Our Front Page stories on the maneuvers of Microsoft and America Online are only the latest manifestation of a definite trend. Online business suddenly is the 800-pound gorilla.
What happens on the internet has been a subject of intense interest to Wall Street for some time. But now it’s beginning to matter just as much to Main Street–not to mention the street where your office is.
Educators and analysts have told our reporters how this latest mega-merger might affect our schools directly, but AOL Time Warner also stands as a harbinger of a latter day tectonic shift.
Captains of industry believe business is migrating to the digital marketplace. America Online is only the latest beneficiary of that conviction. No longer is the importance of the internet tied primarily to its status as a wonderful means of communication and research. Now, it’s on the rise for an older reason as well: money.
Some consumer advocates predict the birth of AOL Time Warner will mark the fundamental transformation of the internet–from an avenue of communication controlled by no one to a boulevard of commerce controlled by giant corporations. (Not for nothing do the internet scientists call what you log on to through America Online the “commodity internet.”)
And where there’s big money, big taxes can’t be far behind. Because schools operate primarily on tax revenues, this is a matter that merits some attention.
Visitors at eSchool News Online < http://www.eschoolnews.org> recently took a straw poll about a tax on internet sales–an iTax, if you will. The poll was unscientific, to be sure. But the results were unequivocal.
Only 7 percent of you favored an iTax outright. An additional 18 percent favored it only if most of the proceeds were earmarked for education. But fully 75 percent of you said you oppose such a tax, even if most of the revenues would be spent on education.
The spirit behind those sentiments is laudable. As educators, you put your commitment to knowledge and communication above narrow self-interest. But let’s not be too hasty.
Internet sales are expected to hit $109 billion a year by 2004, and that number is bound to rise thereafter. To put that in perspective, $144 billion represents the total sum U.S. K-12 schools will spend on all goods and services this year.
Consider this: That $100 billion or so of internet spending will not all come from an expanded economy, even if the boom goes on for four more years. Most of the money is sure to be diverted from purchases currently made in brick-and-mortar businesses, in communities just like yours.
The disappearance of the tax revenues on $109 billion a year would decimate state and local government operations, including schools. Even where schools are not direct beneficiaries of sales and use taxes, governors and mayors suddenly bereft of such revenues would waste no time yanking dollars out of school budgets to make up for at least part of such a shortfall.
But, in my opinion, the politicians are never going to let that happen. Even if they swear to impose “no new taxes,” nobody is going to sit back and watch $100 billion-plus migrate online tax free.
It’s true we all hate taxes, and politicians pander to the masses–but only to a degree. Taxes on internet sales are coming, no matter how sincere sound the pledges to the contrary.
Still, good things can happen for bad reasons. The politicians’ urge to pander probably will hold off an iTax long enough to allow internet sales to gain momentum. And that’s all they really need. As long as commerce on the internet is not stamped out aborning, it quickly will become hardy enough to withstand taxation.
Perhaps education’s best bet is to insist that a portion of those new taxes be earmarked for that freer, faster network that should supersede the commodity internet and become an even more effective tool for schools.
This is not the ideal scenario, I’ll grant you. But no matter what the politicians insist today, you may read my lips on this: An iTax is as inevitable as the sunrise.