At a New York City meeting of the Advisory Commission on Electronic Commerce last week, some commission members voiced concerns the potential loss of revenues for state and local governments if they were restrained from taxing Internet access and transactions. The underlying implication seemed to be that states and localities were somehow starving for revenues. In fact, nothing could be further from the truth.

Just look at how real, per capita state and local total revenues have grown in recent decades (source: U.S. Census Bureau, U.S. Department of Commerce):

Year  Per Capita Total Revenues
(1996 Dollars)
1962 $1,438
1972 $2,638
1982 $3,153
1992 $5,083
1996 $5,706

From 1962 to 1996, for example, real per capita total state and local government revenues expanded by 297%. Just from 1992 to 1996, real per capita revenues grew by better than 12%. While 1996 is the most recent complete, comparative data available from the Commerce Department, economic growth in recent years has continued to push state and local revenues ever higher.

While it makes no economic sense to expand the reach of the tax man into cyberspace-which would only serve to stifle entrepreneurship and innovation, while raising costs for consumers-there also is no revenue justification for new Internet taxes.

Rather than looking for new ways to drain more resources from the private sector, state and local officials would do better to concentrate on how to downsize government and provide pro-growth, pro-entrepreneur tax relief.