 04:31:25 PM EST

Just out of curiousity, what are the taxation policies for mail-order companies? You've still got the same things to choose from: location of the purchaser, location of the seller, location of the warehouse where the things ship, etc. You've got the same problems with overseas orders and shipments and so forth.

So what are the current laws covering these sort of things?

Dlugar

"Presense" (5.00 / 2) (#15)
by ucblockhead on Wed Oct 17, 2001 at 05:01:15 PM EST

The current laws for mail order companies are very complex, but the gist of it is that if a company has a "local presence", then they have to charge sales tax. Otherwise, they don't. Sometimes "local presence" means the same state, other times, it might mean the same county or even just the same city. It is confusing, because the rules themselves are set by the states or county.

That's why you sometimes see catalogs that say something like "enter sales tax if in WY,CA,TX,VT,OR", or something similar.

The rules are so complex, that retailers often throw up their hands and charge extra tax in places where they don't really need to.

One of the big arguments is how "local presence" applies to the internet. Barnes and Nobles was very pissed off because Amazon, not having a storefront, did not have to charge sales tax anywhere. They sued over this, at one point, though I believe the end result was to all Barnes and Nobles to not charge tax on their site.

If the moratorium on "e-commerce" tax goes away, that argument is likely to erupt again, depending on how things go. One reason for the "local presence" rules is that it is very difficult for a small, two-bit operation to deal with taxes in the thousands of different jurisdictions in the country.
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This is k5. We're all tools - duxup
[ Parent ]

Use tax (none / 0) (#16)
by finial on Wed Oct 17, 2001 at 05:11:28 PM EST

Also, most taxing authorities (states, counties, cities) that have a sales tax also have something called a "use tax" which applies to any item to which a sales tax was not applied, regardless of where it was purchased. It's just like a sales tax, but is paid at the other end, that is, by the buyer, not the seller. If, for example, a resident of Massachuetts (which has a 5% sales and use tax) travels to New Hampshire (which has no sales or use tax) to buy some item (basically, anything except a car), the buyer is required to report that purchase and pay the 5% sales and use tax on the item when required (generally at the end of the year but can be monthly if you frequently make big purchases). It's very hard for the state to enforce which may be why you never heard of it, but it is the law. Cars are treated differently in Mass. You pay the sales and use tax when you register the car, not when you buy it, so they get you no matter where you bought it.

[ Parent ]
However (none / 0) (#17)
by epepke on Wed Oct 17, 2001 at 05:13:37 PM EST

At least some states want you to pay taxes on goods that you purchase in other states. I know this is the case in Florida, because they had TV ads telling people to do it. I also know that in New York, it is the responsibility of the employer to pay the taxes, so adding them to a bill is a technically legal marketing ploy.


The truth may be out there, but lies are inside your head.--Terry Pratchett


[ Parent ]
asD (4.00 / 1) (#31)
by Delirium on Thu Oct 18, 2001 at 03:55:03 AM EST

AFAIK it's not only a storefront - any sort of presence counts. This is why most online stores charge tax for California residents (because their warehouses are mostly in California).

[ Parent ]
California law (none / 0) (#42)
by ucblockhead on Thu Oct 18, 2001 at 02:32:31 PM EST

It varies by jurisdiction, which is part of the whole problem.
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This is k5. We're all tools - duxup
[ Parent ]
Minor correction (none / 0) (#47)
by skullY on Thu Oct 18, 2001 at 07:35:41 PM EST

That's why you sometimes see catalogs that say something like "enter sales tax if in WY,CA,TX,VT,OR", or something similar.
Sorry for being (probably) overly pedantic, but you won't ever see Oregon (OR) in one of those lists. It's one of two states with no sales tax whatsoever (I forget what the second is). Incidentally, it's also one of two states with no self-serve gas (New Jersey being the other, IIRC).

Getting back to the article's topic, I personally don't see taxation on this sort of thing as a problem, I just think it needs to be tackled correctly. Most areas already have Use Taxes (as others have pointed out) so we just need a good way to enforce them. The problem lies in enforcing them without violating rights.....

Possibilities I've pondered since reading this include making people file these with their state tax-returns, with penalties applying if you get audited and found to have failed to report large (Say, greater than $10k) ammounts of purchases that weren't taxed. Make it something that is not grounds for an audit, but can be used should it be found in an audit. Much like seatbealt laws where (In California, at least) they can't pull you over for not wearing a seatbelt, but if they pull you over for another reason and you're not wearing the belt, they can slap the fine on.

This, IMO, would be a good way for states to levy their sales tax on their citizens, without putting undue burdon on the merchant who has no operations in your state. Just imagine a merchant having to file reports with the taxation boards in 50 or 60 different localities besides their own.



--
I'm not witty enough for a sig.
[ Parent ]

They're a joke. (4.00 / 1) (#18)
by Happy Monkey on Wed Oct 17, 2001 at 05:18:46 PM EST

If you aren't charged sales tax by the catalog company, you're supposed to keep track of your purchace prices, calculate sales tax for your home state, and add that to your state income tax form.

In other words, If you aren't charged sales tax by the catalog company, you don't pay sales tax.
___
Length 17, Width 3
[ Parent ]

When I saw the title (none / 0) (#24)
by wiredog on Wed Oct 17, 2001 at 07:05:05 PM EST

I thought this was about the situation in Washington DC.

The idea of a global village is wrong, it's more like a gazillion pub bars.
Phage

Taxed and Unrepresented (none / 0) (#51)
by maveness on Fri Oct 19, 2001 at 06:29:57 PM EST

I have a hard time getting worked up over whether online e-tailers should have to collect/pay sales tax. Most national e-tailers already charge sales tax according to the purchaser's declared location (or shipping destination if applicable). I don't' see any reason why this should be handled differently than mail order catalogs.

By the way, I live in Washington, DC -- home of the federal government and a disenfranchised population. I can vote for the President (we finally obtained that right, after a struggle), but not for a Senator or Representative. My mayor and local government are very limited in powers by Congressional oversight committees that the citizenry had no say in electing. And I have all the pleasures and burdens (can you say "terrorist bullseye"?) of living in my nation's capital.

Yet, I pay full federal income taxes. And high city taxes. Didn't the colonies have a revolution over something similar back in 1776?

*********
Latest fortune cookie: "The current year will bring you much happiness." As if.

No taxation without representation. | 53 comments (41 topical, 12 editorial, 0 hidden)
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