-Caveat Lector- ------- Forwarded Message Follows ------- The DLC Update Tuesday, September 21, 1999 ************************************************************************* In this Update: * Idea of the Week: The "Software Solution" for the Internet Sales Tax * Under the Budgetary Big Top * Gore On Universal Health Care New Democrat Idea Exchange: Discuss the Idea of the Week and see what other New Dems are saying at http://www.dlc.org/idea/discussion.htm . New comments are posted weekly. ************************************************************************* ***Idea of the Week: The "Software Solution" For The Internet Sales Tax*** The current growth and future explosion of "e-commerce" (electronic sales of goods and services via the Internet) is a critical element in the development of the New Economy. E-commerce gives consumers greater choice and more competitive prices. It will help produce a breakthrough in the number of Americans who find it useful to go online, and have enormous implications for the "digitization" of daily life. But e-commerce is also threatening to reduce state and local tax revenues, creating a dilemma for policymakers. On the one hand, state and local regulation of e-commerce--and even more, regulation of Internet access--could inhibit the development of the digital economy. On the other hand, the migration of sales from face-to-face transactions to remote media-- including not only e-commerce but telephone and mail-order sales--is eroding the revenue base that finances public schools, policing, infrastructure for economic development, and other critical services. Recognizing this problem, Congress last year enacted the Internet Tax Freedom Act, which imposed a moratorium on taxation of e-commerce until 2001, and established a commission to make recommendations on its future development. The commission met this past week in New York and amidst a flurry of activity on both sides agreed to solicit tax proposals from state tax officials and other groups. But the heated deliberations are in danger of degenerating into a dialogue of the deaf between those who fear sales taxes will kill e-commerce, and those who fear e-commerce will kill state and local governments. Fortunately, as Rob Atkinson and Randolph Court explain in the new PPI paper released last week, "Internet Taxation, A Software Solution," (available at http://www.dlcppi.org/texts/tech/internettax.htm) there is a "third way" available: the development and dissemination of computer software that can make fair taxation of the Internet and other remote sales easy and efficient. The software, which should be available for free downloading by retailers, would immediately identify tax rates by the address of the buyer, and would electronically remit sales taxes owed to the proper jurisdiction, at the click of a mouse. If publicly promoted--i.e., by the Federation of Tax Administrators --this software would become available almost instantly. Furthermore, it could be offered to catalog and phone-sale retailers who are also currently outside the normal pattern of sales taxation. This last point reinforces the need for Congressional action to make taxation of all remote sales fair and rational. Under current law, states and localities can tax mail-order or phone sales only if the seller has retail outlets within their jurisdiction, on the theory that the "point of sale" is the seller's location, however remote. "Virtual sales" on the Internet are making this "point of sale" doctrine increasingly archaic, and unfair. It's time to shift to a system where the "point of sale" is the buyer's location, not the seller's, no matter how the sale is conducted, by Internet, phone, mail or in person. The "software solution" makes that shift possible. Some libertarians oppose this approach on grounds that e-commerce creates a tax-free paradise. They are happy, not worried, that a shift toward virtual points-of-sale will make it impossible for states and localities to tax transactions. A recent letter from a group of Congressional Republicans to the commission on e-commerce taxation essentially adopts this posture, on grounds that making it easier to tax electronic sales represents a "tax increase." This argument is disingenuous at best. Maintaining the ability to tax commercial transactions wherever they occur hardly represents a "tax increase." And celebrating the erosion of a major state and local revenue source only makes sense if you are willing to identify alternative sources, or specifically recommend radical spending decreases. Conservative opponents of taxing of remote sales are not willing to do either. Let technology create a level playing field for all sales and make commerce more convenient and efficient for sellers and buyers alike. ***Under the Budgetary Big Top*** Under Republican Congressional stewardship, federal budgeting is beginning to resemble a three-ring circus. * In Ring #1, you have Senate Republicans toying with the idea of creating a thirteenth month of the fiscal year to provide more room for domestic spending. * In Ring #2, House Republicans talk about taking back welfare block grant funding from the states, and postponing disbursement of earned income tax credits for the working poor to provide more room for domestic spending. * And in Ring #3, a variety of Republicans, including the front-running candidate for the GOP presidential nomination George W. Bush, are claiming that there's plenty of federal funding available for a $800 billion tax cut. All these performances reflect P.T. Barnum's belief that "there's a sucker born every minute." Republicans claim they can afford to "give the people their money back"--"the people" being defined as the high earners who have done conspicuously well under current tax policies during the "Clinton boom"--because of projected federal budget surpluses. These surpluses are contingent on whether legislators abide by discretionary spending caps placed on annual appropriations established by the 1997 Balanced Budget Agreement. But under the budgetary Big Top of 1999, Republicans are performing a variety of high-wire acts and low farces to get around the caps, the very basis of their cash-back offer to the American people. GOP appropriators have already conducted a side-show shell game in classifying routine federal spending--such as the appropriation for the 2000 Census--as "emergency" spending. They also evaded budget caps by massively transferring funds from the essential Labor-HHS-Education bill to everything else, on the cynical theory that Congress would find a way to fund education and training programs no matter what. Many Congressional Republicans thought they would get out of this self-constructed box in a deal with the President and other Democrats where they would pretend to grudgingly accept an abandonment of appropriations caps. But now they must abandon them on their own. Congress should forget the big tax cuts and get honest about domestic spending while setting real priorities, especially on basic research, technology, education and training. Then they could adjust the appropriations caps accordingly. Robbing the poor to fund other needs, while pretending there's money to spare for cutting taxes for high earners, is morally and fiscally irresponsible. The GOP should take down the tent, send out the clowns, and stop treating the American people as suckers. ***Gore On Universal Health Care*** At a time when Congress is obsessed with regulating the health insurance of Americans who already have access to care, it's refreshing to see that Vice President Al Gore has released a proposal to move toward universal health coverage, without relying on a universal entitlement to government-provided health care. Gore would move towards universal coverage from two directions: (1) changing the federal-state financial formula for child health insurance to push states towards maximum coverage; and (2) providing a partial, and refundable, federal tax credit for individuals purchasing private health insurance. Both proposals make eminent sense. The first makes federal child health insurance grants contingent on states' willingness to actually cover the uninsured, so that states like George W. Bush's Texas can no longer get a fiscal windfall while leaving kids uninsured. The second directly helps individuals buy private health insurance instead of exclusively relying on their employer's proposal. Gore's rival for the Democratic presidential nomination, former Senator Bill Bradley, has repeatedly said he differs from Gore in supporting universal health coverage. Gore now has a proposal. It's time for Bradley to counter with specifics. -------------------------------------------- Subscribe and Unsubscribe -------------------------------------------- You may subscribe to this list at any time by sending an e-mail to [EMAIL PROTECTED] with "SUBSCRIBE NEWDEMNEWS" in the body of the message. You may leave the list at any time by sending an e-mail to [EMAIL PROTECTED] with "SIGNOFF NewDemNews" in the body of the message. ---------------------------------------------------------------- Membership is your key to unlocking doors to the DLC-PPI world of people and ideas. 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