Senate Must Pass Clean Internet Tax Ban With No Internet Sales Tax

Christopher D. Coursen Founder, Status Group
Font Size:

Dysfunction in Washington and the inability of elected officials to advance sensible policy is well documented. Fueled by undue outside influence and gerrymandered Congressional districts, both of which create a hyper-polarized political climate, the White House and Congress continually fail to advance meaningful reforms that could help Americans. This all too familiar phenomenon reared its ugly head most recently when House Democrats deserted President Barack Obama to defeat a necessary precursor to a large trade agreement – one on which Republicans and Senate Democrats had already compromised.

Yet wins in Congress still exist, even if they are seemingly small in nature.

On June 9, the House of Representatives unanimously passed the Internet Tax Freedom Act (ITFA), a ban on Internet access taxes by state and local governments. Passed initially in 1998 to help spur Internet deployment and adoption by reducing costs, ITFA has been extended five times.

This time, the measure would write the ban into law permanently – a positive development that would forever fend off the more than 10,000 different state and local taxing jurisdictions always seeking new revenue streams. Communications services are highly taxed compared to most goods and services – 17 percent on voice services and 12 percent on cable on average – and tend to place an unfair burden on lower income users least able to afford them. These services, which the Wall Street Journal just dubbed “some of the fastest-growing bills in household budgets,” are ripe targets for local taxation.

For consumers, passing the measure is a clear win that helps keep costs from rising. As the bill’s author, Congressman Bob Goodlatte (R-Va.), said when the permanent ban passed the House, “this legislation prevents a surprise tax hike on Americans’ critical services this fall [and] maintains unfettered access to one of the most unique gateways to knowledge, and engines of self-improvement in all of human history.”

Unfortunately, enshrining the ban into law will not be as easy as it sounds due to a totally separate piece of legislation known as the Marketplace Fairness Act(MFA). In short, MFA would allow state governments to collect sales taxes from remote retailers, such as Amazon, with no physical presence in their state. It is largely favored by members of Congress hailing from states without an income tax, relying on sales taxes that continue to plummet due to online sales. The bill actually passed the Senate in 2013 but failed to garner attention in the House.

In 2014, MFA supporters, including Senators Lamar Alexander (R-Tenn.), Mike Enzi (R-Wyo.), Heidi Heitkamp (D-N.D.) and Amy Klobuchar (D-Minn.), tried to couple the separate tax measures into a combined bill. And now this small contingent of Senators are attempting to repeat history. The Washington Examiner reported that “a top Senate aide said ‘it would not be surprising at all’ if the Senate combined the two measures into one bill.”

For all the beneficiaries of the Internet tax ban, this spells trouble and must be stopped.

The MFA certainly has merits. As does a totally separate piece of bipartisan legislation recently introduced by Congressman Jason Chaffetz (R-Ut.), which would also attempt to tackle online sales taxes. According to a June poll from Morning Consult, the Chaffetz measure is actually favored compared to its competing measures in Congress.

But regardless of what legislators or constituents think of these sales taxes, the issues must not be conflated. In the recent words of Senator Ron Wyden (D-Ore.), it is “legislative malpractice” to do so.

Solving the online sales tax debate is a complicated issue, one that requires sacrifice and compromise –something not in great supply. With the 2016 election season looming large, Congress must advance the vast majority of bills before the August recess if it hopes for passage in 2015. There is simply too much at stake for consumers, already dealing with extensive add-on fees, to risk the expiration of ITFA.

There is a reason the House ITFA bill had 188 co-sponsors from across the political spectrum – it is a simple, straightforward, no hidden agenda piece of legislation. It is supported by leading Senators, including Majority Leader Mitch McConnell (R-Ky.), Finance Committee Chairman Orrin Hatch (R-Utah) and Assistant Democratic Leader Dick Durbin (D-Ill.). If it were brought to the floor, it would pass overwhelmingly. After all, what Senator is going to vote for increased taxes?

Rather than continue down this path of political gamesmanship and the resulting dysfunction created thereby, the Senate should do what is right for consumers. Otherwise, we will all be paying the cost.

Hon. Christopher D. Coursen is founder of the Status Group. He formerly served as majority communications counsel for the Senate Commerce Committee and advised the Ronald Reagan and George H.W. Bush administrations.