Cybertax: A Digital Divide of Historic Proportions

One of the more interesting tax policy debates of the internet age is heating up, as Congress considers the ban on internet access taxation. The ban is due to expire in November. The current internet sales tax regime, governed by case law rather than legislation, may also come under discussion. State and local governments have long argued that the federal access tax ban deprives them of something on the order of $10 billion annually and that the ban runs afoul of traditional notions of federalism. The virtual -- so to speak -- certainty that the ban will be extended speaks to an ideological evolution in the United States over the last generation. Mark Murphy, Fiscal Policy Analyst , Department of Research and Collective Bargaining Services of American Federation of State, County and Municipal Employees (AFSCME) testifying on the issue before the House Judiciary Committee's Subcommittee on Commercial and Administrative Law in May, put the issue in historical context: As our economy and society evolves. [B]y definition more and more economic activity will be innovative and advanced. It cannot all be made tax-exempt. One can imagine that if this approach to tax policy had been taken earlier in our history, then manufactured goods, or the automobile and gasoline, or airline service would be 'tax free,' while only agriculture would be left to bear the tax burden. As Citizens for Tax Justice has asked: "Should Thomas Edison have Lobbied for a Moratorium on Taxing Electric Devices?
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