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Fairness major issue in Internet taxation debate

By B.J. Plasket
The Daily Times-Call

DENVER — Gov. Bill Owens continued to expand his role as a national voice against taxing Internet purchases on Friday, while colorful anti-tax crusader Grover Norquist called taxing online purchases a money grab by “corrupt” and “incompetent” politicians.

Owen’s speech — as well as short but more-polite-than-expected debate between Norquist and Maureen Reihl of the American Retail Federation — were part of a day-long seminar on Internet sales taxes sponsored by Owens’ Center For A New Century.

Reihl, who called for the taxation of online purchases based on the argument that all retailers should be on equal competitive footing, was in the minority at the seminar.

Owens, meanwhile, attacked the fairness of states collecting taxes from consumers in other states while providing no services to those consumers.

“When the Wal-Mart in my neighborhood collects sales taxes, it also receives police and fire protection and may buy water from a local government,” the governor said. “When an online retailer collects sales taxes from thousands of miles away, that retailer isn’t receiving any benefits from Colorado, and that is unfair.”

Owens said taxing Internet purchases also would dampen enthusiasm for the online economy and would create a negative economic impact.

“The Internet is one of the most vibrant sectors of our economy,” he said, rejecting the notion that consumers shop online to avoid taxes.

“Online purchases usually involve shipping charges,” he said. “That offsets the 5, 6 or 8 percent that would be collected in sales taxes. The online shopper may actually spend more.”

Norquist, the Harvard-educated, self-proclaimed “right-winger” president of the organization Americans for Tax Reform, said “corrupt and incompetent” local, state, and national politicians who call for online sales taxes are less interested in fairness and equity than they are in getting their hands on an estimated $440 billion that would end up in state coffers over the next decade if online sales were taxed.

“Governor Owens sees the Internet and says, ‘We could sell used state vehicles on e-Bay and save money,’” Norquist said. “Other politicians look at the Internet and say, ‘Let’s tax it.’ We need more Governor Owenses.”

Owens said the billions of dollars that could be generated by online sales taxes would be better off in the hands of the private sector.

Federal law currently prohibits state and local sales tax on items bought online or in catalogues, but Owens said a national movement to “streamline” sales tax collections nationally is gaining momentum.

Norquist likened that movement’s arguments to those put forth years ago that predicted disaster for retailers when catalogue-retailers were exempted from sales taxes.

“It didn’t happen,” he said, calling online sales taxes a “coward’s tax.”

“These legislators are saying, ‘I’m going to tax people in other states who can’t vote here,’” he said.

Reihl rejected the idea that online sales taxes would amount to tax increases, saying such a program would bring about equity between online and so-called brick-and-mortar retailers.

“We just want equal collection responsibilities for all retailers,” she said.

Owens warned that national online sales taxes would put taxation in the hands of an out-of-state bureaucracy that would have no accountability to taxpayers and predicted that state audits of online sales tax collections would threaten privacy by allowing the government to know what people are buying and exposing their credit-card numbers and other personal information to the government.

Reihl again defended the so-called streamlining concept, saying the movement is “not about taxing the Internet, but about equitable sales tax in the states.”

Owens said the collection of $440 billion dollars cannot be called anything but a tax increase.

“If the Internet tax will generate $440 billion, that would largely negate President Bush’s most recent tax cut,” he said. “In Colorado, a family of four already pays about 35 percent of its income in taxes. That is enough.”

Crediting Colorado’s rank as the state with the fourth-lowest taxes per capita in the nation as one of the reasons for its reputation as a high-tech mecca, Owens said the imposition of an online sales tax would “substantially alter the retail landscape” and put states that do not tax online purchases at a competitive disadvantage.

B.J. Plasket can be reached by e-mail at bplasket@times-call.com.