Congress Continues To Debate Internet Tax Freedom Extension

Telecom Policy Report, May 29, 2007

"Finally, a number of states and localities are ignoring the will of Congress; therefore, Congress needs to make it clear once and for all that the transport underlying the provision of Internet access and high speed Internet access is covered by the moratorium on taxes on Internet access service. Otherwise, the record is clear that states and localities will seek to avoid the moratorium on Internet access taxes by imposing taxes on the underlying transport and high speed Internet access. Recent studies of the taxation of telecommunications services suggest that such taxes could be excessive and discriminatory."

>>Jeff Dircksen, director/Congressional Analysis, National Taxpayers Union & Foundation: "First, state and local governments already place sizeable taxes, fees, and other charges on taxpayers who subscribe to various telecommunications services, whether wired, wireless or online. Second, allowing governmental entities to increase this burden would be counterproductive for consumers and telecommunications providers. Third, the Supreme Court's 1992 Quill ruling has protected taxpayers by ensuring tax competition among state and local governments who might otherwise engage in round after round of tax hikes in a 'race to the top.' Finally, on behalf of our members, I would urge you to consider how taxpayers would be better served by low-tax, pro-free market policies that encourage economic growth and innovation in the telecommunications sector (in contrast to higher taxes, fees, and additional regulation).

"Rather than aggravating these economic losses with new or higher taxes, Congress should adopt a policy that bans new taxes and repeals those already in place (or at least lowers them). Given the potentially destructive impact that expanding or raising Internet and telecommunications taxes could have on this important economic sector, the remedy could not be clearer: Congress and the states should declare this tax territory permanently 'off limits.'"

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