Taxing the Internet is a Bad Idea

Earlier this month, House members introduced a new bill that would make the Internet Tax Freedom Act permanent. First passed in 1998, the Internet Tax Freedom Act was a 15-year ban on the taxation of Internet access. The bill has been continually extended in a patchwork fashion, most recently at the end of 2014 to extend the law through September 2015, at which point the law will expire if further action isn’t taken. This new bill is similar to the same bill that passed the House by voice vote in 2014 but failed to be voted on in the Senate.

The bill was introduced in a bipartisan fashion, with strong support from both sides of the aisle. The bill would explicitly bar Federal, state and local governments from imposing any sort of access fees or taxes on top of Internet access. Consumers are already paying for their Internet access, with monthly service charge for Internet access in 80% of American homes. Opening up the Internet to taxation could lead to extremely onerous taxes and fees, similar to what we now see in the wireless industry. The average consumer pays over 15% in taxes and fees on their wireless bills, with consumers in seven states paying over 20%.

These taxes would disproportionally hit people who need the Internet most—by broadly applying taxes to the Internet, we potentially cut off access to the low-income and disadvantaged. Internet access has been extremely valuable to people across the Internet, allowing people opportunities to shop, further their education, or even open businesses. The Internet allows consumers to engage in these activities at an even lower cost, thereby lowering the bar for many to take advantage and compete in a marketplace they may have otherwise been shut out of.

In 2010, the Internet accounted for 4.7% of economic activity in the US, with estimates that the Internet could be responsible for 5.4% of GDP by 2016. Penalizing Internet access for Americans could be detrimental to that growth, cutting off an important access point for Americans to engage in commerce and go about their lives.

This is an area where most Republicans and Democrats can agree, given the issues it could cause and the importance of Internet access. Many state and local governments are always looking for more revenue to pad their coffers, in whatever form they can find it. Congress should move to cut this source off to protect free and open access to the Internet. The House should take action on this bill and get it into the hands of the Senate as soon as possible.

Zack Christenson writes on digital tech issues for the American Consumer Institute.  For more information, visit www.theamericanconsumer.org

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