Internet under Siege; Make the Tax Exemption Permanent

Article excerpt


Ronald Reagan memorably observed that the government's view of the economy can be summed up as follows: "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

Fortunately, so far when it comes to the Internet, the federal government has uncharacteristically suppressed the urge to tax and regulate. And the result has been a flourishing of information, productivity and opportunity. But state and local governments will get another crack at proving Mr. Reagan's aphorism correct unless Congress acts soon to protect consumers and entrepreneurs from opportunity-killing taxes on Internet access.

As governor and as a senator, I supported and sponsored with Sen. Ron Wyden of Oregon legislation banning taxes on Internet access as well as updating definitions so that there is no discrimination based upon which platform one uses to access the Internet, whether it be cable, DSL, wireless, satellite or power lines. Congress first passed a temporary ban on state and local governments taxing Internet access in 1998 and renewed the moratorium in 2001 and 2004. This law protects every American from harmful, regressive taxes on Internet access, as well as duplicative and predatory taxes on Internet transactions. It ensures that a complicated and costly telephone-like tax regime, which increases bills for service by an average 18 percent nationally, will not be imposed on Internet consumers for the privilege of accessing the Internet.

The moratorium has prevented avaricious state and local tax commissars from slapping consumers with new taxes when they log on to the Internet. The result has been that Internet use in the United States has grown from 36 percent in 1998 to more than 70 percent today. But the moratorium is set to expire on Nov. 1 unless Congress acts to renew the temporary moratorium or make it permanent.

At a time when the United States is lagging behind much of the world in broadband penetration, extending the tax moratorium would put us one step closer to achieving much greater broadband access across the country. But I do not believe that a temporary moratorium is sufficient.

A permanent ban on Internet access taxes would extend the reach of technology and help eliminate the digital divide. According to a study by Government Accountability Office analysts, only 11 percent of households with incomes below $30,000 have broadband service, compared to 61 percent of households with incomes above $100,000. Basic economics indicates that for every dollar of taxation added to the cost of Internet access, we can expect to see lost opportunities for thousands of American families, especially people in rural areas and people everywhere with lower incomes.

Taxes on access increase costs for distance learning, interactive medicine, online businesses and basic communication. …