Internet Taxation Ban Attracts Congressional Debate

Four bills addressing Internet taxation are pending in Congress as House and Senate committees this week held hearings on the matter.

The original moratorium banning Internet taxes will expire Nov. 1, unless lawmakers extend the date or institute a permanent freeze.

Companies such as Verizon Communications Inc. support a permanent ban on Internet access taxes while states want the ability to tax however they please. Carriers say competition unhindered by surcharges promotes broadband adoption. But states want the right to tax access services such as Web hosting and connectivity so they can beef up their individual coffers.

The issue does not necessarily split down partisan lines, either. Sen. Tom Carper, D-Del., on Wednesday introduced a bill that would extend the tax ban another four years. On the other hand, Sen. Daniel Inouye, D-Hawaii, chairman of the Senate Commerce Committee, said the moratorium should be lengthened temporarily, if at all.

Among the provisions in the proposal to extend the original Internet Tax Freedom Act (the one set to expire later this year) is language that alters the definition of tax-free Internet access so consumer e-mail and instant messaging remain free; closes a loophole that puts state revenue at risk; and continues the original grandfather clause to protect existing revenue.

The National Governors Association (NGA) on Tuesday said Carpers ideas are reasonable.

Governors must maintain the authority to manage their states revenue streams. This legislation protects that authority and clarifies the definition of Internet access so states are not at risk of losing significant revenues, said Raymond C. Scheppach, the NGAs executive director.

Verizon, meanwhile, called for a permanent Internet tax ban, which the other three bills would provide.

Competition between providers is making high-speed Internet access more affordable and available than ever, said Peter Davidson, Verizon senior vice president for federal government relations. This hearing makes clear there is no appetite in Congress to open the door this fall to regressive new taxes that would slow this great progress.”

National Governors Association
U.S. House
U.S. Senate
Verizon Communications Inc.

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