The House of Representatives approved the Permanent Internet Tax Freedom Act, a bill making a temporary moratorium on state and local taxes on Internet access. The current moratorium, included in a continuing resolution and omnibus spending bill passed late last year, expires in October.
The original temporary moratorium on Internet access taxes, the Internet Tax Freedom Act, has been extended four times since being first signed into law by President Bill Clinton in 1998.
The Benefit Principle
Andrew Lundeen, director of federal projects at The Tax Foundation, says there are no good reasons to tax Internet access.
“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.”
Lundeen says Internet access taxes are about increasing government revenues rather than offsetting benefits of government services.
“In the case of Internet access, there doesn’t appear to be a specific service that the government needs to pay for through taxes,” he said.
“Allowing the taxation of Internet access could have a negative impact on the Internet economy, and the economy at large,” Lundeen said. “With the Internet economy growing rapidly and the rest of the economy relatively sluggish, taxing Internet access may be counterproductive.”
Katie McAuliffe, the executive director for Digital Liberty, a non-profit organization advocating for a consumer-driven technology and media market, says Internet access taxes will be passed on to consumers, discouraging low-income households from getting online.
“If states were allowed to tax your Internet access, you would see your cable bill go up, your mobile phone bill go up,” she said. “It’s a regressive tax.”
McAuliffe says promoting economic opportunity and making it easier to get online go hand in hand.
“If we’re trying to promote innovation, then we probably shouldn’t tax one of the most innovative parts of the economy that we have,” she said.
Rudy Takala ([email protected]) writes from Washington, DC.
Kathryn Kisska-Schulze, American Business Law Journal, “The Future of E-mail Taxation in the Wake of the Expiration of the Internet Tax Freedom Act”: https://heartland.org/policy-documents/future-e-mail-taxation-wake-expiration-internet-tax-freedom-act