County News

Tax structures created in the 1930s are hobbling and will eventually cripple state and local governments if adjustments aren’t made to reflect today’s information-based economy, says Tom Bonnett, public policy advisor and speaker/panelist at the July 19 General Session discussion on Internet taxes.

And why in an Information Age – built on networks not assembly lines – has the federal government kept its hands off the Internet? Three possible reasons says Bonnett.

First, there’s the "real politik" approach: Campaign contributions have kept the tax man at bay. Next, there’s market ideology: The economy functions better when government keeps its hands off. And finally, the most ideal assumption: It’s in the national interest and promotes the country’s competitive advantage to refrain from any Internet regulation or taxation.

Cook County (Ill.) Commissioner Carl Hansen, vice-chair of the NACo Taxation and Finance Steering Committee, debates the taxing of Internet sales at a General Session July 19.

What’s the right answer? All of them Bonnett says.

Bonnett’s remarks set the stage for a panel discussion on whether state and local governments should be able to require the collection of sales taxes on goods sold through the Internet. Joining Bonnett as panelists were Carl Hansen, Cook County (Ill.) commissioner and Paul Russinoff, director, State and Public Policy for America Online (AOL).

Hansen and Russinoff dueled briefly over how much state and local governments were losing in revenues because of uncollected sales taxes on Internet-sold goods. Hansen claimed $4 billion; Russinoff, citing a recent Ernst and Young study, said the loss in 1998 amounted to less than one-tenth of one percent of state sales tax revenues, or about $170 million.

Regardless of the difference in numbers, Russinoff said AOL wants to see a "fair, forceful system for collecting sales taxes." Bonnett said no one wants to tax the Internet. The question is "Do we tax transactions made on the Internet?"

There was no question in Hansen’s mind about governments’ need to collect sales tax on goods sold over the Internet: "If you want a stop sign at an intersection, you need revenues." Hansen, who said no one wants to harm businesses, also pointed out that "revenues will be collected one way or the other." The "other" being more onerous perhaps than business would like, he said.

Bonnett predicted that the private sector would "sign into a deal, if it covers everyone else."