You've Got Taxes!
Christopher Caldwell doesn't like spam. That's ok — who does? Caldwell, however, thinks that the solution to unsolicited commercial email is to have "lawmakers" — the federal government — do something about it. There's a problem here, but what's worse is that Caldwell gives the impression that his real objective here isn't to eliminate nuisance email, it's to set a precedent for taxing the internet.
Caldwell suggests as a first step toward eliminating spam the creation of a national "no email" list — a measure that's been proposed by Sen. Charles Schumer (D-NY). Even without knowing the details, which Caldwell does not provide, the involvement of Sen. Schumer in this plan is reason enough for skepticism. And indeed, Caldwell himself doesn't think a "no email" list goes far enough. After brushing aside the question of how "no email" legislation would be enforced (a pretty important question, one would think), Caldwell turns his attention to a much more controversial measure: taxing email. According to Caldwell, "a do-not-spam list is a first imperative. But it is also a social necessity that the principle of taxing the Internet be established soon."
This begins to look like a classic bait-and-switch. Winning readers over to the anti-spam cause is easy enough. Getting them to endorse an entirely new kind of tax is wholly another thing; but if the two causes can convincingly, or just emotionally, be joined, then a world of possibilities opens up. And so the move from a mildly statist, dubiously effective anti-spam measure, to an appeal for an email tax and, in implication, an internet sales tax, too. Spam ceases to be the issue.
Or does it? Caldwell says that a tax on email will discourage spam. "A penny-per-email charge would drive most spammers out of business, subject them to jail time for tax evasion if they hid their operations, and cost the average three-letter-a-day Internet user just ten bucks a year. If even that seems to hard on the small user, then an exemption could be made for up to 5,000 e-mails per annum." There's one other measure Caldwell has in mind, but for now let's take a close look at a 1-cent per message tax with the stipulated exemption. How would this affect spammers and how would it affect ordinary people?
The spammers are the professionals here; most other email users are, relative to them, just amateurs. So if there is a technical means to avoid the tax, spammers will be in a better position to take advantage of it than the rest of us will. As it happens there isn't a technical means to avoid the tax, there are a great many. For example, what's to stop a spammer from sending 4,999 emails from a dozen different accounts — or a hundred different accounts? The burden of opening new accounts is not very great. There are also ways of disguising the transmission routes that emails take, making it difficult or impossible to trace them to their original source, and there are even computer viruses which can hijack your computer and email account to send out spam.
Ordinary email users would not get the spam-free environment that they want from the email tax. What they would get, in addition to continuing spam, would be several new nuisances as well. In order to provide even the most minimal deterrent to spammers, the email tax would have to apply to persons regardless of what email accounts they used. Necessarily, this means a federal database linking names and physical addresses to email addresses. It's hard to imagine the federal government doing a very effective job of this, but again, spammers could slip through the system's cracks a lot more easily than the rest of us. Without any benefit to taxpayers, a new and vast federal database will have been born.
The tax itself, as always with taxes, would also have a destructive effect. What would happen to listservs and other large email discussion lists? Some of them have hundreds or even thousands of subscribers, and since they all receive all of the mail sent to the list, somebody would be liable for enormous taxes. Would this burden fall on the individual sender or would it fall on the list administrator? Perhaps an exemption could be provided for listservs, but in this case a.) the cost of compliance, of registering for the exemption, would itself be damaging and b.) spammers would have a financial incentive to abuse these lists. So far, these lists in my experience have been mercifully free from spam, thanks to filtering software and watchful administrators.
Listservs are just a special case, however. If the tax isn't attached to individuals, which may well be technically impossible, it would have to fall on internet service providers. This would ultimately mean higher prices for consumers, not because the tax would be shifted forward from ISPs onto us, but because it would be shifted backward from the ISPs to the companies that support the ISPs (ISPs will have to cut costs, thus hurting suppliers), in a process that ultimately gets back to consumers. (Murray Rothbard discusses this phenomenon, the "backward shifting" of taxes in Power and Market.) Even users who do not send more than 5,000 emails a year would be affected by this.
And why exempt the first 5,000 emails anyway? Since the stated purpose of the tax is to discourage spam, a purpose the tax has little hope of fulfilling anyway and even less of accomplishing if the first 5,000 messages are exempt, why allow the exemption? It would mean an "unfair" tax burden on those people who legitimately send more than 5,000 emails a year. Christopher Caldwell, as he makes clear in his article, certainly doesn't want to be unfair. He should, then, in principle support an email tax on all users. And why limit it to 1-cent? Why not 10-cents? The American people as a whole wouldn't object. A 10-cent email tax could raise much-needed revenue to keep America safe, provide prescription medicines for our nation's most vulnerable seniors, and establish a nation-wide "Amber Alert" system to protect our children from child molesters. Show me the Republican legislator who isn't Ron Paul who could vote against that!
It is a basic law of government: a new tax will not stay at its original level, it will be expanded to apply to more people and the rate will rise. That's what happened with the income tax, after all. The State has no reason to forgo revenue by keeping tax-rates low.
Caldwell, as I said, wants to be fair. He tells us, "It was always unfair not to tax business on the Internet, of course. There is no reason that Amazon.com should enjoy a pricing advantage (a de facto government subsidy) over a corner bookstore." But don't think Caldwell is just a typical left-liberal who wants to raise taxes in the interests of "fairness," oh no! No, indeed: he writes, "If the postage [i.e., the email tax] were decried as a tax hike, then it could be used to fund one-to-one tax cuts in other areas — like sale taxes for brick-and-mortar retail stores that have labored under such an unfair tax disadvantage for the past half decade."
The old-fashioned conservative retort to this is that, well, life simply isn't fair. Don't impose new taxes on internet commerce just because brick-and-mortar retail already pays sales tax. For one thing it isn't even an apples-to-apples comparison: a federal email tax would not be equal to the many different sales taxes in various states. Does Caldwell really mean, then, that those sales taxes should also be applied to electronic commerce? He doesn't say so explicitly, but that has to be what he means, at least if he wants to be "fair." Of course, even this wouldn't be "fair" — internet commerce has the disadvantage of having to pay for regular postage already. Amazon has to mail me a book, costing me more than if I were just to buy one at a local shop. Whatever the government may do, there will not be a condition of "fairness" existing between these two kinds of commerce, because they are not the same and not equal.
Still, simple human sympathy might make us want to cheer for the little guy, the brick-and-mortar retailer, against the Amazon Goliath (to mix mythical metaphor for a moment). Unfortunately for Caldwell, the picture he paints isn't true to life, because e-commerce is a boon to small retailers, perhaps even more than it is to giants like Amazon. Just think of Ebay, where individual sellers can auction their goods, or book stores like Abebooks.com and Alibris.com, or Amazon's own used book market, all of which allow small retailers, mom-and-pop book stores, to sell to individual buyers. The "little guys" are not at a disadvantage here: they can undercut Amazon's prices because they sell used books, and in the aggregate they have a stock of goods even larger than Amazon's, because they provide out of print and rare books.
So who does lose out in internet commerce? State governments that cannot tax the 'net do. And so do bad bookstores (for example). Mall bookstores like Waldenbooks or B. Dalton's cannot compete with either Amazon.com or with independent internet booksellers in terms of either variety or price. It's the mediocre middle that stands to lose out, not either the very small and quite specialized bookstores or the very ones like Amazon and (both on- and off-line) Borders. Do we really want the government helping bookstores with poor selections and high prices at the expense of those with great selection and lower prices?
Christopher Caldwell's internet taxation schemes are just bizarre. They stand little chance of helping ordinary people by eliminating spam, and are sure to lead to higher taxes, higher prices, and less goods — while also giving government more money, something a lot of us find quite objectionable enough. Even apart from self-conscious libertarians and small-government conservatives, anybody might look at the federal behemoth and wonder whether this wasteful, irresponsible, voracious and counter-productive institution really needs still more of our money.
Caldwell writes that opposition to his internet tax plan is "ideologically driven." He's talking in particular about politicians, but let's consider things from the layman's perspective. In my case, most of all I just don't want to pay more taxes, especially not on the email that I use every day. This coincides with my principles, but even if I had completely different principles I wouldn't want to pay an email tax, as I dare say most people don't. It's quite pragmatic. Considering the real harm and dubious benefits of an email tax, one has to wonder whether it isn't actually Caldwell who is the ideologue recommending as he does something that goes against common sense and the interests of most people. Unless he's in the pay of Waldenbooks or the federal government, which I don't believe is the case, his ill-considered suggestions can only be understood as arising from a statist ideology.
June 13, 2003
Daniel McCarthy [send him mail] is a graduate student in classics at Washington University in St. Louis.
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