In the stopgap continuing resolution bill passed by Congress in September is a piece of federal government telecommunications and tax policy that has been proposed and approved five times since 1998.
Instead of kicking the can down the road once again and causing uncertainty in the one economic sector experiencing economic growth in good times or bad, lawmakers in Washington, D.C., should take the issue off the table and pass a permanent version of the Internet Tax Freedom Act.
In June, the U.S. House of Representatives approved the Permanent Internet Tax Freedom Act, with the sponsorship of 132 Republicans and 59 Democrats. These days, partisan lawmakers in Washington can barely agree on the color of the sky, but they overwhelmingly agree using the local phone company or Internet service provider as a deputy tax collector does not benefit consumers.
Studies show taxing Internet access leads to fewer people subscribing to broadband service. Research by the Phoenix Center for Advanced Legal & Economic Public Policy Studies predicts a small, 2.5 percent Internet access tax would cause between 5 million and 15 million people to log off the Internet permanently.
“Indeed, given the price sensitivity of many Americans to broadband service, eliminating the ITFA will set the country back many years of broadband adoption growth,” researcher George Ford wrote. “In light of such findings, the case for making the ITFA permanent is compelling.”
“Internet access drives innovation and the success of our economy,” Rep. Bob Goodlatte, R-6th District, said in commenting on the House’s approval of PITFA. “It is a gateway to knowledge, opportunity, and the rest of the world. The American people deserve affordable access to the Internet, and the Permanent Internet Tax Freedom Act will help prevent unreasonable cost increases that hurt consumers and slow job creation.”
Banning state and local governments from taxing Internet access or using taxes to discriminate against the Web has been a staple of federal tax and telecom policy for so long, the constant “Will they or won’t they?” drama associated with 16 years of “temporary” ITFA moratoria is silly.
Settling for regular renewal of the moratorium, as though it were some controversial idea requiring continual re-examination, cannot be justified, because the tax makes no sense. Taxes should be connected to funding a service benefitting the tax’s payers, notes Andrew Lundeen, director of federal projects for the Tax Foundation. Internet taxes do the opposite.
“There doesn’t really seem to be a good reason to tax Internet access,” he said. “Taxes should start with a principle. The reason we have taxes is to fund government services, so a good principle for tax policy is that those who receive a benefit or service from the government should pay for that service. In the case of Internet access, there doesn’t appear to be a specific service that the government needs to pay for through taxes.”
Just as allowing state and local governments to tax and discriminate against Internet access makes no sense, setting the nation’s telecom policy through continuing resolutions and short-term sunsets is also nonsensical.
Fostering an environment of economic uncertainty by governing through short-term stopgap measures is unnecessary and bad for consumers and the economy as a whole. The Senate should finish the job started in 1996 and return the nation’s tech policies to a state of regular order by voting on and approving PITFA.
[Originally published at the Roanoke Times]
Jesse Hathaway is a policy advisor for budget and tax issues at The Heartland Institute.
