Note to Congress: Taxes Are Not What's Causing Some Households to Go Without Internet


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Some voices from the tech world are making dire predictions because the Internet Tax Freedom Act expires on November 1. The law bans states from taxing internet access providers. This means states currently cannot tax, say, the monthly fee you might pay to AOL or another internet provider -- but technically could after November 1 if Congress does not act.

(This is not to be confused with the issue of sales taxes for online purchases. The U.S. Constitution has been interpreted to say that states cannot require out-of-state online retailers or other out-of-state retailers to collect sales taxes from customers unless Congress gives the states permission to do so).

When the Internet Tax Freedom Act was first enacted in 1998, the argument made in its favor was that the internet was a new industry and states needed some time to figure out what constituted internet access. Now, the industry says that the internet must continue to be tax-free so that it can more easily reach the many communities and households that have limited access.

As the Center on Budget and Policy Priorities points out, there are a lot of things that might prevent a household from having access to the internet but taxes are not one of them. The cost of a computer is the obvious bar for many households. As for communities where the proper infrastructure hasn't been developed by telecommunications providers, that has nothing to do with taxes. In several states that do tax internet access (states that did so in 1998 and were grandfathered in the law) more advanced fiber-optic networks are being built.

Identical bills have been introduced in the House and Senate (H.B. 743 and S. 156) to make the ban permanent. There had been talk that a compromise was reached in which another extension would be passed instead of making the ban permanent, but the outcome now looks unclear because provisions unrelated to the internet have become part of the bill. Rep. Linda Sanchez (D-CA), chairwoman of the Judiciary subcommittee that has jurisdiction, supports finding a compromise to temporarily extend the ban.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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