Earlier last month, the House Judiciary Committee sent the Permanent Internet Tax Freedom Act out of committee by a bipartisan vote of 30-4. Next, it will hopefully move out to the House floor for a full vote. The Act is an attempt to make permanent a ban on any taxation of the Internet or data at the federal or state level. A companion bill is currently working its way through the Senate, known as the Internet Tax Freedom Forever Act.
Now, the current Internet tax moratorium is set to expire at the end of this year. First enacted in 1998, the tax moratorium has made Internet access tax-free for over 15 years. In that time, we’ve seen the Internet flourish and enable millions across the country to empower themselves with information and access to the global economy. With most Americans having free and clear Internet access, we’ve seen a boom in many different sectors—with companies like Amazon, eBay, Google, Facebook and thousands of small businesses creating hundreds of thousands, if not millions, of jobs and generating billions in revenue and tax dollars.
The Internet has driven innovations in education, telemedicine, retail and news and information. Who knows where we’d be with an onerous tax on Internet access. Thanks to the low cost of Internet access in the US, consumer subscribership has flourished—the US currently ranks 6th in wireless broadband penetration—an impressive number for such a large country.
If the Internet tax moratorium were to expire, it would be bad news for both the economy and for consumers. The Internet will account for 5.4% of GDP by 2016—an incredible number for a technology that’s only been around in wide use for a few decades. Allowing taxation of the Internet would open the door for discriminatory taxes on data, email and access to information—and would be most detrimental to those who can least afford it. According to the National Broadband Plan, the goal is for 100 million people to have access to ultra high-speed Internet—something that taxation surely wouldn’t help.
It’s not just idle worrying that Internet taxes would skyrocket should a moratorium be lifted. Currently, the average wireless tax hovers around 17%, while the average cable TV tax is around 12%. With these rates, it’s no wonder that consumers and consumer advocacy groups are worried about the potential increases in costs for something so many take for granted.
The quicker that the entire Congress acts on this bill, the better. Right now consumers are left in limbo, with state legislators and many federal policymakers looking to Internet access for yet another source of income to fill their coffers. If Congress is serious about innovation and what’s in the best interest of consumers, they should make the Internet tax moratorium permanent. Only then will they prove they’re committed to a freely accessible Internet and putting into place innovation friendly polices.
Zack Christenson writes 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.