NCPA - National Center for Policy Analysis


October 9, 2007

Taxes and other government-imposed charges can boost your phone and cable TV bills by 20 percent or more.  To guard the Net against that kind of pile-on, Congress in 1998 adopted the Internet Tax Freedom Act, which temporarily barred state and local governments from taxing online access services or imposing discriminatory levies on Web-based businesses.  The ban was renewed in 2004 but is due to expire Nov. 1.  Before it does, Congress should make it permanent, says the Los Angeles Times.

According to the Times:

  • The Internet is transforming how people communicate, work, learn and play, especially as broadband proliferates.
  • Although roughly half of U.S. Internet users have broadband at home, millions do not have any kind of Internet service there and millions more have only dial-up accounts.
  • These are largely poor, elderly or rural people, and the federal government needs to ensure their access to affordable broadband services.

Barring states and cities from taxing Internet access won't close the connectivity gap, but it will help keep down the price of broadband service, says the Times.  That's an important step in the process of enabling more consumers to afford it.  The prohibition also spares many cable-modem and DSL users, who pay taxes on the TV and phone services they receive through the same wires, from being double-taxed.  Nor should Web-based companies have to pay taxes that their brick-and-mortar rivals do not.  Mail-order businesses are immune to taxes outside the states where they're based, so e-commerce companies should be too.

Source: Editorial, "Don't tax Internet access," Los Angeles Times, October 8, 2007.


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