Acton Commentary

New Restrictions on Technology and Consumer Choice? Humbug!


During the holiday season an unprecedented number of people are avoiding crowded shopping malls and the bitter cold and choosing instead to do much of their shopping on the Internet from the comfort of their own homes. An estimated $4 billion will be spent between Thanksgiving and New Year's Day on everything from books and CDs to researched big-purchase items like computers and furniture. Rather than wait this Christmas for Santa Clause to bring presents down the chimney, 8.6 million households will wait instead at their door for a mail carrier bearing gifts.

As every Christmas story must have its Scrooge or Grinch, this one is not exempt. This year the Justice Department and the tax collector seem to be saying in the face of a thriving information technologies industry and millions of satisfied Internet customers: “bah humbug!”

Judge Thomas Penfield Jackson's recent Finding of Fact in the Microsoft anti-trust case represents the first step in a potentially devastating process to break up the Microsoft Corporation. The Acton Institute believes consumer choices, not government management of innovation, is the best marketplace regulator. Just as a burgeoning industry that gives parents control over what children may view on the Internet makes government censorship unnecessary, a vigorous, competitive, free economy that requires businesses meet consumer demand to stay profitable makes the breakup of Microsoft unnecessary. When we permit government to make assessment of our needs for us, we allow those assessments to trump the subjective choices of customers.

A second threat to the entrepreneurial spirit responsible for the unprecedented opportunity available to consumers this Christmas involves the prospect of Internet taxation. In 1997, the Congress passed the Internet Tax Freedom Act that placed a three-year moratorium on Internet taxation and also established the Advisory Commission on Electronic Commerce to determine if, when, and how Net commerce and services should be taxed. With the second-to-last meeting of the commission this week, it appears increasingly likely that it will recommend a burdensome regime for taxing electronic commerce.

Since the Internet taxation moratorium went into effect electronic commerce has boomed at a rate far exceeding that of the rest of the economy. Entrepreneurs from around the country quickly worked to meet customer needs over the Internet in this new environment. Had a significant tax been in place on purchases made over the Internet, many gifts this season, rather than finding their way under the Christmas tree come December 25th, might have otherwise remained on the shelves. The Acton Institute believes a society should work to actively preserve an environment that affirms the creative potential of the human person, rewarding them for their work and allowing them to retain the fruits of their labor. The tremendous incentives and opportunities created by the no-tax environment on the Internet, otherwise unheard of in our age, should not be abandoned.