The Critical 'I'

Read. React. Repeat.

Monday, May 03, 2004

THE CASE FOR ONLINE TAXATION
Technocrats like to imagine that government has nothing useful to offer to the tech community. That is, until they go crying to Washington to restrict visas for foreign workers, and put a curb on codework outsourcing to India...

More than anything, regulation and taxation for online services and commerce are considered must-avoids, blemishes that would ruin the pristine nature of the new medium. The theory is that any tax, even minor, would spoil the party by killing growth in this sector, another victim of the suffocating reach of government.

BusinessWeek's Howard Gleckman argues that this is so much horse-hockey:
Trouble is, nobody has been able to explain why these hot new technologies need government subsidies and tax breaks. They seem to be doing just fine, thank you, without new giveaways. By March, 2004, 41.5% of U.S. households with Internet access already had broadband, according to Nielsen/NetRatings. And the trend is growing by about 1% a month. Indeed, customers are signing up about as fast as providers can build the infrastructure to support them...

Think about it. State and local sales taxes average about 6.5%. For low-cost dialup service, that adds about 65 cents to a user's monthly bill. For $40 broadband service, it might add $2.60.

That may chase away a few potential customers, but it seems unlikely that many will abandon what backers insist is an essential technology for the cost of a slice of pizza. Are consumers who happily spend $100 a month for cable TV, $40 for cell-phone service, and still more for their TiVo and their satellite radio subscriptions, really going to end up in the ditch beside the digital highway over another couple of bucks?