Internet access is free of government taxes — and it now looks like it might stay that way for a long time.
The House passed a bill on voice vote Tuesday that would for the first time make permanent a ban on federal, state, and local taxation of Internet access. The measure now heads to the Senate, where a similar bill sponsored by Sen. Ron Wyden has racked up more than 50 cosponsors.
The Permanent Internet Tax Freedom Act is an attempt by Congress to definitively bar government from taxing users for Internet access or levying discriminatory Internet-specific taxes on things like email or bandwidth. It is separate from a controversial effort brewing in Washington to create a tax on Internet sales, which has drawn sizable opposition from online retailers like eBay.
In a historically unproductive Congress, the bill represents one of the only pieces of substantive legislation that stands a chance of landing on the president’s desk and signed into law this year.
A ban on taxing Internet access has been in place since President Clinton signed a bill into law in 1998, enacted in part to protect the growth of the then-nascent technology. The measure has been renewed three times, most recently in 2007, and is set to expire Nov. 1.
But the legislation endorsed by the House on Tuesday would do more than simply make that tax ban permanent. It also would also end taxes in seven states — Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin — that were already on the books before the 1998 law and allowed to continue.
“This legislation prevents a surprise tax hike on Americans’ critical services this fall,” said Rep. Bob Goodlatte, chairman of the House Judiciary Committee and the bill’s chief sponsor. “It also maintains unfettered access to one of the most unique gateways to knowledge and engine of self-improvement in all of human history.”
Although backed by a wide swath of Internet freedom and antitax coalitions, the bill is not without its detractors. Last week, the Center on Budget and Policy Priorities released a report harshly indicting the “harmful” legislation, which it calculated would cost states up to $7 billion in potential annual revenue. The seven states that currently have taxes on Internet access would collectively lose an estimated $500 million in annual revenue, the report added.
Some Democrats have urged for an adoption of another temporary extension of the tax moratorium. During debate last month in the Judiciary Committee, Rep. John Conyers, the panel’s top Democrat, said the Internet no longer needs tax protections to grow, as it is “now a prosperous sector of the global economy.”
“Studies show that there is no difference in the rates of household Internet access between states that tax Internet access and those states that do not tax Internet access,” Conyers added. “In other words, there is no evidence that making [this bill] permanent will encourage people who do not currently subscribed to high-speed Internet access services to begin doing so.”
Other Democrats have argued that a permanent tax moratorium infringes on states’ rights. Yet despite a number of lawmakers rising to the floor in opposition, the bill passed on a voice vote Tuesday.