Once again, Congress risks allowing an Internet access tax

Putting a tax on Internet access strikes many people as absurd, but Congress is drifting in that direction

Putting a tax on Internet access has been compared to charging people to enter a physical shopping mall. The idea strikes many as absurd, including most lawmakers. But Congress is drifting in the direction of letting this tax moratorium expire in mid-December.

If Congress does let the moratorium end, states will be free to impose an access tax. Doing so would cost U.S. taxpayers about $14.7 billion a year in new taxes, according to a new study by the American Action Forum, which describes itself as a center-right policy forum.

U.S. House members of both parties were so opposed to the idea of lifting the access tax moratorium that it approved in July -- and by voice vote, no less -- a permanent ban on access taxes. There is similarly strong support in the Senate for extending the moratorium -- if a "clean" bill without any amendments is offered.

The Senate remains a question mark, given that there's interest there to amend moratorium legislation with bills requiring online sellers to collect sales taxes on goods, a more controversial measure.

Congress won't return until after the November election, and is due to end the session in mid-December. The moratorium preventing local and state governments from imposing access taxes was approved in 1998, and extended three other times, most recently in 2007.

Congress failed in 2003 to act in time to extend the access moratorium, but it did so retroactively, a scenario that is again possible, said Steve DelBianco, executive director of NetChoice, a trade association that represents ecommerce businesses.

"There is no doubt the Senate will pass a clean extension if given the opportunity," said DeBianco.

If Congress doesn't extend the moratorium, DeBianco said he's aware of at least one state, Washington, that may act immediately to impose access taxes.

Telecommunications access is already heavily taxed. The foundation's report cites data showing that U.S. wireless consumers pay an average of 17.05% in combined taxes and fees on their cell phone bills, including 11.13% in state and local taxes.

Wireline services are taxed at similarly high rates, the report said.

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