April 17, 2007 10:21 AM PDT

Ban on monthly Net access taxes faces obstacles

WASHINGTON--A key U.S. senator said Tuesday that Congress may fail to renew a temporary ban on some state and local Internet access taxes that expires on November 1.

Sen. Ron Wyden (D-Ore.) said he fears that lobbyists for state and local governments and their powerful allies in Washington will stymie efforts by Internet and telecommunications companies and free-market groups to make the ban permanent--or even to renew it again.

"There remain a lot of officials in local government who are licking their lips at the prospect of going after this cash cow," Wyden said during a morning speech at the annual meeting here of the Computer and Communications Industry Association, whose members include Google, Yahoo, Microsoft and Oracle.

Ron Wyden Sen. Ron Wyden

If the tax moratorium expires, monthly bills for Internet access could come to resemble bills for telephone service, with a welter of confusing taxes, recovery fees, surcharges and administrative fees tacked on at the end. Those fees can raise a subscriber's total cost by 20 percent to 30 percent. (See CNET's guide to your cell phone bill.)

Wyden is one of the authors of the original 1998 law that prohibited taxes on Internet access charges. After tense negotiations, it was renewed temporarily in 2004. At the beginning of this year, the Oregon Democrat--along with Sens. John McCain (R-Ariz.) and John Sununu (R-N.H.)--proposed a bill that would attempt again to make the existing ban permanent.

The existing law says that local governments generally cannot tax Internet access, including DSL (digital subscriber line), cable modem and BlackBerry-type wireless transmission services. It also prohibits governments from taxing items sold online in a different manner than items sold at brick-and-mortar stores, but it does not deal with sales taxes on online shopping.

A separate battle is brewing over sales taxes. State legislators and the National Governors Association are pressing Congress to force out-of-state retailers to collect sales taxes on Internet shipments.

One worry among technology companies is that in the fall, the pro-tax forces may propose a deal: the Internet access tax ban will be renewed, but only if sales taxes on e-commerce are permitted. Steve DelBianco, executive director of the NetChoice coalition, said he's concerned about just that. The group, which opposes the sales tax plan, counts eBay, Yahoo and the Electronic Retailing Association as members.

State governments have historically opposed an unfettered ban. They argue that such a policy will deprive localities of billions of dollars in additional tax revenue that could pay for local services and would amount to an unfair subsidy for telecommunications companies.

A CNET News.com congressional scorecard from November 2006 summarizes politicians' votes on Internet access taxes. (See House and Senate votes, and the summary.)

Wyden said he's at a disadvantage because he's "one of the only people left who know much about this issue." He was referring to the departure of two vocal backers of a permanent tax ban in the past: former Virginia Sen. George Allen, a Republican who lost his bid for re-election last fall, and former Republican Rep. Christopher Cox, who is now the chairman of the Securities and Exchange Commission.

It won't be easy to pass legislation that encounters resistance from an "NBA dream team" led by Sens. Byron Dorgan (D-N.D.), Lamar Alexander (R-Tenn.) and Tom Carper (D-Del.), Wyden said.

There is, however, also support for the effort in the House of Representatives. A companion bill, sponsored by Rep. Anna Eshoo (D-Calif.), currently enjoys 49 co-sponsors. Rep. John Campbell (R-Calif.) has introduced a similar bill that has 28 co-sponsors, some of whom overlap with sponsors of the other House bill.

Sununu, who spoke later at Tuesday's meeting, echoed his colleague's call for passing legislation that makes the ban permanent. He said he feared that new taxes would limit the investments Internet service providers are able to make in their networks and depress "economic activity in that space."

"You can't get away from the fact that the power to tax something is the power to destroy it," he said.

CNET News.com's Anne Broache reported from Washington. Declan McCullagh reported from San Francisco.

See more CNET content tagged:
Ron Wyden, ban, tax, Internet access, Sen.

12 comments

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US Government is corrupt
I have lived in many places, under the power of many
governments. It seems to me, as I can compare that the U.S.
government is no more corrupt or less, than many others. I was
on the impression that the government was setup to guide the
people, to help the people, to do things for the people, and man
kind.

But the government don't do this at all, sure there are Senators
and Presidents and Vice Presidents, but at the end of the day, it's
all organized and not doing what it is supposed to be doing.
Government systematically lies everyday to the general American
public and the whole globe, they do all kinds of stuff that we are
not even aware of.

The power of this country was seized by people within a circle
and few people have the balls to see it and start doing
something about it. The taxing of people is getting to a
ridiculess level, so that the ordinary still supports to this day the
Rich and politically powerful. No different then from the times
of Kings, Queens, and the priviledged few. Yes it is better, but
still corrupt in many way. I guess human civilization is yet again
on a path to distruction and recycle.
Posted by rmiecznik (224 comments )
Reply Link Flag
Local goverments are already collecting taxes on this access
They're collecting "franchise fees" and other taxes on the internet service providers already. Any politition voting for such a tax is simply trying to create a new tax on a service that's already being taxed.
Posted by aabcdefghij987654321 (1721 comments )
Reply Link Flag
As long as Democrats are in charge, nobody's money is safe.
As long as Democrats are in charge, nobody's money is safe.
Posted by lingsun (482 comments )
Reply Link Flag
Oh please...
Bush is doing his fare share of flushing out hard earned money down the John. Before Bush we had a surplus, now we are deeper in the hole than ever before.

It should be as long as the government is in charge, nobody's money is safe. Both parties waste and then expect us to just fork over more.

Robert
Posted by Heebee Jeebies (632 comments )
Link Flag
Give me a break
If this was a party line vote, it'd never pass. First of all, Bush would veto it (assuming he could find his pen) and if he wouldn't someone else would filibuster it and that'd be the end.

As for taxes, if you think that the repbulicans have been fiscally conservative (in any way, shape or form), then I've got 1MB of very rare RAM from 1990 to sell you for the bargain price of 10,000.

They may have lowered taxes, but they spent like drunken sailors at a ***** house. We still gotta pay the bill sometime...though maybe you're old enough that you'll be dead before the bill is due.
Posted by notgonnatellya (65 comments )
Link Flag
As long as (fill in the blank) are in charge...
You say Democrats. They say Republicans.

I say Politicians. They all look alike to me.

And the institution we call "our government" has reached a level where it has taken on a life of its own. Its first priority is to ensure its survivival and secondly to grow.

So pointing one's finger at one's favorite whipping boy ignores the larger issue.
Posted by dkathrens77 (10 comments )
Link Flag
Tax, double tax, and tripple tax?
As one of the others posting here mentioned, there are already taxes levied on access in some areas. Now, we're looking at having yet another form of access tax? The worst of all, though, is taxes on services. One of the uses I have for broadband is VoIP, but the government requires taxes to be paid for that service! So, I have to pay taxes on top of taxes?

At least one layer of taxes needs to be removed.

Paul
Posted by paulej (1261 comments )
Reply Link Flag
.....
Yeah, we need to vote those tax-and-spenders like Lamar Alexander out of office. The people of TN need to send a strong message to the democratic party in that state.

I'm not sure how voting Lamar Alexander out would do that, exactly, since he's a Republican.

We should also ensure that the Oregon democrat Ron Wyden is voted out, because he's the lead man behind the... <*whispers* What? Oh.> Nevermind.

John McCain is reviled by the Republican party for his attempts to sneak billions of dollars worth of pork projects into the national defense budget. That's why so many republicans are coming out and saying that he's not a great man for the job. He's against keeping the government out of our homes and bedrooms, the man is a tota... <*whispers* What? Highlighting defense pork? Anti-government spying?> Err... what was I saying earlier?
Posted by RvLeshrac (5 comments )
Reply Link Flag
Taxation without Negotiation (Modem...)!!!
We've already footed the internet (via tax dollars to fund DARPA) bill. Time to take you old computers and dump them over Capitol Hill...
Posted by Below Meigh (249 comments )
Reply Link Flag
Why Don't our "Representatives" ask Us ?
We elect these people to "represent" us.. who are this country and who are "We The People". The laws they create each year are supposed to reflect the majority opinion of the People of these United States. The Laws affecting every single person in this entire nation are NOT supposed to be written according to what just afew government employees or local bodies would like, or what company ABC and it's lobbists would like. Our laws are supposed to be based on what the people of America feel is fair and just as a whole.
Lawmakers... listen up ! We all have phones, TV, and web access. Our representatives had really better start using these mediums to get majority opinions of we people on matters such as this. Otherwise, I can see those representatives may, and should rightfully, find themselves voted out of office just as fast as they were voted in, or better yet, outright fired from such a job !
From reading all the feed back on articles such as this, day in and day out, I'm sure I'm not the only one who is Getting Tired of being an Outsider listening in on these debates that our elected officials keep having on "our behalf".
Posted by bruceslog (112 comments )
Reply Link Flag
they listen
It goes in one ear and out the other, nothing in between to stop it.
Posted by twotall610 (53 comments )
Link Flag
Reasons to make Internet access tax-free
The Information Technology and Innovation Policy (ITIF) just released a report explaining why Internet access should be tax free. The three main reasons are 1) to support a national broadband policy; 2) to protect the federal interest in ensuring all citizens have Internet access, and ensure no states are "free loaders"; and 3) to treat Internet access as an investment in production, much like machinery, which is tax-exempt in virtually all states.

The report also refutes the arguments of opponents of the moratorium such as the claim that states need these tax revenues to support their schools and fire fighters (seriously, that is about the best argument they make). Here is the link to the full report --

<a class="jive-link-external" href="http://www.itif.org/files/ITFA.pdf" target="_newWindow">http://www.itif.org/files/ITFA.pdf</a>
Posted by castrotech (2 comments )
Reply Link Flag
 

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