September 17, 1999

Warning: The following column might be objectionable to public employees and is intended for mature bureaucrats only.

The opening salvos of the war for Internet taxation have been fired and from this point on, government-spin casualties will mount at alarming speed. Our local and state governments are salivating at the prospect of taxing electronic commerce. Expect their please for money to be as desperate as a college student calling home collect.

While e-commerce is growing very quickly, there is a precedent in the rate of mail-order growth during the early eighties. Then, as now, state and local taxing authorities were predicting doom at the anticipated revenue losses, but the crisis never happened.

Even casual shoppers like the tactile pleasure of touching merchandise and trying on clothes, but the true shopaholic needs the instant gratification of a local store "fix." But assuming there will be a proven drop in (local sales) taxes, would that necessarily mean a drop in public funds? We've lived through the greatest model of that scenario right here, which of course is Proposition 13. Opponents' propaganda was as dire as Chicken Little's warnings--but what really happened after Howard Jarvis' revolution?

Between 1980 and 1992 California's budget increased 75 percent in real dollars, after adjusting for inflation. The libertarian Cato Institute studied the decade that followed Prop 13 and found out California residents' incomes went up 50% faster than the national rate and twice as many jobs were generated here than in the country as a whole. Furthermore, our state and local taxes as a percentage of personal income are still slightly above the national average.

What's a city to do? How about eliminating or reducing the local sales tax? Ohio officials are considering just that. A community with no or low sales tax would pull in shoppers from a huge area. Cutting taxes on major Internet sales items like software, music, and books would be especially smart for existing local retailers and for the coming Barnes & Noble store.

How many Fairfield city council candidates can think outside the stockroom box to see the potential business and property tax boon from an anti-tax strategy?

© 1999 Cynthia Hahn