Extend the internet tax moratorium indefinitely

Zack Christenson Research Fellow, American Consumer Institute
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Consumers today are experiencing a virtually tax-free Internet environment — that is, their access to the Internet and data isn’t being taxed. Thanks to the 1998 Internet Tax Freedom Act, a moratorium on new taxes on Internet taxes has been in place at both the federal and state level.

This moratorium has been a boon for the growth and development of the Internet, encouraging access for consumers and keeping costs for consumers low. It’s enabled billions of dollars in commerce since the Internet’s inception.

The moratorium is set to expire next year, however, leaving the possibility of taxes being levied by Congress, as well as state and local governments across the country. We could potentially see a repeat of skyrocketing wireless taxes, where the average tax burden for a wireless consumer averages out to 17.2 percent.

There are now bills in both the House and Senate that seek to extend the Internet tax moratorium indefinitely. The Senate version is called the Internet Tax Freedom Forever Act and has support from both sides of the aisle, being cosponsored by Senators Thune (R-SD) and Wyden (D-OR). The House version was released just yesterday. Called the Permanent Internet Tax Freedom Act, it would do much the same that the Senate bill hopes to do and also enjoys broad support from both sides of the aisle.

These bills would prevent taxation of the Internet, but also would stop multiple and discriminatory taxation of other digital products, such as apps, music, movies and other such items you might download from iTunes or Amazon. Just image being taxed for downloading an app based on where you were located, and again based on where you live, and again based on your ISPs’ location, and yet again based on there the app’s server is located. Taxation of digital goods could lead to multiple taxes on a single electric commerce transaction. These bills stop this.

Many have voiced strong support for the bill. The Internet Tax Freedom Act Coalition (ITFA), a coalition of businesses, consumer advocates, and associations, released a statement applauding the introduction of the bill into the House, saying:

“The impact of the Internet is evident in the scope of its use to help displaced workers look for new job opportunities, to permit students to access online educational materials to complete their homework, to provide small businesses and entrepreneurs with access to new marketplaces throughout the nation and across the globe, and to enable consumers to access information and entertainment anywhere and at any time. The Internet provides consumers with access to healthcare monitoring services, government services, wireless AMBER alerts and 24/7 news coverage.”

The reasons for keeping the Internet tax-free should be obvious, as the statement from the ITFA plainly shows. We should not be taxing what we should be encouraging — that is, consumers having easy access to what is quickly becoming the dominant mode of commerce, education and information in the country. By keeping prices low and taxes out of the equation, we’re letting the Internet continue to develop and bring more innovation, more commerce and better ways of learning and accessing information.

In addition, access to the Internet and sale of digital goods have created millions of jobs. Just think how the success of Amazon, Facebook, eBay or other Internet companies might have fared if the government stepped in to raised market barriers and consumer costs.  Or just think about the 500,000 jobs that have been created by the app economy and how taxation of digital goods could have affected that outcome.

Cheap, quality access has made the Internet a dominant force in our economy.

The President has laid out a National Broadband Plan to make sure every American has quality access to the Internet. While we’re nearly there, taxing the Internet works at cross purposes with that goal. By taxing the Internet and disincentivizing quality and cheap access, we’re potentially rolling back the gains our economy has realized over the past 20 years. We shouldn’t let that happen.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research, a nonprofit educational and research institute.  For more information, visitwww.theamericanconsumer.org.