In an article ("Bush Faces Wedge Issue as GOP Rivals Focus on Question of Taxing Internet") this past Monday, December 6, Wall Street Journal reporters John Simons and John Harwood fell victim to the static view of Internet taxation.

First, they wrote: "Permitting increasing amounts of commerce to move to a tax-free zone could ultimately force states to increase taxes on more traditional transactions--or increase pressure to institute income taxes in states that don't have them, such as Texas and Florida." Later, they reported: "So far, state and local governments are losing only a small portion of revenue as a result of growing business-to-consumer Internet sales."

This, of course, wrongly assumes that the economic pie is only so big. In reality, innovations such as the Internet drive economic growth forward. That is, the economic pie grows ever bigger. Rather than losing revenues, state and local governments are benefiting from the relatively tax-free status of the Internet, as faster economic growth means fewer demands on government and more revenues rolling into state and local government coffers.