Last month, representatives from dozens of organizations, including The American Consumer Institute, sent a letter to the leadership of several key committees that oversee various aspects of Internet regulation and economic activity. The letter implored the leadership of the importance of keeping the Internet free of taxation, something that is in jeopardy if the current Internet tax moratorium is allowed to elapse in exactly six months — on November 1st of this year.
Americans have enjoyed tax-free access to the Internet for over 15 years now, thanks to the Internet Tax Freedom Act of 1998, which provided that access points to the Internet could not be taxed. This went a long way into fueling growth of the Internet—with no disincentive to purchasing Internet access, almost 80% of all Americans currently have home Internet access. With the law set to expire later this year, a new bill has been winding its way through both houses of Congress. Called the Internet Tax Freedom Forever Act, it would declare that Internet access can never be taxed, as well as preventing discriminatory and multiple taxes on digital goods and services, among other provisions.
As the letter says, Internet access issues affects almost everyone in the country, and accounted for 4.7% of all economic activity in the US in 2010 alone. The Internet was an emerging technology when the Internet tax moratorium was first passed. Just imagine the detrimental effect that taxes would have had on such a huge economic engine such as the Internet.
Allowing the ability for different government municipalities to tax the Internet could have other detrimental affects as well. Low-income people would be hardest hit, at a time when more and more doors are being opened for educational and entrepreneurial opportunities. Imposing taxes on Internet services would de-incentivize many from pursuing these avenues. And burgeoning Internet sub-economies such as the digital goods market, which accounts for nearly 500,000 jobs, could be halted in its tracks. In a worse case scenario, we could even see Internet taxes becoming as outlandish as many consumers wireless bills, with the average consumer seeing taxes that exceed 17% of their bills.
Congress should continue to allow consumers unfettered access to the Internet, without the intrusion of more local, state and federal taxes. Doing so will go a long way towards allowing the continued growth and investment into this fast growing sector.
Zack Christenson Writes on digital tech issues for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information about the Institute, visit www.theamericanconsumer.org.