Should Internet Access Remain Tax Free?

    August 20, 2013

You probably pay a lot for Internet, but at least you don’t have to pay taxes on your service with each monthly bill. That may all change next year, and two senators want to stop that from happening.

The Hill reports that Sens. Ron Wyden and John Thune introduced the Internet Tax Freedom Forever Act into the Senate on Thursday. The bill would prevent state and local governments from imposing taxes on Internet service. In other words, the taxes that you see on your monthly utility bills would not appear on your Internet bills.

Do you think the Internet should remain tax free? Is there any benefit to taxing Internet service? Let us know in the comments.

The Internet Tax Freedom Act is nothing new. In fact, the bill was originally authored by Wyden all the way back in 1998. It barred the above federal, state and local taxes on Internet access, but it also barred said governments from imposing such things as a bit tax or a bandwidth tax. Such taxes were bad in 1998, and would be absolutely disastrous in today’s age of constant bandwidth consumption.

The government has three times now recognized that the Internet should be kept tax exempt. The most recent extension – the Internet Tax Freedom Amendment Act of 2007 – will expire on November 1, 2014. Wyden and friends hope to place a permanent ban on Internet service taxes by that time.

In defending the permanent tax exemption, Wyden says that it’s needed to facilitate the innovation and job growth that Internet brings:

“As the Internet Tax Freedom Act enabled and promoted Internet access and adoption across America, the Internet became a platform to facilitate global commerce, sparking nothing short of an economic revolution. It facilitated the development and growth of the digital economy and has created new industries and the good-paying jobs that come along with them. “Consumers, entrepreneurs, and innovators can breathe easy knowing that a permanent extension of ITFA is on its way.”

Wyden’s co-sponsor, Thune, said that the legislation would even help promote Internet access in rural areas that are still sorely lacking broadband Internet access:

“Use of Internet technology is one of the key drivers of economic growth, innovation, and information in our 21st century economy. Keeping the Internet accessible to consumers encourages innovation and investment in our global economy. Our legislation would make permanent the prohibition on Internet access taxes, would prevent multiple and discriminatory taxes on Internet commerce, and would promote Internet access throughout the country, which is especially important in rural areas of South Dakota.”

Interestingly enough, Wyden and Thune’s bill would go above and beyond what the current Internet Tax Freedom Act does. It would ban multiple and discriminatory taxes from being applied to digital items. The bill currently bans multiple taxes on the sale of digital goods, but there’s no law against discriminatory taxes on digital goods. If passed, you would no longer have to pay any taxes when buying digital songs, movies and apps.

As you would expect, the bill has already received tons of support from the wireless and Internet provider industries. In fact, CTIA President and CEO Steve Largent said that a permanent moratorium on Internet taxes is needed to preserve the current “affordability” of wireless and wired Internet:

“An affordable internet is vital to millions of American consumers and businesses, and Senators Wyden and Thune remain at the forefront of preserving this critical access to opportunity and information by introducing the Internet Tax Freedom Forever Act of 2013. Wireless broadband was in its infancy when Congress passed the Internet Tax Freedom Act fifteen years ago and put the first temporary tax moratorium in place. Today, millions of Americans rely on wireless technology for myriad purposes in their everyday lives, and it’s more important than ever to create a reasonable and permanent tax process on internet access. CTIA and its members look forward to working with Senators Wyden and Thune on behalf of all American internet users to ensure Congress will act on this important legislation before the current moratorium expires next year.”

In the wake of the bill being announced, a number of trade groups and companies have joined forces to create the Internet Tax Freedom Act Coalition. The group is made of the usual suspects, including, AT&T, Comcast, Time Warner Cable, T-Mobile, Verizon and others. All of these companies have plenty to gain with the passage of this bill, and it’s unsurprising to see them voice support for it.

Unlike some issues that telecoms and wireless carriers push for, consumers would actually benefit from the passage of this bill as well. We may be paying a lot for Internet and wireless service, but we would paying a lot more if stuff like the bandwidth tax was enacted. The ban of multiple and discriminatory taxes will probably be a point of contention with traditional retailers, but I think everybody can agree that Internet access taxes are no good.

Do you support the permanent extension of the Internet Tax Freedom Act? Or should state and local governments be allowed to tax the Internet? Let us know in the comments.