Wisconsin wants to tax Internet downloads; how it could solve the piracy problem

by: David Strahlberg

Milwaukee's Journal Sentinel reported that Governor Jim Doyle is proposing a tax on Internet downloads.

Quick comment: Now that music downloads are a proven success, everyone wants a piece of the action.  The music labels are already threatening to raise the wholesale price of songs to $0.99 from $0.65.  Now, politicians want to tax every transaction. 

While its unclear exactly how many songs have been downloaded, everyone would agree that the number is quite large (The Unofficial Apple Weblog estimates that over 250 million songs have been downloaded from the iTunes music store alone).  Even a minor tax on every song would translate into a great deal of tax revenues.

As the article points out, this tax would would be difficult to enforce, as it would rely on the honor system (and you remember how well that worked in school).  According to the Legislative Fiscal Bureau, less than 1% of taxpayers self-reported their Internet transactions in 2003.  Obviously, more than 1% of taxpayers purchased goods online so some people were not reporting accurately.

Of course, Governor Doyle's tax might be the solution to the movie/music piracy problem.  If high school kids and other notorious downloaders were shirking the download tax, the IRS could go after them 'Al Capone style' and convict them of tax evasion.  Maybe Governor Doyle is onto something.