When news of the new "Amazon Tax" spread, most New Yorkers probably thought it just meant they'd have to start paying a little more when they ordered online merchandise. But the law, passed in Albany last month, is likely to have a far greater effect on small businesses than it is on consumers.

Critics of the new law say it is unworkable because tracking multiple sales tax rates is difficult - particularly for smaller retailers - while supporters counter that software tools are making this easier. But the reality is that Amazon and other merchants with affiliate programs won't bother adding the additional capability to collect New York tax; instead, they'll take the far easier step of blocking any New York-based site from their affiliate programs. The result will be a tremendous loss of income for the numerous small New York businesses now participating in affiliate programs.

If New York wants a larger share of online sales tax revenues, it should focus on making the state more attractive for online retailers to set up shop here, and improve enforcement of existing tax laws. Instead, the Amazon Tax will hurt New York's small online businesses and entrepreneurs, and ultimately may lower overall tax revenues, while strengthening New York's reputation as being unfriendly to small businesses.

Exxon's profits are soaring with the recent oil price spike, but the energy industry's earnings aren't as outsized as the politicians seem to think. Thomson Financial calculates that profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8%. And this was a boom year for oil. An analysis by the Cato Institute's Jerry Taylor finds that between 1970 and 2003 (which includes peak and valley years for earnings) the oil and gas business was "less profitable than the rest of the U.S. economy." These are hardly robber barons.

This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

Before you dismiss this agenda as the pie-in-the-sky wish list of wannabe social engineers, consider the trajectory of the Twinkie tax, which has gone from reductio ad absurdum to serious policy proposal in just a few years. In a June 1994 newspaper ad that criticized proposals to sharply raise tobacco taxes, R.J. Reynolds said: "Today it's cigarettes. Will high-fat foods be next?" Anti-smoking activists traditionally responded to this sort of slippery-slope argument by insisting that cigarettes were unique, "the only legal product that when used as intended causes death." To suggest that anti-smoking measures might pave the way for attacks on cheeseburgers and ice cream, they said, was just silly.

Yet six months after R.J. Reynolds tried to scare people with the outlandish prospect of a tax on fatty foods, Yale University's Kelly Brownell endorsed the idea on the op-ed page of The New York Times, citing the precedent set by cigarette taxes. He said "taxing foods with little nutritional value" would deter consumption and help raise money for bike paths, running tracks, and nutrition education. "Fatty foods would be judged on their nutritive value per calorie or gram of fat," he explained. "The least healthy would be given the highest tax rate."

John McCain, the Republican nominee for President, has proposed extending the Bush tax cuts. So as morning follows night this week, Democratic news analysis has been pouring forth to proclaim that his tax ideas are a threat to the republic because they'll explode the budget deficit. The Senator needs to understand that he can't win this election by playing on this economic turf.

The subtext of the criticism of the McCain tax plan is that it would somehow "starve" the government of revenue. The figures being tossed around for the "cost" of the McCain tax plan have been estimated at $2 trillion by the liberal Center for American Progress, while the Brookings Institution estimates $5.7 trillion.

Senator McCain doesn't need a doctorate in economics to understand this debate. As a Member of Congress and Presidential candidate, he has listened endlessly to Democrats mau-mau their opponents with rhetoric about "fairness" and the "deficit" and, best of all, the "investment needs" of the government, aka, spending.

The past week's criticisms are intended to bait Mr. McCain into debating his tax cuts on these liberal terms. He can only win this debate, and the election, by breaking free of that mindset and making his own personal case for lower taxes and the prosperity they help to create.

The proper way to prepare to meet the entitlement challenge consists of three essential elements: Change entitlements to slow their cost growth; eliminate all nonessential spending in the remainder of the budget; and, most important but often overlooked, adopt policies that promote economic growth. The greater the economic growth, the larger the economic pie, and the greater the public and private resources available to finance entitlement obligations and other national priorities.

Last year's federal budget illustrates the importance of economic growth to the federal budget's overall health. The federal budget deficit was recorded as 1.2% of GDP, half its average level over the past four decades. This modest deficit occurred despite the fact that Congress has been on a decade-long spending binge; despite the fact that not a single entitlement program has been significantly reduced since the late 1990s and two entitlements, Medicare and farm support payments, have been significantly increased; and despite the fact that we are in the midst of costly but necessary wars in Iraq and Afghanistan.

The consensus that tax increases are needed for fiscal balance is wrong. The next president can fund our defense priorities, maintain tax cuts, and balance the budget. A tax-increase consensus blurs the basic debates over our budget priorities in 2008 -- and severely limits our choices in 2028.