State governments always seem to find creative ways to tax Americans, so why haven’t they taxed us for using the Internet yet? It’s because we’re protected by the Internet Tax Freedom Act — but if the Senate doesn’t pass a permanent extension of the act by Nov. 1, we might see $15-$20 additions to our phone bills for Internet usage.
“It’s really unfortunate because the House passed it on voice vote to make it permanent, and now the Senate is messing it up,” president of the Taxpayers Protection Alliance David Williams told The Daily Caller in an interview. “I mean Harry Reid in particular is messing this up.”
On July 15, the House passed the Permanent Internet Tax Freedom Act (PITFA) via voice vote — in true bipartisan fashion — which would allow permanent freedom from Internet taxes and eliminate the need for extensions. The Senate still has to pass the bill. On July 31, right before the August recess, Republican Texas Sen. Ted Cruz tried to bring the bill to the floor, but was shut down by Sen. Majority Leader Harry Reid. (RELATED: Congress Mulls Internet Access Taxes For Millions Of Americans)
“If this Senate doesn’t act, we’re going to see consumers on Nov. 1 begin paying taxes for basic Internet services,” Cruz said. ”This ought to be something where stop playing games and say let’s all come together and agree, ‘don’t tax the Internet.’ Unfortunately we’re not in that situation. We’re saying an objection to the House-passed bill because there’s hope that by holding the Internet Tax Freedom Act hostage it can become a vehicle to impose sales taxes on transactions over the Internet.”
Reid is trying to get the Senate to pass a different bill called the Marketplace and Internet Fairness Act, which lumps PITFA together with the Marketplace Fairness Act (MFA). MFA calls for a sales tax on Internet transactions, to make the marketplace fairer for online retailers. Since a sales tax is imposed on traditional brick-and-mortar retail transactions, why shouldn’t all transactions be taxed? For Democrats, there should be no question about an Internet sales tax — it’s only fair. The issue lies with Republicans.
If the two bills aren’t lumped together, MFA won’t pass, because Republicans won’t vote to impose an Internet sales tax. Because of Reid’s agenda to authorize an Internet sales tax, PITFA is stalled, and the Senate is running out of time.
President of Less Government Seton Motley says that PITFA should be a perfect example of bipartisanship — agreeing with Cruz — but it’s Harry Reid who is preventing the Senate from getting anything done.
“The reason it’s a do-nothing Congress is because Harry Reid is a one-man speed bump,” Motley told TheDC in an interview. “He wants to force Republicans to vote for a tax-increase in order to stop a tax-increase. He’s not amending a bill, he’s appending an entirely different bill to a bill.”
Here’s what happens if PITFA doesn’t pass, according to Motley: Americans can expect a $15-$20 hike on their Internet bill. Some states will tax more than others, but we all know that if state governments are given the opportunity to earn more revenue with more taxes, they will, even if it means taxing something as basic as opening up your Internet browser.
“I think what’s going to happen is some states are going to keep it relatively low, but some states like Illinois will have much higher Internet taxes,” Williams told TheDC. “I think it’s going to be a mixed bag. It has the potential to bring millions of dollars into state coffers, but they aren’t going to put the money towards better Internet access, they’re going to put it toward wasteful spending. This is bad news all around.”
For poorer states — like Illinois — this a golden opportunity. If MFA passes and PITFA does not, then the state of Illinois will have more opportunities to tax consumers and producers.
“Illinois is broke, needs money,” Williams told TheDC. “They’re looking for more taxpayer money. It’s Sen. Dick Durbin who is supporting the MFA. It seems like he’d be all for getting more revenue into the state. It’s the lazy way.”
But for Sen. Durbin (D-IL), the Internet sales tax is more than just a way to revive a bankrupt state. It’s also a way to prevent unfair business practices and crony capitalism. The question is whether or not MFA will actually solve these problems.
“Small businesses in Illinois and across the country don’t want special treatment,” Durbin said in a 2012 press release. “They don’t want a handout — all they want is a level playing field. The Marketplace Fairness Act gives them that while helping states avoid raising taxes or making painful cuts that will slow our economic recovery.”
Congress only has 12 more work days until Nov. 1, and then Americans will be seeing rather substantial increases in their Internet bills. Paying an extra $15-$20 a month for your Internet usage hurts. Unfortunately, according to Williams, the situation is far worse than we think.
“[If Congress doesn't pass PITFA], it opens up the whole Pandora’s Box for states to tax Internet access,” Williams told TheDC. “This is something that is very real. It’s really scary to think that if Congress doesn’t do anything, states will open the floodgates for new taxes on the Internet, and it’s going to affect people of all income levels — in the inner city, in the country, this isn’t going to discriminate. States will have the potential to tax everybody.”