The Internet Tax Freedom Act will harm States’ tax revenues by giving rich households a loophole to avoid sales tax, a study has claimed. The report was written by Iris Lav and Michael Mazerov at Washington DC’s Center on Budget Policy and Priorities, a foundation-funded think tank representing low-income households. Mazerov argues that if the act is passed, these low-income earners will be worse off. State and local governments have spending needs, he says. If their revenues are eroded and internet commerce can’t be taxed, they will be forced to raise sales taxes. He believes affluent net users will respond by taking more of their business online. Though the act includes clauses to protect State taxes, Mazerov says the language of these provisions is so vague that they are likely to be difficult to enforce. The act’s proponents maintain that taxing internet commerce is discriminatory and that such taxes will stifle the nascent industry. But Mazerov points to Forrester’s projections for e- commerce to reach $350bn by 2002 as evidence of the net’s robust growth.
