Senate Needs to Keep a Tax Free Internet

Last week, after several years of attempts, the House finally voted to pass the Permanent Internet Tax Freedom Act. The bill would prohibit taxing access to the Internet at the state, local and Federal levels. The current ban on Internet taxation ends in just a bit over three months from today.  Therefore, it is important that Congress push its members to ensure that the Internet remains safe from onerous fees.  The fact is that taxes can sometimes ensnare new technologies and services once regulators get their hands on it—as has happened with wireless phone services, where many consumers now pay upwards of 20% in taxes on their bills.

Internet access has remained tax-free since 1998, when Congress originally passed the Internet Tax Freedom Act. That bill only provided temporary reprieve and set to expire on November 1st of this year. Since the original passage, we’ve seen the Internet flourish, with nearly all Americans having free and unfettered access to the service at relatively low costs, allowing new forms of commerce, new forms of business, new forms of communication and a nearly unrestricted flow of both information and entertainment.

The bill has had fairly bipartisan support. But with the new bill now in the Senate, some Senators may attempt to use the popularity of this bill to attach a less popular bill to it—a bill seeking to tax goods purchased on the Internet. Senator Mike Enzi claims he’ll be adding the Marketplace Fairness Act, which would tax anything purchased on the Internet, to the Permanent Internet Tax Freedom Act. This is a troubling development, given the controversy surrounding the one and the relative bipartisan nature of the other.  Some Senators seem to be alright with playing chicken with the future success of the Internet.

Another problem, identified by American Consumer Institute president Steve Pociask, is the economic costs that the combination of new Internet access taxes could have with potential net neutrality regulations, and the effect this would have on consumers. As he outlines in a piece at Forbes, the combination could end up increasing taxes by more than 17%, potentially leading to a decrease of broadband subscribers amounting to 65 million people by 2020. If the goals of the National Broadband Plan are to be achieved, this would be a serious setback.

The moratorium on Internet taxation has allowed for entirely new sectors of the economy to flourish. By their nature, taxes on anything will discourage its use or utilization. As such, by applying a tax to the Internet, we’re discouraging e-commerce, which amounted to $4.5 trillion in 2013; Telemedicine, which has grown by leaps and bounds and now allows for consultations with your doctor without leaving your home; distance learning and online education, which helped provide training and education for 6.7 million people in 2012; and, really, the entire Internet economy and all the jobs it supports, including an expected 5.4% share of GDP by 2016. If Congress wants to continue to see the benefits and growth of the Internet, they should move quickly to prohibit any taxation of Internet access.

Zack Christianson writes for the American Consumer Institute Center for Citizen Research, a nonprofit educational institute.  For more information, visit www.theamericanconsumer.org.

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