By Bruce A. Love
This week, the federal government voted to continue the ban on taxes to access the Internet. This affects the federal government as well as states. With the general election just one year away, it’s not so surprising that the vote went the way it did. The last thing any politician would want to do is anger millions of surfers, bloggers, chatters, and other online researchers who believe that virtual speech ought not be taxed by governments. Unfortunately, lawmakers left the door open for the possibility of Federal Internet taxes in seven years. This tells me that some people in Congress REALLY want a piece of the Internet pie! I, for one, prefer to keep my speech free of federal taxation.
It’s true that online communication is anything but free (yearly high-speed Internet access can cost hundreds of dollars per household). But these charges are understandable since it costs Internet providers money to bring such services to your home. However, the idea of taxing our access to online services seems, to me, at least, to be very much in opposition to the fundamentals of free speech. One could even argue that by taxing the Internet, the government would be effectively discouraging free speech. On the other side of the argument, others might say, “but, it’s just a few cents” or “just a few dollars.” But this is not a valid argument. After all, you didn’t pay tax to purchase your news in today’s Mirror, did you? In Pennsylvania, newspapers are not taxed. In the state where the Declaration of Independence was signed, we value our “free speech.” Online news should receive the same consideration.
This long battle over the Internet tax issue goes back to 1998, when Congress first passed a three-year moratorium on new taxes on the Internet. This moratorium barred states and localities from imposing taxes that were specifically targeted to the Internet, or were higher for the Internet. The moratorium was renewed in 2001, 2004, and again last week.
The moratorium that passed this week does not pertain to sales taxes. Sales tax can be (and must be) charged to online customers if they reside in the same state as the physical location of the online company from whom they purchased the goods. It makes sense to charge state sales taxes on Internet purchases, otherwise it would put “brick and mortar” stores at a disadvantage as they try to compete with online stores.
The decision of federal and state governments to tax or not tax Internet access has huge implications. Taxing Internet services could inject a huge amount of capital into state and federal coffers, but taxing Internet access could discourage technological growth and the exchange of ideas of America’s citizens. Making the ban on taxation of the Internet would be a good step forward for U.S. consumers, industry, and the economy. The Internet must be allowed to flourish in this country and help America compete globally and thereby ensure the long-term growth of our economy. As American online businesses succeed, Congress will get the tax dollars they desperately want in the form of business income tax from profitable American businesses.
