Capital gains tax The existence of capital gains tax means that a stock which has gone down a lot is likely selling for less than it should, given its probable future return---or at least, it is selling for less than it would if capital gains tax did not exist. This is because the average seller, who is underwater on the stock, is gaining not only the proceeds of the sale but also the benefit of a tax deduction. In effect the government is paying him a little something to sell it. Conversely, a stock which has gone up a lot lately will tend to have its price buoyed further upwards by the effect of the tax system. Since most of the owners are now sitting on large gains, they have a disincentive to sell, relative to a tax-free environment. Estate tax Given that we are going to take money from anyone to fund the government, it seems the best possible people to take it from are dead people, who can't use it anyway. The second-best possible people to take money from are those who could use the money, but haven't done anything to deserve having it. Most people inheriting large wealth fall into that category. Use tax Consumers who avoid paying state sales tax by buying on the Internet generally owe an equivalent state use tax on the purchase. So the uneven tax playing field between in-state and out-of-state retailers does not exist in theory, only in practice-- because for the consumer, use tax is inconvenient to track, easy to forget, and tempting to disregard. The existence (in practice) of the uneven playing field is probably more due to the Quill v. North Dakota decision than to the Internet Tax Freedom Act per se. Catalog retailers enjoy this de facto subsidy whether their orders arrive by Internet, telephone, or mail. Since state governments evidently have some power to regulate the credit card industry, I wonder if they could impose on the credit card company, instead of imposing on an out-of-state retailer, to aid them in collecting use tax on out-of-state purchases. I don't believe this scheme conflicts with the Internet Tax Freedom Act (although there may be other objections) since it would merely further the collection of an existing use tax, not impose a new tax on Internet transactions.

Richard Mason

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