While Congress’ failure to reach consensus on important issues is not new, their unwillingness or inability to act decisively on the issue of Internet access taxes, even in the face of resounding bipartisan agreement, could soon become economically disastrous.
For the past 16 years, the Internet Tax Freedom Act has protected Americans – especially those most economically vulnerable – from taxes on Internet access. Initially passed in 1996 and extended three times since then, ITFA encourages students, small businesses and consumers to adopt and use the Internet without the burden of state or local taxes on that access. In turn, the Internet has grown into a dynamic force that drives and shapes our economy and has improved the quality of life for many Americans. This could all change November 1st if Congress does not act.
The Act’s protections expire at the end of this legislative session, and, if not extended or made permanent, taxes on Internet access could be imposed as high as double the national sales tax rate.
Think of the impact that would have. The Internet is reshaping the economy, the way we communicate, and the way we live our lives. It’s a critical resource for American families, bringing new economic opportunities, educational advancement, and increasingly, healthcare access and consumer-friendly financial services. The Internet has been a golden fleece for small businesses, providing entrepreneurs with entry into new markets and more consumers than ever before.
Moreover, avoiding new taxes on Internet access is one of the rare issues on which both parties agree. In June, the Permanent Internet Tax Freedom Act (H.R. 3086) in the House of Representatives and its companion bill the Internet Tax Freedom Forever Act (S. 1431) in the Senate both passed the important fifty percent co-sponsorship mark. And just recently, a congressional committee decisively voted to advance H.R. 3086 for further consideration. But given how Washington works, much still remains to be done before the ban on Internet taxes is extended or made permanent.
The bipartisanship around this issue extends beyond Congress. Earlier this year, a group of 29 bipartisan organizations from across the political spectrum came together to support passage of both pieces of legislation, noting the benefits for families, the economy, small businesses, and innovation.
These are just some of the reasons why the passage of these two bills is imperative. Most importantly, they make the moratorium on Internet access taxes permanent which will encourage greater opportunity and economic growth. Furthermore, a moratorium on Internet access taxes will continue to promote America’s global competitiveness and foster an environment where all businesses can compete in today’s global economy without the financial burdens of unreasonable taxes.
Lest we forget, our country is still recovering from tumultuous economic times. Taxes on Internet access will only disincentivize technology adoption, and could potentially drive American households with more modest means offline. Studies by the Pew Research Center and others have shown what is obvious: Cost can be an important factor in consumer adoption of new technologies. Given that tax rates already in force on telecommunications services are high (roughly 17 percent on telephone and 12 percent on cable) in addition to general sales tax rates, one can imagine how quickly the cumulative effects of taxes could deter adoption and suffocate future growth rates.
If Congress is serious about promoting economic growth and accomplishing the long-held goal of ensuring Americans have affordable access to robust broadband services, then passage of ITFA is the way to help those objectives come to fruition. Since the first Internet tax moratorium was enacted, consumer spending on Internet access has consistently risen, with first quarter 2014 spending at $85 billion.
Failing to act and allowing prohibitive new taxes to take root will undermine our economy while we still face daunting unemployment figures. We have seen firsthand through our past experiences, particularly the Great Depression and the 70’s, how raising taxes at inopportune times can indeed diminish opportunity.
We cannot let that happen here.
The difficult part has been accomplished – there is broad bipartisan political consensus that something must be done to save Americans from prohibitive taxes on Internet access and activities. Now congressional leaders must end the internal jockeying that often tangles up worthwhile legislation such as trying to pair it with other measures, and pass a permanent extension of ITFA before it is too late.
Steve Forbes is chairman and editor-in-chief of Forbes Media and co-author of “Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t.”