TAX THE INTERNET?

Larry Irving is founder and head honcho at the Irving Information Group, a consulting firm providing strategic advice and assistance to international telecommunications and technology companies, technology and media startups and foundations and non-profit organizations. Before that he served for almost seven years as Assistant Secretary of Commerce for Communications and Information and Administrator of the National Telecommunications and Information Administration (NTIA), where he was a principal advisor to President Clinton and Vice President Gore and the Secretary of Commerce on domestic and international telecommunications and information technology issues. From Clinton-Gore to DWT; he wrote us a post on the controversy around the issue of taxing the Internet. Here's his report:

The Senate Commerce Committee is set this week to debate an extension of the 1998 Internet tax ban preventing local and state government from collecting tax on Internet connection services.
 
Two proposals are currently competing on the floor: Senators and former Governors Carper (D-DE) and Alexander (R-TN), introduced a proposal in May, S. 1453, that would extend the ban for four years, but would permit states to collect on access taxed before the imposition of the moratorium in 1998.
 
Challenging the Carper-Alexander proposal is S. 156, introduced by Senator Ron Wyden (D-OR) which proposes an indefinite, permanent ban. With outside support from likes of Google, Yahoo, AT&T, and Verizon (check out other supporters from the DontTaxOur Web Coalition), the Wyden bill has widespread bipartisan support.
 
DON'T TAX THE INTERNET


In ancient Greek mythology, Sisyphus, a provincial king, was subjected by the gods to the punishment of rolling a boulder up a huge hill only to have it roll down again. In present day Washington, advocates of freedom from Internet taxation are subjected to a similar punishment as every several years, despite strong public support and bipartisan political support they have to reestablish the fundamental principles on which the Internet was founded, freedom, minimal regulation and minimal taxation.
 
Congress passed the initial Internet Tax Freedom Act in 1998. The legislation, then as now supported by users and providers of internet access, passed overwhelmingly in Congress and was signed by President Clinton in October, 1998. Briefly stated, the Act barred local, state and federal governments from taxing internet access and from imposing internet only taxes such as bit taxes, bandwidth taxes and email taxes. The legislation has been renewed twice in intervening years. But for this legislation, the Internet would be subject to a myriad of possible taxes from, according to some tax experts, up to 30,000 state and local franchising authorities. The legislation introduced this year would make the ban on unneeded taxes and fees on internet use permanent and end the triennial Sisyphean effort presently necessary to protect the Internet and its users.
 
No one seriously argues against another short term extension. But state and local taxing authorities oppose making the tax ban permanent on the basis that taxes may one day be necessary. They can't articulate why taxing the internet would be a good idea or what would cause taxing the internet ever to be necessary, but they want the option. As a general rule, I am not reflexively anti-tax. I understand that governments need revenue to provide services to the public. But I can find no compelling reason for taxing the internet or users of the internet.
 
I served for almost seven years in the Clinton Administration and helped define the Administration's internet policy. We attempted to ascribe to what we referred to as the internet's Hippocratic Oath, "first do no harm." That philosophy served us well, has served our nation well, and I would submit, will serve the present set of internet policymakers, local, state and federal equally well. Taxation of the internet could cause substantial harm.
 
The internet and particularly the broadband internet have been huge success stories. In the 9 years since Congress first passed the first Internet Tax Freedom Act, tens of millions of American households and hundreds of millions of Americans connected to the Internet. Let me repeat that, in the past decade, hundreds of millions of Americans have joined the Internet revolution. As prices for access have fallen and the quality of the internet experience has improved, the Net has become an integral part of life for the majority of Americans. But there is more work to be done. Approximately a quarter of the American public are not connected to the Net and almost half of America is not connected to the broadband internet. Permitting taxation of internet services could stem the growth of the net. Worse, the state and local taxes most likely to be imposed on internet services are the type of regressive taxes that will disproportionately impact low income Americans, precisely the portion of our population that is most likely to not be connected now.
 
We have a chance to end our triennial homage to Sisyphus by passing the Internet Tax Freedom Act of 2007. Let's get it done and let's get on with the task of making broadband more accessible to and affordable for all Americans.