image A four-percent tax on digital music and perhaps e-books? That’s the proposal from New York Gov. David Paterson. Oh, great. Isn’t this exactly what we need to encourage literacy and new technology? The possible e-book tax would directly or indirectly hurt people ranging from writers and publishers to corporations such as Adobe—which just laid off 600 workers.

The New York insanity, if enacted into law, could lead to more taxes of this ilk in other states and add to expenses for small e-booksellers. It could even encourage piracy by jacking up costs for legitimate buyers.

As a writer and e-book reader, I challenge the International Digital Publishing Forum and the Association of American Publishers—both with many members in New York—to speak up if they haven’t already. Alas, the IDPF in the past failed to protest when Europe countries passed discriminatory taxes against e-books. No need to search for contact information for Paterson, by the way.

TeleRant—with other views welcomed

So how might New York and other cash-strapped states raise much-needed money? Well,  I’d love to see politicians at both the federal and state levels truly sock it to billionaires and the very richest multimillionaires—campaign contributions notwithstanding. We’re talking about rich-rich, not your garden-variety Millionaire Next Door.

TeleRead is is an e-book blog rather than a political blog, but I can’t resist since government policies can affect e-books along with everything else. The top one percent of U.S. households, billionaires included, possessed 33 percent of wealth in 2001. I wouldn’t be surprised if the distribution were even more skewed today. Same for income distribution. Like it or not, the mega-rich can each read only one e-book at a time. Better for e-books and other objects of discretionary spending if the United States is less of a banana republic. I’m a capitalist, but enough is enough. Grotesque income inequalities can hurt even the rich by reducing the market for the wares their companies make or sell—e-book gizmos included.

What do you think? Agree or disagree? What’s more, I’d welcome thoughts from people outside the States—on both income distribution and download/e-book taxes.

Details on the proposed tax: InformationWeek and others mentioned in Google News Roundup, as well as CNET.

The situation outside New York, as summed up in the Christian Science Monitor: “Currently, 17 states and the District of Columbia have similar laws in place, according to CNET. Politicians in Massachusetts, Wyoming, and Washington are weighing their own bills.” Time for the IDPF and AAP to speak up in those cases, too? If the much-hated RIAA wants to win points among consumers, it, too, would do well to join the fray and fight download taxes of all kinds.


  1. Hi David,

    I completely agree an e-book tax is a bad idea which could cripple the e-book industry before it has had a chance to find its legs. But I don’t agree with your sentiments against wealthy people. I think you suffer from the belief that the “wealth pie” is finite and if someone gets a bigger slice then others must get a smaller slice. This is a fallacy. People who earn income through voluntary exchange will always produce wealth which is not at the expense of anyone else. This is self evident as everyone who enters into a trade does so because they think they will be better of as a result. It follows that millionaires and billionaires have made society much richer and it is unfair to punish them merely for being successful. Instead we should be incentivising potential entrepreneurs to follow in the footsteps of people like Bill Gates, Larry Page and the Sergey Brin, who have probably done more for e-book technology than anybody.

    I don’t understand why you think income inequality is a problem in itself. If everyone is getting richer while some people are getting richer faster than others, I don’t think this is a bad thing. In a globalised economy, people with very valuable skills are going to be rewarded disproportionately as there is a worldwide demand for what they produce (take extremely talented sports people or hugely popular authors for example). But they haven’t robbed or defrauded anyone so let them keep the products of their labour.

    I also think it is a false statement to say that e-book technology would be better off if the rich were taxed more. For one thing, taxing can reduce the overall wealth of a society as productive people choose to work less or move to lower tax places. This could mean less money for everyone to spend on e-books. Secondly, wealthier companies are the ones most likely to invest in costly research & development (eg into colour e-ink).

    If the New York government is in financial trouble it should start cutting back on wasteful spending, not looking for new victims to expropriate wealth from – be they e-book consumers or the rich.

  2. Taxing downloads would simply put downloads on the same tax footing as if I bought the pbooks or the CDs in my local Barnes & Noble or even online from B& I don’t see it as an impediment to ebook growth. In fact, if done properly, it might even the playing field to some degree. Right now I have to pay sales tax on any purchase I make online from B& because B&N has a physical presence in New York. I may be wrong, but I don’t believe I would have to pay that tax if I purchased the books at Amazon instead (I’m no longer sure because I do not buy from Amazon and I know that last year New York passed a law requiring online retailers to collect the sales tax).

    At least books are discretionary purchases. Applying the sales tax to discretionary purchases is better than having a tax increase on my home or my income, neither of which are discretionary.

  3. Tennessee has this thing called a “Use Tax”. Buy something from out of state that you intend to use in-state and you are supposed to fill out a form (annually if not more often) and send that tax money to the state Revenue office.

    It is strictly on the honor system at this point (I’m not aware of the enforcement legalities) and almost no one pays it. The stated aim of this tax is to encourage state residents to buy things in TN that are cheaper in surrounding states that don’t have TN’s high sales tax.

    This tax probably applies to electronic media – Of course, I already get taxed (10% !!) when I buy music from iTunes (I don’t do Amazon) since Apple has multiple stores in TN.

    I’m surprised if NY doesn’t already tax iTunes purchases. So is this 4% is on top of regular sales tax? Sounds greedy to me.

    And looking at a description of the proposed tax — it’s for a lot more things than electronic media downloads. Basically a 4% tax on ANY form of entertainment. I can see that being popular come election time.

  4. @Andy – almost all states that have sales taxes have such a system. Here in Michigan I’m supposed to fill out a form and pay sales tax anytime I buy something out of state…riiight.

    I don’t know how other states are, but Michigan is kinda odd because books are taxed but magazines are not. Frankly, I would exempt all books, magazines and newspapers from sales taxes. Too few people read already…adding taxes is just stupid.

  5. I’m guessing that in most political subdivisions print books and music CD’s are subjected to the usual sales tax.

    I don’t see how applying the same sales tax to those items in digital form is “insanity” as David says.

    How many people are likely to NOT purchase an ebook cuz of a sales tax?

  6. Hi, HG. At least some won’t. There’s also the issue of small e-publishers and e-tailers having to wrestle with more complex software issues. As for p-books, I’m in favor of tax breaks for them, too, as I’ve already noted. Thanks. David

  7. The link to details about the tax is broken, so I can’t comment on the tax itself, but, on general principle, I wouldn’t be opposed to paying a tax on a first-time sale of a DRM-free ebook. Your average Kindlebook (admittedly not DRM-free) costs about $7; I’d pay the extra 28 cents. I’m all in favor of ebooks, but I don’t think they deserve a special dispensation from taxation.

  8. Thanks for your thoughts, Court. Granted, the 28 cents isn’t huge. But neither is the revenue provided the state of New York at this point. There are more efficient ways of raising the money, such as by making the rich bear their share of the tax burden.

    As for the link, it’s fixed for the moment—at least if you mean the one to the “four percent,” etc. Fingers crossed. People should let me knew if once again there’s a problem.


  9. Yup, the link is fixed.

    Well, look, I don’t know what the best taxation scheme for the state of New York is, so I’m not going to comment on that, per se. I’ll just reiterate that, strongly as I feel about ebooks being a big chunk of publishing’s future, that’s no reason they should be exempt from paying their taxes. In fact, to my mind, this constitutes one more reason why DRM-free ebooks should be fully legitimized: so that the state can benefit from their legitimate sale (if not resale) by receiving revenue. As opposed to outright piracy, I mean.

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