2007-09-19 / Editorials

Economy Cannot Afford Internet Access Taxes

Unless Congress acts before November 1, Queens residents will be among millions of Americans who will see new taxes from state and local governments on their monthly Internet access bills. According to Don't Tax Our Web, an umbrella group of Internet service providers and telecommunications company associations, a tax on Internet access would be highly regressive, falling hardest on those who can least afford it.

We agree. An Internet access tax in actuality would tax access to information, to knowledge, to a voice in the democratic process and to economic opportunity. Ours is a market-based economy, and perhaps most important among the tax-free Internet's many benefits is the lower cost to consumers and businesses that allows a single individual with an Internet connection to create a new Web site or grow a business. Democratization of entrepreneurship has resulted in large part from the widespread accessibility afforded by a minimal Internet tax burden.

Internet access in most of the United States is untaxed because in 1998, Congress implemented the Internet Tax Fairness Act, preventing most states and localities from imposing taxes on Internet access. The tax moratorium was extended in 2001 and 2004, but public interest groups in favor of a tax-free Internet worry that the "temporary" part of the moratorium may be just that. "The problem with a temporary moratorium is that it certainly sends a signal that this may expire," Broderick Johnson, a spokesperson for Don't Tax Our Web, commented.

The 1998 Internet Tax Fairness Act and the 2001 Internet Tax Freedom Act prevented localities from imposing new taxes on Internet service providers, except for several states that already had taxes on Internet use in place. Congress left them alone. However, organizations such as the National Governors Association (NGA) and the U.S. Conference of Mayors have expressed concerns that the changing nature of the Internet prevents states and municipalities from collecting revenue due them. Of particular concern is the definition of "Internet access", which determines whether a technology can be taxed locally. States are also concerned that they are losing money because e-commerce transactions are typically not subject to sales taxes. (This is not the case if a merchant has a store in the state where the item is being purchased or delivered.)

The possible imposition of such taxes is a major concern for Web-based companies, as well as some of their counterparts with actual stores. "Companies have to be able to plan, they have to have a sense of what their costs will be," Johnson noted. Allowing the imposition of Internet-use taxes would constitute a major blow to companies that conduct many, if not all, of their transactions on the World Wide Web.

Treasury Secretary Henry Paulson and Commerce Secretary Carlos Gutierrez have sent a letter to key leaders of Congress, notably House Speaker Nancy Pelosi (D-California) and Senate Majority Leader Harry Reid (D-Nevada), urging them to support the permanent Internet tax ban. Keeping the Internet tax-free, it said in part, will "help ensure that consumers have affordable access to the Internet …and strengthen the foundations of electronic commerce as a vital and growing part of our economy".

Tax-free Internet access plays a part in almost every aspect of American life. Even people who do not use computers and think the Internet is some sort of newfangled way to catch fish indirectly participate in Internet business transactions, whether they know it or not. In only a few short years the Internet has become a major factor in the economic outlook of the United States. Taxing the Internet would impose a heavy burden on those least able to sustain it and seriously damage a flourishing segment of the American economy. We urge our representatives in both houses of Congress to renew the present moratorium on Internet taxes- better yet, make the ban permanent. We cannot afford to do otherwise.

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