Tax the Internet!

Depending on whose numbers you believe, the Internet now constitutes about 2% of the global economy, or 3.8% of developed nations' economies, and its growth rate may still be exponential.

It took the Internet more than four decades to go from zero to two percent of the world economy. If, as I suspect, it's still growing along the same exponential curve that most Internet measurements have followed, a decade from now it could account for a third to a half of all global economic activity. The taboo on taxing it is worth revisiting, and several states are now doing so.

Believe it or not, the original reason why most people favored not taxing the Internet was a desire to foster its growth -- either through the direct economic savings of not being taxed, or by sparing it the potential regulatory complexities of a new kind of international commerce. Back then I thought, and still believe, that this was a very good idea, but times have changed. The Internet no longer needs special tax treatment to thrive.

There are of course complexities that stem from the nature of Internet commerce. But the sheer size of the Internet economy, two decades after its commercialization, suggests that it's past time to confront the complexities of its taxation.

I am not arguing (here) that taxes should be higher or lower overall, but simply that they will be increasingly unbalanced and unfair if they are only imposed on an exponentially shrinking portion of the economy.

The mechanics of Internet taxation will be tricky, to say the least, but current tax codes aren't exactly simple, either. It seems to me that Internet taxation could be made tractable by beginning with a few core principles, such as:

1. All mechanisms should be designed for feasibility and simplicity of implementation. This will dictate certain architectural decisions, such as seller-side tax collection, and it will also work to minimize bureaucracy and wasted time.

2. The introduction of Internet taxation should minimize disruption to existing government revenues. This means that when possible, revenue from taxing particular Internet actions should go to the jurisdiction of the seller that received the revenue. For example, in the USA, sales tax from Internet transactions should be directed to the buyer's state of residence. The seller's venue can be taxed in other ways, but without residence-based sales tax, tax revenue would tend to drain away from populous jurisdictions that don't host Internet services.

3. Internet taxes should be as uniform as possible across all tax jurisdictions. For example, although the state that receives sales tax should be determined by the buyer's residence, the amount of the tax should be decided more globally if possible. The economic distortions at such places as the Massachusetts/New Hampshire or San Diego/Tijuana borders serves no useful purpose and would probably be even worse if applied to Internet taxes.

4. National tax regimes should complement each other whenever possible. Rules should be written with reciprocity in mind. It isn't reasonable to expect a small merchant in Haiti to deliver tax collections to every taxing domain on the planet, but it is certainly reasonable to expect a large multinational vendor to do so, at least for jurisdictions where it conducts business.

Having said that, what exactly can reasonably be taxed? The easiest case is basic Internet access, which is already often taxed locally at the "last mile." This is an appropriate offset for the local infrastructure costs, and satellite services could be treated in the same way -- the local folks can see the dishes and enforce the rules. A uniform sales tax rate would avoid competition between jurisdictions, and would be almost a necessity for a value added tax.

Internet advertising is currently largely untaxed. Taxing it might slow the growth of Internet advertising, but few people would shed a tear for that, and it could be a large source of revenue if exponential growth continues. This could be addressed as a sales tax on the transaction in which the advertising is purchased, but the taxing jurisdiction might be near-impossible to work out, and would be an undeserved windfall for a few jurisdictions. It would be much more tractable if the advertising delivery agent (e.g. Google) collected and reported geographic information to facilitate the distribution of taxes to the domain of the "eyeballs."

However, it should be noted that there are a lot of poorly-thought-out proposals for taxing aspects of the Internet that would be implausible to tax. A "click tax" sounds promising until you realize that someone could write a program that just sits around raising someone's taxes. An email tax would get buried in technical and regulational complexity, given the difficulty of sorting out the true identity of a sender or receiver. Taxes on social networking success are slightly more plausible, where there's a single entity to perform identification and reporting, but it still isn't clear which activities it would make sense to tax.

Finally, there is a strong case to be made for particularly taxing the most bandwidth-hungry applications, and plowing the proceeds back into infrastructure upgrades. Video-heavy services such as YouTube and Skype might reasonably be expected to contribute to the continued upgrade of infrastructure that their services help make necessary.

I certainly don't claim to have all the answers, but if the role of the Internet in our economy is still growing exponentially, then it's surely time to open a discussion around the topic of how it might make sense to tax the Internet.

Betraying My Oldest Friend

Every now and then, you say or do something that you can't take back, and it changes your life forever.  Sometimes it's a good thing, like having a child.  But when it's a betrayal of something you love, you will carry the regret to your grave.

For me the archetype of such betrayal is Winston Smith, in Orwell's 1984. Imprisoned by the all-powerful government, he has already endured countless tortures, but clings to the notion that he has never betrayed Julia, the love of his life.  To break this last shred of autonomy, his torturers confront him with his deepest fear, being eaten alive by rats.  Facing this horror he begs, "Don't do it to me, do it to Julia."   As his torturers understand, those nine words can never be taken back, and when he is reunited with Julia -- who has had a similar experience -- the knowledge of their mutual betrayal dooms their relationship.

I  have twice in my life been conscious of such a life-changing betrayal.  I regret them both, but would still repeat them if I could.  Both may sound trivial to many readers, but my regret is painfully real and deep.

The first was over a quarter century in the past.  I have always been a baseball fan, a fanatic partisan of the New York Mets, who I fell in love with as the perennial doormats of the National League.  In the American League, however, I found a second favorite, the team of all my relatives, the accursed Boston Red Sox.  For two decades, I rooted for both, confident -- in the era before interleague play --  that they would never face each other, which could only happen if both somehow met in the World Series.

In 1986, as any baseball fan can tell you, that actually happened.  I was over the moon, saying (and believing) that I would love every minute of the Series, no matter which of my two favorite teams won.   I held onto that belief until the final inning of the sixth game, with the Red Sox an out away from breaking their famous curse, when Bill Buckner committed perhaps the most famous error in baseball history.  At the very worst moment in nearly a century of suffering for Red Sox fans, I jumped to my feet and cheered myself hoarse.

I can say that it was inevitable, and that anyone would cheer their favorite team over their second favorite.  But I found I could never call myself a Red Sox fan again.  I had betrayed them as surely as Winston betrayed Julia.

My second great betrayal happened just this week.  To understand it, you should know that I was a bit of a prodigy as a child.  I was reading adult books at the age of 2, and had more or less finished high school by the end of third grade.  Books have always been my best friend.  For 53 of my 55 years, I don't think there has been a single day when I haven't spent at least an hour reading; even hiking the Appalachian Trail, I endured considerable extra weight rather than do without books.

The emergence of e-books has left me wary and conflicted.  The logic of e-books is obvious, especially to someone like me, who is away from home travelling more often than not.   Depending on the length of my trip, I typically carry 10 to 30 pounds of reading material, and I have a bad back, so switching to e-books would appear a no-brainer.

But I couldn't do it.  Books have been my most faithful friends since about the time I was toilet trained.  To cast them aside for the hottest, sleekest new model seemed unthinkable, and as shallow and faithless as casting aside my wife of 35 years for a similarly hot, sleek new model.  (Of course, Amazon doesn't sell the latter for under $100, but I digress.)

But every time I travelled, I found myself gazing at the lightly-loaded and paper-free modern travellers with more envy than when I gazed at... ok, that's enough of that analogy.  I even experimented with reading a couple of books on my smartphone, where the tiny screen allowed me to pretend I'd tried e-books and found them wanting.

Then, a few weeks ago, I got an iPad for work purposes, and, after some dithering, decided to give e-books "one more try."  I was only a few chapters into my first e-book, Walter Isaacson's magnificent biography of Steve Jobs,  when I realized there was no going back.  

Then, within a day or so of that realization, I went out to lunch at an Ann Arbor deli that happened to be a few doors down  from Nicola's Books, one of our last remaining independent book stores.  Walking towards the deli, I saw Nicola's and instantly found myself struggling to fight off tears.  I love independent bookstores almost as much as I love books themselves, and I felt like I'd put a knife into Nicola's heart.

I doubt I can ever go back.  Carrying so much less baggage when I travel, buying each book the moment I decide to start reading it, and beginning to reduce the miles of bookshelves that fill my house -- these are unarguably good things, and I can no more regret this decision than I can regret cheering for the Mets in 1986, or than Winston Smith could regret betraying Julia to avoid the worst death he could imagine.  

But we can regret the consequences even if we can't regret the choice.   Winston Smith didn't want to lose Julia, and I didn't want the Red Sox to lose, or the independent bookstores to vanish.  Sometimes, betraying something you love is the unavoidable cost of a greater good.  But I don't expect ever to get over it; 26 years later, I still feel guilty every time I look a Red Sox fan in the eye.

Software Patents, the Hacker Ethic, and Patent Trolls

Nowadays I spend a good chunk of my time working on patent-related matters. Many people -- including my younger self -- would judge this very negatively, because they think -- correctly, in my view -- that the current patent system is, essentially, evil. Recently, I've been motivated to collect some of my thoughts about the patent system, and posted them to the Mimecast blog. You can find them in these two posts, if you're interested:

  Software Patents and the Hacker Ethic
(Archived in 2026 at https://guppylake.com/mimecast-blogs/PatentsBusinessEthics.txt)

  The Scourge of Patent Trolls
(Archived in 2026 at https://guppylake.com/mimecast-blogs/TheEvilNPEs.txt)

Email Don't Impress Me Much

If you're old enough, you can probably remember the day when having an email address was a status symbol in certain crowds. Now, renouncing email is a status symbol for certain rich people, as I discuss in my latest post on the Mimecast blog.

(Archived in 2026 at https://guppylake.com/mimecast-blogs/OnceAndFutureStatusSymbol.html)

When Hiring Remote Workers Makes You a Better Person

Recently I had the pleasure of participating in a debate, on BusinessWeek.com, about the pros and cons of letting employees work from home. This led me to think more about the most amazing experience I ever had with a work-at-home employee, a remarkable and inspiring fellow named John Ferguson. I write about him here, on the Mimecast blog.

(Archived in 2026 at https://guppylake.com/mimecast-blogs/JohnFerguson.txt)

Goodbye, Glen: A Last Look at a Childhood Hero

At age ten, I hadn't yet developed the passions that make pop music so vitally important to many adolescents. I had sung in youth choirs for several years, where I was always much appreciated by the choir directors -- though probably less for my high tenor voice than for my willingness to throw myself into the works full-voiced and without inhibition. I had also started taking classical guitar lessons in fourth grade, the only new form of study my parents permitted me after bringing the rest of my education to a screeching halt the previous summer. I loved both singing and playing guitar, and thought I had a fair bit of talent for both.

Nonetheless, I remained much more interested in collecting the albums of comics and humorists than musical groups, more focused on Alan Sherman than the Beatles. So it was a pair of humorists that led me, via musical comedy, to my first appreciation of popular music. My journey started with the Smothers Brothers.

Tom and Dick Smothers were an acutal pair of brothers, highly talented musically, whose comic personae were a pair of brothers trying to be a folk music act, but whose musical efforts were consistently sabotaged by Tom's goofy antics and the ensuing brotherly bickering. When they sang, their clean, soaring harmonies were a revelation to my ten-year-old self; I came for the comedy and stayed for the songs.

Naturally, when they got their big chance on television, the Smothers Brothers Comedy Hour became a highlight of my week. Every Sunday night, when the show I'd so eagerly awaited came to an end, I knew that the weekend was over, and it was time for bed and another five days of mind-numbing tedium.

But I always thought of the music as incidental to the comedy until the day, when I was a bit over ten years old, that a goofy-faced young man named Glen Campbell stepped out onto the Smothers' stage and began singing John Hartford's "Gentle On My Mind." Campbell was instantly recognizable as what I thought of as a hick -- a country boy with a silly accent, a hard person to take seriously in many contexts.

Nonetheless, I was mesmerized. Between the range, strength, and purity of his voice and the casual virtuousity with which he laid down his guitar licks, I saw -- probably for the first time in my life -- something that I wanted to become but could never be. My singing has always been pleasant and appreciated, and my guitar marginally competent, but I knew immediately that I could practice a thousand years and never sound like Glen Campbell, accent or no. My fingers wouldn't move as fast as his if I flailed them about randomly, and my voice hadn't a fraction of his power or range.

Having grown up a prodigy, I was for the first time aware of being flat-out inferior at something I cared about. For the first time, though by no means the last, I gazed longingly down a path I could never walk. I could possibly have still become a rock star, with a lot of luck; some of them don't seem to have any more talent than I do, certainly. But I never really seriously considered a path where I'd have to hope for luck to compensate for marginal abilities.

Of course, time went on. My fondness for Glen Campbell became an embarassment in the era of Woodstock and the Summer of Love, and I found more culturally appropriate guitar heroes in Jimi Hendrix, Steve Howe, or later Leo Kottke and Michael Hedges. A young hippie wannabe couldn't easily admit to a soft spot for Glen Campbell, who meanwhile became both a right-wing activist and, increasingly, a parody of himself with songs like "Rhinestone Cowboy." He receded safely into my past, one of those childish things we put aside on the road to adulthood.

Then, in 2011, a full 44 years after his music first opened my eyes, I heard an interview with Glen Campbell on the radio. He had been diagnosed with Alzheimer's Disease, and was facing the slow loss of his memory, his talents, everything he had ever been. But rather than fade quietly into the twilight, like his friend Ronald Reagan, he decided to go on one last tour while he still could. With three of his children forming half his backing band, he hit the road, and I found myself with the chance to see him in person for the first and last time.

The Ann Arbor Folk Festival is a remarkable annual event. For two consecutive nights, a five hour concert presents a dazzling array of performers old and new, averaging 20 or 30 minutes apiece, as a fundraiser for Ann Arbor's venerable folk music venue, The Ark. I've been many times, nearly always discovering a new act that quickly became one of my favorites. When they announced that the second night of the 2012 show would be headlined by Nanci Griffith, Emmy Lou Harris, and Glen Campbell, nothing short of jail would have kept me away.

Naively, I had simply assumed that Glen Campbell was the marquee star and would be the final act. I've worshiped Emmy Lou Harris from afar for almost four decades, but it never occurred to me that she'd be the one to close out the show. Thus it was that I saw something I never thought I'd see: Emmy Lou Harris as anticlimax. By the time she stepped on stage, the crowd had almost burned itself out saying goodbye to Glen.

I'd like to tell you that there was no sign of the disease that is ravaging him, but the truth is far more interesting. His memory is clearly already suffering -- he forgot or mangled the words a half dozen or so times, and several times forgot what song was to come next. It was sad, but also touching to watch as his sons and daughter in the band gently guided him back.

Still, he was magnificent, with a voice as strong as ever, from the rich low notes of "Wichita Lineman" to the falsetto yodels of "Lovesick Blues." And remarkably, his wizardly guitar licks were perfect; at 76 with Alzheimer's, he can still do things with the guitar I will never, ever do. And when I closed my eyes he was once again a 30-year-old cowboy opening the eyes of a ten-year-old ex-prodigy, glued to the television, newly aware of his own limits and possibilities, wondering how far his meager talents might take him.

Vint Cerf is Too Modest; Internet Access is a Human Right

In his January 4 op-ed piece, Vint Cerf argued that Internet access is not a human right. While I consider Vint a friend and have tremendous respect for his achievements, I think he’s wrong in this case...

Read the full post on my work blog.

(See it on Huffpost at https://www.huffingtonpost.co.uk/dr-nathaniel-borenstein/internet-human-right_b_1201645.html)