For well over a decade, we’ve lived in a period where taxation of the Internet and data is virtually nonexistent. Thanks to a moratorium passed by Congress in 1998, it’s been illegal for state and local governments to impose any sort of tax or fee to access the Internet. Its purpose was to make sure that the wealth of information on the Internet, and the huge economic benefit it holds, was available to as many people as possible. As we reach the expiration date of the moratorium in 2014, Congress is looking at what comes next. Last week, Senators Wyden (D-OR) and Thune (R-SD) introduced the Internet Tax Freedom Forever Act–which, just as it sounds, would ensure that the law forbidding taxation of the Internet becomes permanent.
The newly introduced bill would not only continue the moratorium on taxation of the Internet but also prohibit taxation on digital goods—including items you might download from the iTunes store, like apps, movies and songs. This would be welcome news for the economy and for the tech industry, which has seen explosive growth thanks to the burgeoning new marketplace that has erupted, due mainly to the thirst for digital goods that smartphones and tablets have created. And because of this thirst, over 500,000 jobs have been created as a result of this new app economy.
Taxes on the Internet and digital goods are discriminatory in nature, often hitting those who can least afford the taxes the hardest. Most observers realize this, stressing the importance of keeping the Internet free of taxation. A diverse collection of groups have joined together to support this new legislation, including Internet companies, communications companies and trade and consumer groups. Individual members include many companies that often find themselves on different sides of issues, including Amazon, Comcast, AT&T, Verizon, the NCTA, Time Warner and T-Mobile. The importance of keeping the Internet widely available is at the top of the agenda for most of these organizations, as it should be for anyone who wants to see economic growth, advanced learning and the proliferation of information.
Without the continued moratorium on Internet taxation, we could see something akin to the huge rate of taxation that wireless consumers face. Currently, consumers in five states see a rate of taxation of over 20%, with the average consumer seeing taxation at a rate of 16.3%. Without the current moratorium against Internet taxation, who knows where we might be? These taxes levied against wireless consumers are just as discriminatory as the Internet taxes would be, with the taxes inordinately harming minorities and the poor harder than anyone else. There’s no doubt that taxing the Internet would have the same affect.
In our information economy, access to the Internet couldn’t be more important. As technology progresses, we’ll rely on the Internet more and more—for education, commerce and communication. Without cheap, reliable access to the Internet, and without cheap, reliable access to the wireless service connecting you to the Internet, countless consumers could be left behind. We need to ensure that everyone has access to the Internet to ensure a better future for America.
Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research, an educational and research nonprofit organization.