Freedom Line Blog

Economist Stephen Moore offers an instructive and important commentary today on two separate but oftentimes conflated taxes.  A tax on Internet service is a self-evidently destructive idea, as it would inhibit both consumer access to the Internet as well as the billions of dollars that Internet service companies invest in constant expansion and modernization.

Liberals love to talk piously about the right to universal Internet access and reducing the ‘digital divide’ in America between rich and poor.  This has been their excuse for pushing so-called ‘net neutrality’ regulations on Internet providers.  Yet taxing Internet subscriptions could make web access connection service, much like cable TV, too expensive for millions of Americans to afford…  Today 75 percent of Americans have Internet service.  But almost 1 in 4 still don’t, and the danger of a new tax is that with families financially strapped, a new tax could mean millions might drop service.”

As Moore points out, some in Congress like Dick Durbin (D – Illinois) and Lamar Alexander (R – Tennessee) continue to hold a permanent ban on Internet service taxes hostage:

So what is Durbin’s game here?  He and Lamar Alexander of Tennessee will only allow the Internet Access Tax Freedom Act to pass if Congress votes to allow states to tax online sales – which is an even worse idea than taxing Internet access, with far more money at stake.  This year, goods and services purchased on the Internet are expected to hit $300 billion, according to the Department of Commerce, and account for a record 7.4 percent of total retail sales.  So state and local politicians and left-wing interest groups have long lustily viewed e-commerce as the next giant pot of money to get their paws on…  They want to require Internet companies to collect state/local sales tax even if that company has no connection (or ‘nexus’) to the state where the tax is paid.  An Internet company in New Hampshire would have to be a tax collector for Illinois and California, even though the company uses no services in those states.  That’s terrible tax policy that will erode tax competition.”

The case against both forms of Internet taxes is obvious.  We therefore encourage our supporters across the country to contact their elected officials (you can quickly and easily locate their contact information through CFIF by clicking here) to demand opposition to both types of taxes through a permanent ban.