States Watch Prosperity as Their Prey


"Invention is continually exercised to furnish new pretenses for revenue and taxation. [Government] watches prosperity as its prey, and permits none to escape without a tribute." ~ Thomas Paine, Rights of Man State governments, searching desperately for more pockets to pick because of 'revenue shortfalls,' are casting a predatory eye at the internet. Not e-commerce ' they're already feeding on that, though from the states' standpoint their share is never enough. What has the states drooling is the connection fees we pay for internet access -- it amounts to a huge pile of money. In typical unconstitutional fashion, the federal government had passed a law telling the states not to touch it, but the bill expired last weekend. Meanwhile, the Senate is making plans to renew it under S.150, which would broaden the tax ban and make it permanent. Lobbyists for the states are fighting it. According to tech writer Declan McCullagh, the Senate is trying to tell the states: '[You] may no longer tax telecommunications services (such as those for telephones, cell phones and pagers) to the extent that 'such services are used to provide Internet access.'' [1] But this, he adds, 'would prevent state governments from cashing in on a mammoth source of revenue as emerging technologies like VoIP and Wi-Fi telephones gain acceptance and more and more handheld devices include Internet access features.' Senator Lamar Alexander of Tennessee is leading the charge for state lobbyists. In a speech on Oct. 22, he argued sardonically that if internet access is allowed to escape the states' taxing power, why not exempt everything else, too? Bad idea, said Alexander; let's add internet access to the list of 'food, medicine, electricity, natural gas, water,' and other things states now loot. [2] Quite unintentionally, he raises a good question ' instead of taxing Net access, why not drop the tax on the others instead and shrink the size of government? Markets produce jobs, wealth, and rising standards of living. Governments undercut market processes; they produce nothing. Most government today is organized crime elevated to a position of social respectability. Heavy taxation, along with central bank inflation, provides the sweetener that attracts the flies to politics. When the lobbyists picked Alexander, they went to the right man. His resume is a primer on how to use the political process for personal advantage. When he was elected governor of Tennessee in 1979, his net worth was $151,000. By 1991, when Bush Sr. made him Secretary of Education, his net worth was estimated between $1.5 and $3 million. Politics pays. As governor, Alexander invested $8,900 in company for which he helped land a state contract worth $250 million, giving him a yield of $140,000. On another occasion, he was one of six investors who purchased a $1 stock option in a newspaper firm that he later sold for $620,000. The list of dealings is long and includes a few made by his wife, Honey. [3] The lobbyists for the Net access grab represent the National Governors Association, for which Alexander served as chairman in 1985-1986. If Alexander can turn the states loose on Net access revenue, no doubt his net worth will not suffer. David Quam, the director of state-federal relations for the NGA, fears that S.150 would make a mess of state enrichment fantasies because it would 'take all the telecommunications transmissions used for Internet access and make them a nontaxable event.' As if to paraphrase an Ayn Rand fictional villain, Quam added, 'There's a real risk that the future of telecommunications becomes tax free.' [4] This is the modern state brain at work. It claims a moral right to the wealth of producers. To statists, the money they're after is not someone else's; it's theirs by right. The theory goes that without government, all of us, including internet access providers, would be at the mercy of barbarians. Taxes, therefore, are the necessary means of keeping Attila away. If government were restricted to its legitimate function of defending individual rights, which would imply a system of voluntary taxation, there might be some merit to this argument. Instead, government has been draining our wealth and curtailing our liberty for the personal profit of those in power. Thanks to its monopoly on aggression, no one stands in its way. When government turns its guns on its citizens, it leaves civilization behind. Tax historian Charles Adams notes that 'patriotism is soluble in taxes ' it dissolves easily.' [5] What he means is, when people are confronted with high taxes they have a propensity to rebel, evade, or take flight. Writes Adams: 'Tax laws have taken away liberty more often than foreign invaders.' Compared to the rebelliousness of our colonial ancestors, our reaction to taxes is 'embarrassingly mild,' he says. Americans are too complacent. 'We have great fear of the tax man'our ancestors had malice aforethought.' [6] Without such malice aforethought, we might still be drinking East India Tea ' and the Net itself would be no more than a slave's daydream.

1 Are taxes on the way for Net access?, Declan McCullagh 2 Ibid. 3 Lamar Alexander's skeleton closet 4 5 Adams, Charles, For Good and Evil: The Impact of Taxes on the Course of Civilization, Madison Books, Lanham, MD, 2001, p. 448 6 Ibid., p. xxii

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George F. Smith is the author of The Flight of The Barbarous Relic, a novel about a renegade Fed chairman.  Visit his website.