Sen. Alexander Backs Internet Tax

The moratorium on taxation for internet access is set to end on Nov. 1st, unless Congress acts to extend it. Adding taxes to internet access is a terrible idea and will slow down one of the most productive and useful technologies of our time.

The American Cable Association, any many others, remain deeply opposed to the tax, with good reason:

"Testifying before the House Committee on Small Business, the ACA, which represents small cable businesses, said allowing the Nov. 1 moratorium to expire would make it harder for cable operators to deploy broadband service to rural customers. Expanding rural broadband access is a priority for Congress and the Federal Communications Commission.

The moratorium prohibits state and local taxes on Internet access, as well as multiple taxes on electronic commerce."

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"At a time when the costs of running their businesses are increasing, small cable operators are deploying broadband services," ACA vice president of government affairs Ross J. Lieberman said, "despite the financial hurdles of offering such services in rural America. Congress can safeguard these investments and ensure that high-speed-Internet access remains affordable for consumers by passing legislation that prevents state and local governments from imposing taxes on this service."

Tennessee Senator Lamar Alexander supports the tax. Bad move, Senator. Why would you even consider this worthwhile?

UPDATE: I am in contact with Senator Alexander's office via his Deputy Press Secretary Jill Bader, who sent this information to my email:

"Senator Alexander is the lead Republican on this legislation and believes that a “permanent” internet tax ban makes no sense because technology is changing so rapidly. For example, if the original internet tax ban of 1998 had been permanent, it would only have covered dial-up access and anyone using broadband could be subject to taxation today. His legislation is a common sense compromise that would extend the moratorium for another four years, without blowing a hole in the budgets of state and local governments.

You can read more about Alexander’s legislation on his website here."

From that website is the following:

"The Carper-Alexander bill alters the definition of tax-free, “Internet access” to ensure that a consumer’s connection to the Internet, including email and instant messaging, remains tax-free. At the same time, the bill closes a loophole in the original 1998 moratorium that could allow an Internet Service Provider to bundle Internet access with other services and make them all tax-free.

This loophole is important because it could harm the traditional tax base of state and local governments. In 2004, the last time Congress extended the ban, Congress exempted voice-over-Internet-protocol services from the moratorium because of fears that states and localities could lose billions of dollars in revenue as telephone services migrated to the Internet.

As the Internet continues to grow and more services migrate to the Internet, Sens. Carper and Alexander said it makes sense to close that loophole and define “Internet access” exclusively as the connection between a consumer and the Internet Service provider. Such clarity will continue to ensure that Internet access is tax free, while also ensuring state and local governments do not have to come up with new – and potentially more burdensome – sources of revenue to pay for teachers, firefighters and health care services.

“Our bill would ensure that consumers continue to enjoy tax-free access to the Internet, including email and instant-messaging,” said Sen. Carper. “In the meantime, we fix many problems with the current law so that as future services, such as cable television, migrate to the Internet, we don’t completely erode the tax base of state and local governments.”

We should not undermine the ability of governors and mayors to pay for goods and services that everyone depends on. A temporary extension, as we have in our bill, will allow us to keep Internet access tax free, while giving Congress more time to understand the Internet’s evolution and what it means for state and local governments.”

I'll be adding more to this story in coming days and urge readers to carefully explore the Senator's bill as well.