The Internet Tax Mirage : Politicians try to drive online commerce—and revenue—out of state.

The Wall Street Journal reports:

The best outcome would be for states to begin to rethink their tax policies in this new era of e-commerce. For states to impose sales taxes as high as 8% or even 10% may no longer be feasible, much as a U.S. corporate tax rate of 35% is no longer competitive with the rest of the world.

Smart states are rethinking their spending commitments, and they will also have to adapt by broadening their sales tax base and lowering rates. Many states exempt about half of their consumption base from sales tax, including groceries, barbers, drugs, legal services, hospitals and more. States could broaden the base and cut their rates in half.

The biggest false claim is that e-commerce will bankrupt states. This is what retailers and state legislatures said after the Quill decision, but sales tax receipts soared in the decade afterward. The most important influence on state tax receipts is economic growth, and revenues in some states are already returning to their pre-recession peaks.

If Governor Quinn weren't so busy driving business out of Illinois, he might not have to pretend he can raise revenue from taxing the Internet.

Financing big government is getting difficult because of competitive tax rates around the world.