The Internet Tax Freedom Act of 1998 was designed to promote the growth of the Internet by placing a moratorium on state and local taxation of Internet access and the creation of discriminatory taxes on emails and other data. The moratorium is set to expire in 2014, but two proposals being considered in Congress, the Senate’s Internet Tax Freedom Forever Act and its companion bill in the House, the Permanent Internet Tax Freedom Act, would permanently extend the ban on Internet access taxes. Neither of the bills being considered or the moratorium exempts Internet sales from general state sales taxes.
Making the Internet access tax moratorium permanent is a necessary step in promoting wider access to the Internet while keeping the cost down and eliminating discriminatory taxes. As the Internet has become one of the driving forces behind economic growth across the United States, ensuring affordable access for businesses and consumers is crucial. An online petition sponsored by MyWireless.org calling on Congress to permanently ban taxes on Internet access has drawn over 44,000 signatures.
On April 10, the Internet Tax Freedom Act (ITFA) Coalition, a group of communications and technology companies, business associations and consumer groups released a letter to Congress calling for legislators to support the current efforts to avoid a tax increase on Internet access. Lawmakers currently have until November 1, 2014, the end of the current moratorium to stop the new tax. Tom Schatz, President of the Council for Citizens Against Government Waste, a signatory of the letter noted that preserving the Internet moratorium is a rare issue that crosses the aisle. “It is not often that an issue receives bipartisan support in Washington, D.C., but the Internet tax moratorium is a rare area where both liberals and conservatives have found common ground,” said Schatz.
Annabelle Canning, executive director of the ITFA argued in a statement that the goal of mobilizing the Internet economy to promote economic growth would “be better achieved by ensuring all Americans have access to broadband Internet access, free from burdensome state and local taxation. Permanently extending ITFA would allow Americans to reap the benefits provided by broadband Internet access through increased access to job training,education, employment opportunities and government services without excess taxation.”
Supporters of both bills argue that increased Internet access taxes say allowing these taxes could quickly make ISP bills resemble phone bills, with more and more taxes added and more people being unable to afford Internet access. Wireless tax rates have reached all-time highs with almost half the states nationwide now impose a wireless tax above 10 percent,according to the Tax Foundation; the national average is more than 16.3 percent.
In the letter, Steve Pociask, President of The American Consumer Institute Center for Citizen Research (ACI) argues Internet access must remain free if the digital economy is going to continue to grow. “While Congress and the President want consumer adoption, investment, deployment and innovation in broadband services, allowing the imposition of onerous taxes would nullify these goals. We need to not tax what we should encourage.”
The twin bills would also prevent state and local governments from imposing multiple taxes on digital goods, such as apps and music, as many governments have begun to do with wireless phone service. Under the moratorium, the digital economy for apps and digital music has boomed, according to the American Consumer Institute Center for Citizen Research, the lack of an Internet access tax has “enabled the app economy to create nearly 500,000 jobs, and digital music downloads from the iTunes store alone accounted for over 25 billion songs at this point.”
Internet access taxes place an unnecessary burden on consumers in order to do something the market is already handling quite effectively. Making the Internet access tax moratorium permanent would help broadband access and development expand while reducing the need for government broadband spending.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
