May 22, 2007 3:26 PM PDT

Politicians weigh renewal of Net access tax ban

WASHINGTON--With only months left on a moratorium restricting state governments from taxing Internet access, the U.S. House of Representatives on Tuesday began a debate over whether the ban should be made permanent or allowed to lapse.

At issue is the scheduled expiration on November 1 of a law, initially enacted in 1998, that says local governments generally cannot tax Internet access, including DSL (digital subscriber line), cable modem and BlackBerry-type wireless transmission services. The law also prohibits governments from taxing items sold online in a different manner than those sold at brick-and-mortar stores, but it does not deal with sales taxes on online shopping.

That's the way it should remain, some politicians said at a brief hearing here convened by a House of Representatives panel on commercial and administrative law.

Related podcast
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Former House Majority Leader Dick Armey talks to
about Internet taxation.

"If we could liken the Internet to a mall, a place where you can go in and purchase goods and services, and also liken it to a library, a place where you can go and pull a book, pull a resource, and obtain some information, why would we tax a person upon entering a mall or why would we tax a person upon entering the library?" asked Rep. Hank Johnson, a Democrat from Georgia.

Industries that provide Internet access services have long backed making the ban permanent, and they already enjoy support from some members of Congress. In the House, Rep. Anna Eshoo, a California Democrat, has introduced such a measure, and senators have made similar moves.

But previous attempts at renewing the ban for more than two to four years have failed, in part because of resistance from state and local government lobby groups. State government representatives caution against making the moratorium permanent, saying it would deprive states indefinitely of vital revenue sources and that its original purpose--boosting the nascent Internet to commercial viability--has essentially been accomplished.

A 'slippery slope'
"If a moratorium is made permanent, there is a slippery slope where other industries will seek their own preemptions of state laws," said David Quam, director of federal relations for the National Governors Association.

The NGA supports the idea of extending the ban in a limited sense and for a defined time period, he added. He said reports by government auditors and the University of Tennessee have shown no statistical correlation between levels of broadband penetration and the existence of Internet access taxes.

Rep. Jim Jordan, an Ohio Republican and one of 66 House members who co-sponsored the permanent ban proposal, suggested he wasn't swayed by that argument. "Taxes always impact everything else in our economy," he said. "I would assume they've had a major impact in this area as well."

As a rule, economists dislike taxes that could discourage investment, but taxes that could hinder build-out of the Internet are especially problematic, argued Scott Mackey, an economist and partner at the law firm Kimbell Sherman Ellis. He spoke on behalf of a coalition of Internet service providers, "backbone" providers and application and content companies that support a permanent extension of the tax ban.

"A permanent moratorium will send a strong, pro-investment signal to those entrepreneurs that are looking to improve communications and commerce over the Internet," he told the politicians.

A U.S. Senate committee is scheduled to weigh the issue at its own hearing scheduled for Wednesday.

A separate issue on one politician's mind was what to do about the collection of sales taxes on the Internet. State governments have long griped that they are losing revenue to booming e-commerce businesses that aren't required to collect taxes from customers in states where the businesses don't have a physical presence. Rep. Bill Delahunt, a Democrat from Massachusetts, said he was planning to try again at enacting a bill designed to address those concerns.

As for the Net tax ban, he said, "my own position is we ought to have a temporary moratorium until we finally resolve the issue of how the states are going to support public services with an eroding tax base predicated on the growth of e-commerce."

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-- quote --
As for the Net tax ban, he said, "my own position is we ought to have a temporary moratoirum until we finally resolve the issue of how the states are going to support public services with an eroding tax base predicated on the growth of ecommerce."
-- end quote --

The problem I have with this statement is that when the ban is, again, temporarily placed on the internet access tax, only those interested in generating revenue will be thrown back into action that favor eliminating the ban altogether and they will create reports that say making the ban permanent will harm state and local revenue while those who are in favor of keeping the ban permanent will go on to other issues of more immediate interest and general 'todaity' - a 'fad,' if you will - and will completely ignore the issue until it's time to revisit it - AGAIN. Please tell me that isn't what just happened here.

I strongly oppose taxing internet access because history has shown that new taxes, let alone new TYPES of taxes, end up getting bickered over at the state and local levels (read Los Angeles Road Reconstruction). This wastes too much time for more pressing issues: how do we get Kaiser-Permanente to stop homeless patient dumping?

Mayor Villaregosa (sp?) in Los Angeles complained that he didn't get enough money from the state for his freeways while smaller cities got a bigger chunk of it. Oh-woe-is-me. Did he say anything about Kaiser? I haven't seen it.

I'm actually a bit sick of my non-representative politicians not knowing what they do - they're so detached from their responsibilities - and it's pathetic.
Posted by `WarpKat (275 comments )
Reply Link Flag
AMEN!!!!! n/t
Posted by btljooz (401 comments )
Link Flag
America voted to have everything that moves taxed, and all that
stands still taxed twice.
The current gang in Congress ran on a "We're gonna stick to you,
but we hate Bush" platform, and the population said "OK", so I don't
see where anyone (left of center, at least) has room to complain.
Posted by GGGlen (491 comments )
Reply Link Flag
Yep, you are correct. Sadly, this crap affects us too. It is funny how the left wing leans on the conservatives to balance themselves.
Posted by suyts (824 comments )
Link Flag
Look at your phone bill to see the future
Look to your phone bill for a perfect example of what happens
when you're allowed to tax it. $25 for the service, $13 for taxes
and "recovery" fees.

I would expect money-hungry States would be chomping at the
bit to squeeze just a little more out of their citizens. This would
just be yet another way to tax, tax, tax.

I would like to see some accountability from all levels of
government for the money they already collect.

Sadly, we are seen as nothing more than sources of money to
our government, whether it is local, state, or federal.
Posted by m.meister (278 comments )
Reply Link Flag
You are surely right
Aside from Verizon's monopolistic, arrogant attitude in a head to head competition with Vonage they could most likely fare well. What is different are tax rates.
Posted by libill (7 comments )
Link Flag
no new taxes
Phone bills are annoying enough. My cell phone bill has more charges, and taxes than it does for the damned service.

The other commentor is right. the US did vote the Taxaholics into office on the "Bash Bush" platform. most people around here seem to be the type that like that. They shouldn't be complaining about the new taxes we'll get because of it.
Posted by ejryder3 (39 comments )
Reply Link Flag
Do you think it really matters?
The people in the lobbies, in congress, the president and his cabinet, do what they want to do.

They don't listen to the people anymore. Doesn't matter what you or I want.

If the people sit idly by and do nothing while the elitist just keep making their laws, then say that is that and the citizens of the usa are like well ok, then what do you expect but to be railroaded?

I am more concerned with all these laws the govt. keeps passing and most people are not even aware of just exactly what they have done and what they are going to to, then to pay "yet another tax".

Bush just passed a law on May 9th, that puts us as close to living under a dictatorship than we have ever been. But "oh well" what do the American people care? Wake Up People
Posted by Eskiegirl302 (82 comments )
Reply Link Flag
WTF are you talking about?
[b]Quoting:[/b] [i] "... Bush just passed a law on May 9th, that
puts us as close to living under a dictatorship than we have ever
been. ... " [/i]

The President does not "pass laws".

The Congress (representatives of the people) passes laws (writes
and votes on bills) and the President can either sign or veto

Given the civics lesson above, it's hilarious that you think a
Democrat Congress just helped move their most hated
Republican Presidency closer to a dictatorship.

Put down the crack pipe.

Posted by Sparky672 (244 comments )
Link Flag
Taxes on internet connections
I have been on this blog/forum for a long time and it's very sad to see comments from people that don't have a clue about the subject that they are commenting on. It's even scarier that many of these same people vote. Eskiegirl 302 - a president has never been able TO PASS a bill - He can only SIGN a BILL that was PASSED by Congress or VETO a bill PASSED by Congess!!!
Posted by ladyvols (4 comments )
Link Flag
Good on you...
your post shows that you have a point of view, and apart from a couple of errors of fact, your'e thinking about the big issues.

Wrong or right your'e exercising your democratic right to free speech. That's participation, and that's essential.

Posted by m.o.t.u. (96 comments )
Link Flag
No Tax is good
Half the reason the internet has become so successful is because the government has had little involvement.
Posted by Angelos333 (2 comments )
Reply Link Flag
The entire reason the internet has become so successful is because of extensive US Federal government involvement... that other nations and other international organizations are trying to take away from the United States.

(... imagine the internet in the control of an international organization that China, North Korea, and Cuba have an equal say in how it operates as the United States.)

The internet though is a great example of how the US Federal Government should be involved.... they keep the plumbing running ... and ge the hell out of the way of everything else.
Posted by ZachFSW (1 comment )
Link Flag
Bush and laws
PRESIDENT Bush didn't pass any laws, lady. You should learn your civics lesson. Its the same as he didn't go to war in Iraq by himself. Blame the jerks you elected this last time, but quit blaming Bush for everything.
Posted by wgilbert5 (19 comments )
Reply Link Flag
Yeah! Bush doesn't even respect the law....
So get off his case. Just because his administration doesn't listen to the voting public and has had half his cabinet either indicted or quit under pressure doesn't mean he has the ability to "make the laws". In fact he doesn't even respect them. The United States is a democracy and don't you forget that, well except for the Administration, that has gotten...well...empirical.
Long live King George and his merry band of criminals who take from the poor and give to the rich!
Posted by fred dunn (793 comments )
Link Flag
no new taxes
It really gets me when state and local gov't complain that this will harm them from getting money from the Tax paying people. What a load of bull. They can always up there property, sales, and income tax. they don't need an internet tax. We already pay taxes from these other stuff and these state and local gov't are just grubby little worms that want to milk tax payers dry. Enough of them nickle and diming us for money in the diguise of an extra tax especially when they will always raise the taxes I have mentioned.
Posted by ereal2000 (28 comments )
Reply Link Flag
Other reasons
Normally you would be correct. The reason they want this tax
instead is to get money from people in other states to pay their
taxes for them when they buy from an online store in that state. If
they can generate enough money from them they won't have to
raise their own taxes.
Posted by JGK55 (2 comments )
Link Flag
People Need Free Access To Varying Viewpoints In The News
People need free access to varying viewpoints in the news, and the internet is the only way to get it today.

Posted by dornbear (21 comments )
Reply Link Flag
Sales tax
"...the collection of sales taxes on the Internet. State governments have long griped that they are losing revenue to booming e-commerce businesses that aren't required to collect taxes from customers in states where the businesses don't have a physical presence."

Anyone here remember what it was like before the internet? You know...such as finding something in the back of a magazine, and thinking, "Say, I'm gonna buy that." And you ordered it, by phone or snail-mail, from a company that was out-of-state. And you didn't pay sales tax because it was out-of-state? Can someone explain what the difference is, ordering something out-of-state over the phone or mail, and ordering something out-of-state over the internet? I never paid sales tax when ordering out-of-state before; why should I pay now, just from using a different means?
Posted by scayf (6 comments )
Reply Link Flag
only partially true
The law is that you pay tax on an internet purchase only if the
"store" you are purchasing from has a brick and mortar location in
your state. So if I buy something from Joe's Surf Shop Online Store,
which is run out of the back of the sole brick and mortar location in
California, I don't have to pay sales tax since I live in Ohio.
Posted by youngm7 (7 comments )
Link Flag
This is a grab by control freaks
I think there are 2 issues here. One is that politicians are addicted to the money drug much like crack addicts. Two, politicians the world over want to control information flow. In some countries the control is outright, but in this country tools are used. That tool is money and taxes are money. They conveniently fail to mention all of the other taxes like on transmission facilities and transportation facilities. No new taxes. If the pol's have to work for once like everyone else, then fine.
Posted by libill (7 comments )
Reply Link Flag
Vote the Bums Out!
The reason they want to tax it is only because it is one of the last items that the government is not taxing now.
I don't smoke but my wife does and when I buy her a carton of cigarettes we pay an additional $10 vice tax, along with the tobacco tax, and then on top of that sales tax.
If they start taxing internet access it will be the same all over again. There will be an access tax, then they will add a rural access fund surcharge, then they will add sales tax, along with any and all other creative taxes they can think of.
Personally I pay about 25% of my total income to the government(s) now. Let's just cut to the chase and give them all of our paychecks and become a communist country.
Posted by fred dunn (793 comments )
Reply Link Flag
If it exists TAX IT!
Keep pulling the level for all those incumbent asswads, people. Like cancer, these politicos have nothing better to do with their lives than to screw everyone else. More laws? More control? More bureaucracy? More taxes? How else can a feckless twit justify their time in the state or nation's capital?
Posted by Schratboy (122 comments )
Reply Link Flag
Is anyone surprised?
The money to buy votes has to come from somewhere. Might as well come from Net users.
Posted by kmne68 (7 comments )
Reply Link Flag
Death, Taxes and more Taxes
Illegal internet taxes to be paid for by illegal paper money, yet more examples of gov't infringements on our rights. Add it to the ever-growing list of violations:
They violate the 1st Amendment by opening mail, caging demonstrators and banning books like "America Deceived" from Amazon.
They violate the 2nd Amendment by confiscating guns during Katrina.
They violate the 4th Amendment by conducting warrant-less wiretaps.
They violate the 5th and 6th Amendment by suspending habeas corpus.
They violate the 8th Amendment by torturing.
They violate the entire Constitution by starting 2 illegal wars based on lies and on behalf of a foriegn gov't.
Support Dr. Ron Paul and reverse these trends.
Last link (unless Google Books caves to the gov't and drops the title):
<a class="jive-link-external" href=";isbn=0-595-38523-0" target="_newWindow">;isbn=0-595-38523-0</a>
Posted by Reader117222 (5 comments )
Reply Link Flag
notwithstanding the fact
that the "president has never been able TO PASS a bill", I believe Eskiegirl 302 was referring to this: see: National Security and Homeland Security Presidential Directive <a class="jive-link-external" href="" target="_newWindow"></a>

In this directive, Bush declares that in the event of a ?Catastrophic Emergency? the President will be entrusted with leading the activities to ensure constitutional government.
The language in this directive, some believe, would in effect make the President a dictator in the case of such an emergency.
Posted by etc24 (1 comment )
Reply Link Flag
Does Hitlary Qualify?
Quote: "In this directive, Bush declares that in the event of a ?Catastrophic Emergency? the President will be entrusted with leading the activities to ensure constitutional government. The language in this directive, some believe, would in effect make the President a dictator in the case of such an emergency."

Would Hillary being elected qualify as a Catastrophic Emergency? We can only hope and pray that W. nullifies the election and suspends the constitution if that happens.
Posted by Wesley_Mouch (16 comments )
Link Flag
Another tax? Are they kidding?
These money-grabbing b*astards already tax me on Internet access. They force Verizon (my ISP) to collect it for them! And they want to add another tax? Is this all they think of, how much more they can steal from our pockets? It's time for some heads to roll!
Posted by Chuckabutty (4 comments )
Reply Link Flag
New American Revolution
We need a new American revolution. Last time they threw the tea into the harbor, this time we need to throw the politicians into the harbor.
Posted by worddust (21 comments )
Reply Link Flag
Ho Hum
Gee, another tax....what will they think of next? Why is it that politicians' solutions to EVERYTHING is another tax and another government agency? Let's take the current gasoline price situation for example.

I live in California and we pay sales tax on gasoline purchases (and most other transportation fuels, such as diesel and aviation fuels). According to the State Board of Equalization the average tax amount is 8% (varies by city and county), and the same Board of Equalization reports that about 1.3 billion (yup, BILLION) taxable gallons are sold each month. Now that gas prices are approaching $4.00 per gallon...well you do the math. (Hint: Divide $4.00 by 1.08 and you have the extax price. The difference between the retail price and the extax price is the amount of sales tax.)

Can I please hear again about the poor states that are "losing" billions is sales tax revenue. It's a joke! Maybe they need some of the money for bigger salaries and better perks.
Posted by cao_black (3 comments )
Reply Link Flag
internet tax
Please, let's not let the Government get their hands on the Internet. We don't need to have the Internet messed up like they mess everything eles up.
Posted by dheurt1 (35 comments )
Reply Link Flag
Another Tax?
For crying out loud, the last thing we need is another stupid tax! The idea of getting rid of the ban is bad news for two reasons: First, how exactly are they going to determine the tax rate? Will it be based on tracking or just a general flat tax fee? Second, a tax will only slow down development of Wi-fi and other internet related fields; as it is, the U.S. lags behind other countries when it comes to wireless internet technology. That's why I say that lifting the ban on the tax is a bad idea.
Posted by j_magnus (1 comment )
Reply Link Flag
Freedom of communication is vital.
Government has too many taxes on communication lines now. They should all be removed. Their amount is not great, but they stifle free expression. Books and periodicals in paper or the internet form should be tax free. Internet access also.

Free and universal internet , sponsored by private industry, is a vital goal. The internet is the freest form of communication aside from talk. Let's keep it that way.

Posted by ronwagn (38 comments )
Reply Link Flag
The real problem
Doesn`t anyone hear it. We so desparately need one tax in this country ... a national sales tax to go along with a local. A nat sales tax insures everyone pays including illegals. The rich pay more because they spend more. The best part is the government has only one way with which to raise your taxes. In the mind boggling system we are in no American can truly tell me what they paid in taxes last year, gas, electric, phone ... and on and on.
Posted by billcinfla (1 comment )
Reply Link Flag
What are they thinking?
Should our government "representatives" allow taxing, in any manner, they will have, in effect, destroyed the internet. It is a well known fact that if you want anything even remotely technical, totally screwed up, all you have to do is involve local state and county governments. Imagine the total chaos of thousands of these all trying to track, filter and maintain a database of owed and perceived taxes. Remember, these are the same people who couldn't even get a hundred trucks of ice from Georgia to New Orleans after the hurricane!
Local governments are like a giant nest of baby birds all screaming and squawking as they fight for scraps of food. Since they generally do not have an IT staff that is even qualified enough to maintain a local website, they will probably end up hiring an outside IT service, which WE as taxpayers will also get to pay for. The ramifications are unlimited, and none of them are good for business or the private sector. It's just another attempt by the government to tax any, and everything they see.
Posted by Wiz Wildstar (15 comments )
Reply Link Flag
The Function of Gov't
The basic function of any gov't is to protect it's citizenry from fraud and force, including fraud and force that it generates.
The gov't Fraud: "We don't have enough money to fund our projects!"
Answer: No, you don't...It's not YOUR money,it's the PEOPLE's money.
The gov't Force: Try not paying your taxes and experience the practical application.

Personally,I'd rather enjoy the practical application cited in "a New Revolution".

Now, picture in your mind a job where you had to vote NOT to get an annual raise. What would you do to keep that gig?
Posted by Sokr8teze (1 comment )
Reply Link Flag

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