We’ve been here before—no less than four times, actually. Congress once again is pondering the question of a moratorium on taxing Internet access.
Last week the House Judiciary Committee approved the Permanent Internet Tax Freedom Act. This measure would remove “temporary” from a law that has been on the books in various forms for more than 15 years.
But unlike the last time the law was extended, lawmakers appear to be divided on the issue. If they fail to act by Nov. 1, the hundreds of millions of Americans who use the Internet could be slapped with new taxes on their monthly access bills.
When the law was extended in 2007, supporters pushed to make it permanent. State and local governments—a few of which already had Internet access taxes—pushed back hard for a shorter extension. A seven-year compromise resulted.
The handful of states—New York is not one of them—that had enacted Internet access taxes before the moratorium was first approved in 1998 were allowed to keep those levies. At the same time, the scope of the law was broadened to cover not only Internet access but also home pages, email, instant messaging, video clips and personal electronic storage services. And it barred states from taxing companies such as wireless providers for wholesale purchases of Internet access.
The new bill would make the moratorium permanent and remove the grandfather clause.
The arguments on each side of this law have not changed much over the years. Opponents say the moratorium deprives states of much-needed tax revenue (and those who prefer to be less direct say it impinges on states’ rights). They also maintain the Internet no longer is a toddler and thus doesn’t need government protection.
But the point of the moratorium is to prevent nearly 10,000 state and local tax collectors from placing levies solely on Internet access. Such multiple and discriminatory taxes not only discourage innovation but are regressive—creating an even higher hurdle for the 20 percent of households that still do not have Internet access.
Lawmakers should not allow the Internet Tax Freedom Act to expire. And while they are at it, why not make the law permanent?
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