California is once again leading the nation down the toilet. The state recently came to an agreement with Amazon.com where Amazon has "offered" to collect the state sales tax on items shipped to California, bringing it into compliance with a widely unpopular and ignored law. The "agreement" buys Amazon two years to come into compliance, which means that Californians can enjoy the benefit of shopping sales tax free at Amazon until the holiday season of 2013.

California is not the only state trying to do this, but it is one of the few states where the volume of sales is incentive enough for Amazon to work something out. Every once in awhile another state attempts this, and the idea of taxing internet sales bubbles up in DC every once in awhile. We imagine that the federal government will be looking a lot harder at this in it's efforts to get more money to pour down the drain, especially since Amazon has conceded in California.

Inevitable is the word that comes to mind, so we want to get ahead of the curve and keep this as painless as possible. Taxing internet purchases is coming. The handwriting is on the wall.

Every candidate has put together some form of tax reform, and most support some form of federal sales tax to take the place of high income tax rates. Herman Cain has his 9/9/9 plan, which calls for a 9% sales tax combined with reductions in income tax rates. Most of the GOP candidates for President support the idea of the Fair Tax (which is a national sales tax to replace the income tax). See A Taxing Problem  . We can take the issue of internet sales tax, and use it as the test run for these conservative ideas.

To be clear, we do not favor an increase in taxes, but we do support the shift from income taxes, which punish earning and investing, to consumption tax. A consumption tax is by far the most equitable of taxes. You are taxed on what you spend. All the sniping about millionaires not paying their fair share goes away - millionaires spend far more than the middle class or the poor.

Another conservative idea is to frown on the idea of government subsidies for private businesses. Ethanol and Solyndra come to mind - federal dollars going to support ideas that don't work in the marketplace. The lack of taxes on internet sales amounts to a government subsidy. This was put in place for two reasons.

First and foremost was to nurture a new form of commerce - one of the few times such a subsidy has worked. Buying online is the preferred method of commerce for a large and growing number of consumers. The first decade made for a slow start as consumers grew used to the idea of buying goods unseen except for a picture. Over the past five years consumers have come on board in ever increasing numbers as the system has proven trustworthy and convenient.

The second reason was that there was no mechanism for tracing, collecting and distributing taxes across fifty states with varying rates and needs. It was, and will be an accounting nightmare, if each state were to enact a random sales tax to be collected by the thousands of merchants with goods for sale online.

This provides an opportunity for the federal government to look at what a transistion from income tax to consumption tax would look like. Internet sales represent a true area of authority for the interstate commerce clause of the Constitution. These are goods traveling across state lines. We suggest that the federal government exercise it's authority under this clause to declare internet commerce as under federal, not state, jurisdiction.

As it stands now, Company A is located in, let's say California, and collects sales tax for all sales made within the state, which it pays to the state of California. As a California company, it pays and income tax on it's total earnings which it also pays to California. If it sells goods online or by mail order to Texas, there is no sales tax collected by either California or Texas.

We propose something along the lines of Herman Cain's proposal, tailored to online commerce. Interstate online sales will be subject to a federal sales tax. No state sales taxes can apply to interstate sales, no federal sales tax is collected on instate sales. To keep the numbers rounded out let's go with 10%. You spend a hundred dollars online, you get $10 dollars in tax. It's the "same" deal that you get with going to the mall, without the hassle of going there. The federal sales tax then goes to DC, where it can be wasted in the usual manner.

We also, as an offset, would reduce the income tax by a proportional amount. Ideally that would be the 10 percent that was imposed in online sales, but we are not accountants. We are going for "revenue neutral". Not a tax increase or reduction, just a shifting of the tax to consumption.

We do not see internet sales being hurt by this. People who purchase online enjoy the convenience, and will not stop if this plan is put in place. Most goods are significantly less expensive online than at the mall, so an incentive will still be there to purchase online. We expect that as people "get used to it" internet sales will continue to increase, which will in turn increase federal sales tax revenues.

We also see a benefit to brick and mortar stores. There will no longer be the "tax" incentive to purchase online, and going to an actual store gives the benefit of immediately taking possession of your purchase rather than waiting for it to ship.

This approach will allow the American people, and the federal government to experience the advantage of consumption taxes while enjoying lower income tax rates. It will provide expectations for what will occur with a total transition to the Fair Tax model, and the elimination of income taxes. The argument for the Fair Tax right now is theoretical ,so it's a hard argument to make. This will provide actual data to back up the reasoning of Fair Tax proponents.

Of course, that's if it works. If it doesn't we can always go back to the old model. This is where the 16th Amendment Repealers start jumping up and shouting about taxes never getting eliminated, and now we're stuck with a national sales tax and an income tax. Yes, you are right.

If this gets done under Obama, Reid and Boehner, yes, we are screwed. It's not like they aren't already thinking about just getting an additional revenue stream this way to further burden taxpayers. We are trying to get ahead of them in the argument so that we can attach conditions. And make demands.

This is why it is so important that we send honorable men and women to DC to represent us. DC is loaded with dealmakers serving lobbyists, not representatives serving the people. The 2012 elections are important not only as a referendum on Obama, but also as a referendum on Congress. This is a case where the "R" or "D" doesn't matter nearly as much as the work ethic of who we send to fix the challenges facing America.

Taxes are inevitable. There are necessary things to be done in this country. No one argues against that point. There is no need for taxes to be burdensome or a drain on the economy, which the current system is. We suggest this as a starting point on the road to a better way. To do this it is vital to put people in power who share our concerns. So says Common Sense.

RLB