As our Front Page story makes clear, school technology programs from coast to coast are in trouble. That’s because state budgets are in crisis. According to the American Legislative Exchange Council, state budget deficits will total more than $95 billion through the end of 2004.
Just last January in this space, I suggested a quick fix for this whole fiscal mess. Step 1: Extract federal taxes from those U.S. multinationals whose corporate headquarters miraculously became P.O. boxes in the Bahamas and similar island retreats. Step 2: Divert to state coffers the $70 billion in taxes the IRS estimates these sunshine expatriates dodge with their offshore addresses. It wouldn’t take care of the whole problem, but it sure would be a good start.
For some reason, the idea of giant corporations paying their fair share isn’t high on the agenda in Washington these days. So here’s another solutionnot as sweeping perhaps, but then . . . every billion helps, doesn’t it.
The idea: Institute an iTax.
Yes, that’s right. Levy a tax on business conducted via the telephone and over the internet. You might just possibly imagine how it pains somebody engaged in the internet business to say this. But then, a man’s gotta do . . .
So, to start with, we’d need a nationwide agreement to unify the terminology and definitions employed by the more than 75,000 jurisdictions that currently have the authority to levy sales and similar taxes. This is critical, because the U.S. Supreme Court ruled in 1992 that the briar patch of tax codes as it currently stands is so dense and dark that it makes collecting remote sales taxes an unreasonable burden on businesses. And of this, there is no doubt.
In Pennsylvania, to wave just one example, a handkerchief is considered clothing and so is exempt from sales tax. In fashion-conscious New Jersey, on the other hand, a hankie is seen as an accessory, like cufflinks, and therefore is taxed.
But an effortknown as the Streamlined Sales Tax Project, sponsored by the National Governors Associationis under way right now. At last count, the project had 32 states signed on.
Once the tax-code complexity is cleared up, we’d still need a consensus regarding just where in cyberspace the tax man would be able to land. In fact, debate still shrouds just how much is available to tax. Conflicting numbers from prestigious universities, think tanks, and research firms add to the fog.
But near as I can tell, we’re talking about something like $341 billion per year. This breaks down to around $46 billion in consumer retail sales online and $170 billion in business-to-business transactions via the internet. To those sums, you may add approximately $125 billion in remote retail sales stemming from catalogs, infomercials, classified ads, and so on.
Let’s say the average tax levied on such transactions was 6 percent. That would generate somewhere in the neighborhood of $20 billion in new revenue for our hard-pressed states. It would by no means repair all the gaping holes in state budgets, but it sure would save some vitally needed personnel and technology programs in our schools.
Early in 2000, eSchool News Online conducted a straw poll of our visitors. We found educators overwhelmingly opposed an iTax. Fully 75 percent said they’d be against such taxes, even if most of the proceeds went to education. Another 18 percent said they could live with an iTax only if most of the dough did go to schools. An iTax was favored without reservation by only 7 percent of the educators.
The great fear back then: That imposing such taxes on eCommerce would kill the phenomenon aborning. But internet sales have grown stronger in the past three years. In terms of consumer retail transactions, sales for brick-and-mortar merchants remained flat last year while internet sales spiked by 27 percent. There’s no reason to suppose this trend will abate.
Internet commerce, the evidence shows, is now fully able to survive the imposition of an iTax. On the other hand, this country can’t long survive without adequate funding for educationat least not in a fashion our citizens would be willing to accept. In short, the time has come to pay our way as we cruise down the information superhighway.
It’s something akin to the wisdom on an old roadside billboard I drive past: When financial troubles afflict you, the quickest way to get back on your feet is to stop making your car payments.