NCPA - National Center for Policy Analysis


November 2, 2007

The Internet Tax Freedom Act, which imposes a moratorium on discriminatory Internet taxes, has been extended for an additional 7 years.  But without a permanent moratorium, this issue will have to be visited again in 2014, says Pamela Villarreal, a policy analyst for the National Center for Policy Analysis.

The potential consequences of taxing the Internet are significant.  For example:

  • Internet taxes could up to 20 percent to the average bill.
  • The American Consumer Union Institute reports that a 10 percent tax would reduce broadband market revenues by 12 percent.
  • Furthermore, low-income consumers would likely drop their services of defer switching from dial-up to the more speedier broadband.

The National Governor's Association supported a "reasonable" extension of the moratorium -- a compromise, so to speak.  It would prohibit the taxing of email and instant messages, but anything other Internet data has the potential to be taxed. 

Governors argue that their states are losing valuable tax revenue, but the Government Accountability Office reports that in 2004, among "grandfathered" states that collected taxes on Internet access, all but two of them received less then $10 million in revenue, just a fraction of their total state tax revenues.

The lack of a permanent moratorium will leave Congress wringing their hands over this issue in 2014, says Villarreal.

Source: Pamela Villarreal, "Computer Virus on the Hill," Washington Times, November 2, 2007.


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