With the world facing a financial crisis and expecting information technology to save us from worldwide recession or depression, it's no wonderthe U.S. Congress is looking to keep the Internet healthy.With full support from the Clinton administration, Congress will shortlypass a law prohibiting taxes on Internet sales and services. As anInternet proponent — after all, this column pays my rent — I'm all forsuch a law. It won't really make much of a difference, of course, butI'm still for it.

Won't make a difference?

People write dissertations on this stuff, so none of us are going tocome to an in-depth understanding of tax policy and economic developmentin these 1,500 words. But the general belief is that while such a taxpolicy won't hurt the Internet, and might well help it a bit, the endresult will be about the same. The Internet might thrive a little bitmore without taxes, but it would thrive with them, too.

The taxes we are talking about are on the operations of Internet ServiceProviders and on sales made over the Internet. Since these taxes arenearly all levied on the state and local level, this tax law is popularamong politicians in Washington, not the statehouse.

What I find disturbing about all this is not the tax prohibition itself, or even the loss of revenue to states and cities. That'speanuts. What bothers me is the domino effect of weird behaviors thatfollow any such policy. We are so against taxes that we'll doalmost anything — pay almost anything — to avoid them. Think about thatthe next time your brother-in-law boasts about how much money he's"saving" on taxes by paying all that mortgage interest.

We love loopholes. If a tax law makes a loophole possible, we'll useit. Remember the '70s, when bankrupt companies were valuable for theirtax losses alone? Remember the '80s, when real estate limitedpartnerships sprang up solely to generate tax losses, not to makemoney? Remember the Tax Reform Act of 1986, which closed most of thoseloopholes and destroyed those limited partnerships? While good businesscan benefit from tax advantages, they shouldn't have to have thoseadvantages in order to be good businesses.

I used to write about the oil business — a wonderfully byzantine andcorrupt subculture — so let me use some examples from there toillustrate my point. For all of the '50s and '60s, the price of oil inthe U.S. was approximately twice that of the rest of the world. Thiswas the doing primarily of the Texas Railroad Commission, whichliterally controlled the world oil business for at least 30 years. TheRailroad Commission turned the oil wells of Texas off and on to keep oilprices within a certain range. To deal with the threat of Californiaoil, many of those California oil fields were put aside in what wascalled a "Strategic Petroleum Reserve" under the control of the U.S.Navy, which supposedly might need that oil to fuel battleships. Everwonder why the Secretary of the Navy is always from Texas? Now youknow: It's to make sure that California oil stays in the ground.

In what was colloquially called the "Drain America First" policy,imported oil was literally illegal in this country for most of the '50sand '60s. The idea was to make sure America wasn't reliant on oilsupplies that could be torpedoed by Russian submarines. This kept U.S.oil wells pumping like mad, made U.S. oil prices the highest in theworld, and guaranteed we would run out of oil 30 years sooner as aresult. Explain to me the logic of this policy. The only foreign oilthat could be imported was from Canada or Mexico, which were presumablysubmarine-resistant. As a result, oil from places like Venezuela waslanded in tankers at Brownsville, Texas, pumped into tank trucks, driven100 yards into Mexico, then re-imported as Mexican oil.

What does any of this have to do with the Internet? Well, up to this pointthe Internet's freedom from taxation has been for the most part theresult of benign neglect. Taxes were not collected mainly becausegovernments didn't know how to collect them or from whom. But evengovernments get wise eventually, so now the Internet will soon have atleast a three-year reprieve from taxation. The question now is how willthe scam artists take advantage of Internet tax freedom?

Do airlines pay Washington sales tax when they buy jets from Boeing?No, they don't. This has always been accomplished by the actual salebeing made overseas, not in Washington. More precisely, the sale ismade in the air just past the 200-mile limit of U.S. sovereignty off theWashington coast. A crew from Boeing does the takeoff, wire transfersof money are made and verified just past the 200-mile limit, then a crewfrom the purchasing airline flies the plane back to Seattle. It's all atax scam, of course, and it saves airlines millions on every plane.

But soon Internet purchases are going to be exempt by law from salestaxes. It is perfectly logical to assume that Boeing will save jet fueland start selling airliners over the Net. After all, selling on the Net will end (for at least three years) the previous tax scam — the one that required flying a 400-mile roundtrip.

This will be a boon to Internet commerce. Why wouldn't I pay for mynext car over the Net? Why wouldn't I pay for everything over the Net,even though I buy it in a store? I can see a system of Internet paymentkiosks in stores of all types. Of course it will look just like a cashregister, but it will really be an Internet workstation. The personrunning the cash register-cum-Internet workstation might look like achecker, but she'll really be an Internet engineer. And while she mightaccept cash from me, it would only be used to bounce an IP packet offthe Internet backbone authorizing transfer to me full ownership of thatsix-pack of Budweiser under my arm.

It's the electronic version of that Brownsville U-turn.

This can and will happen. Hundreds of billions in sales taxes are atstake, and if changing some terminology and adding an Internet connectioncan save those taxes, people will do it. What bothers me is how littlereal good it does for the Internet. Sure, we put an Internet connectionon six million credit card machines and twice as many cash registers,but 18 million more Internet users really doesn't mean that much to thegrowth and evolution of the Net. This is especially true if gainingthose users comes at the cost of political unpopularity and loss oflocal tax revenue. Remember, somebody still has to fill the potholes and powerthe streetlights.

I'd feel better if only this tax measure somehow encouraged new types ofInternet services, but it doesn't. I'm all for Net growth, all for Net tax exemptions, but this is a loophole that's ripe for abuse. Nobody should be for that.