NCPA - National Center for Policy Analysis

Taxing to Log-On

December 12, 2003

For much of its young life, the Internet has been the locale of all sorts of social and political battles, such as those over censorship and copyrights. Now, a big ideological war is brewing over Internet taxation, says the Wall Street Journal's Lee Gomes.

Antitax conservatives in Congress and elsewhere are taking the lead to ban taxes on connecting to the Internet, and on buying anything once people get there.

In 1998, Congress approved and President Clinton eagerly signed the Internet Tax Freedom Act. The law mandated a moratorium on any state or local taxes on Internet access. Five years later, says Gomes, the Web is even more entrenched. But rather than letting the ban expire, Congress is close to making it permanent -- and with a vengeance.

  • This time, all forms of Internet access would be deemed tax-free, including cable and Digital Subscriber Lines.
  • The states are howling mad, because they stand to lose billions in local telecommunications taxes on phone service.
  • With voice service moving rapidly to the Internet, there is little to stop your local phone company from saying the $50 you are paying them each month is for Internet access and not phone service, and should thus be tax-free.

Antitax forces are smart in going after the Web, says Gomes, because the idea of making it a tax haven resonates with the frontier feeling that many people have about the Net. And with its size growing every day, if you take the Web tax off the table, you've made a good piece of the economy tax-free.

Source: Lee Gomes, "Battle Over Access Tax Is Going to Determine Future of the Internet," Wall Street Journal, December 8, 2003.

For text (WSJ subscription required),,SB107083493487479100,00.html


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