Coalition seeks to ban Internet-access taxes

WASHINGTON — A handful of inventions have altered the course of human history, including the wheel, the printing press and the internal combustion engine.

A bipartisan coalition of lawmakers is now saying the Internet belongs in that elite category, and they are bound and determined not to allow states and local governments to tax the engine that is driving economic prosperity.

"There are narrow-minded, short-sighted state tax commissioners" who see taxing Internet access as a cash cow, said Rep. Chris Cannon, R-Utah.

As chairman of the House Commercial and Administrative Law Subcommittee, Cannon will shepherd legislation through the House that permanently bans access taxes.

At a press conference Tuesday, Cannon and other bill sponsors pointed out examples of elected officials and bureaucrats who insist on the right to tax Internet access, and one governor who is openly defying a bill passed last year that placed a temporary moratorium on access taxes.

"I want to protect American consumers from government tax commissars who see anything successful as a tax target," said Sen. George Allen, R-Va., who is sponsoring the Senate version along with Sen. Ron Wyden, D-Ore. "We should stake out this territory permanently as a no-tax zone."

Lawmakers are concerned that taxing Internet access will slow the pace of broadband expansion into every American home, particularly in rural areas, and that a smaller customer base would slow the rate of investment by companies providing the services.

If the taxes you pay on your telephone are an indication of what state and local governments would charge for Internet access, lawmakers predicted an average tax rate of 18 percent — a rate so high that it would be a tremendous burden on the poor, as well as students, teachers and small businesses.

"The Internet is the engine of American productivity growth and a source of limitless opportunity for U.S. consumers," said Rep. Chris Cox, R-Calif., the primary House sponsor of the legislation. "It is time to make it (the moratorium) permanent."

The temporary moratorium, based on 1998 legislation that was expanded and renewed last year, is set to expire in 2007. This legislation would make the moratorium permanent, and it would continue to phase out exceptions to the access tax that were granted to a few states that had them in place before the temporary moratorium was imposed.