One alternative would be a savings exempt income tax, where taxpayers exempt all savings from their taxable income, resulting in uniform taxation of the consumption base. But the trump card of those who oppose new Internet tax authority for states should have been tax competition. Most people don t realize it, but nothing is stopping states from leveling the playing field on sales taxes. In other words, states purposefully exempt their exports from sales taxes. We could treat Internet sellers that way.
Politicians call that a race to the bottom.
But it s really just healthy tax competition. The politician s answer to this problem is to have Washington step in and oversee a multi-state tax cartel. As OPEC raises your oil prices by undercutting competition among oil producers, the Internet tax cartel will remove the pressure on states to keep taxes low for fear of losing businesses. By closing the escape hatch from the taxman, the SSTP will allow states to raise taxes and increase spending. For those who support limited government, the best hope on the Net- tax front may now be that Congress will fail to act.