Citizens Against Government Waste implores ACEC commissioners to keep the driving force in our economy unburdened by growth-killing taxation

(Washington, D.C.) – In a letter to the Advisory Commission on Electronic Commerce (ACEC), Citizens Against Government Waste (CAGW) today urged the commissioners to reject calls to collect taxes on commerce conducted through the Internet.

“The Internet has transformed the international economy and is the driving force behind our unprecedented economic growth,” writes CAGW President Thomas A. Schatz.  “Taxation would place limits on what has already proven to be one of the greatest technologies ever created.  Internet taxation is not only an immediate threat to consumers, it is an attack on progress and future prosperity.”

Most economists recognize that the sustained growth of our economy is largely driven by the high tech sector and the Internet.  According to Neilsen and IntelliQuest data, there were 35 million Internet users in North America in 1996.  By the beginning of 1999, that number had more than doubled to 87 million. The Internet industry, especially the e-commerce sector, is expected to grow to $1.3 trillion by 2003, according to Forrester Research.

In his letter, Schatz notes that proponents of Internet taxation “justify their position by claiming that revenue is being ‘lost’ through tax-free electronic commerce and that traditional ‘Main Street’ businesses are forced to compete with untaxed web commerce.”  These arguments simply do not hold water.  According to a study by the accounting firm of Ernst & Young, state sales tax revenues skyrocketed in the 1990s, growing by 5.6 percent – three times the rate of inflation – from 1997 to 1998.

Last month, CAGW released an investigative report on Internet taxation entitled Control, Alt, Delete:  How Taxation Threatens to Shut Down Commerce on the Internet.  The report outlines the great promise of the Internet as an engine for economic growth, and the danger to that potential inherent in proposals to tax e-commerce.  The report is available on the organization’s website at www.cagw.org.

Citizens Against Government Waste is a 600,000 member nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.