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Pass Permanent Internet Tax Ban in September | Commentary

By Karen Kerrigan The laundry list of pressing legislative matters facing Congress in September is predictably daunting. From a long-term extension of the transportation bill to an overall package to keep the government open, the heat of August will surely still be felt on the Hill after recess.  

When it comes to the Senate extending the ban on Internet access taxes — preferably on a permanent basis — non-action is not an option. Taxing the Internet would have deleterious effects on the economy.  

In 1998, when the Internet was still new, Congress placed a moratorium on states and localities taxing Internet access and placing multiple or discriminatory taxes on electronic commerce. The rationale was sound: Communication services have forever been a cash cow for local governments seeking revenue, and allowing such uncontainable taxation would snuff the Internet’s potential. According to the Internet Tax Freedom Act Coalition, the average tax on telephone and voice services is a whopping seventeen percent. For cable, it is 12 percent.  

The result of the ban has been profound. By helping keep costs down, 85 percent of Americans now regularly use the Internet, according to fresh data from Pew. The proliferation of the Internet, while not solely attributable to a ban on access taxes, undoubtedly fuels the economy.  

It also helps spur entrepreneurship and small business competitiveness. Internet access helps business owners market their products, service customers, purchase supplies and efficiently run their businesses. As noted by Sen. Ron Wyden, D-Ore., when the Senate’s Internet Tax Freedom Forever Act was introduced in February, “small business owners rely heavily on affordable Internet access, providing them with access to new markets, additional consumers, and an opportunity to compete in the global economy. Economists have recognized that excessive taxation of innovative communications technologies reduces economic welfare more than taxes on other sectors of the economy.”  

Unfortunately, the moratorium has forever been temporary, last extended in December 2014, and now faces expiration in October without action from the Senate. The House of Representatives passed a permanent extension in June by a voice vote and with more than 200 co-sponsors.  

While the solution should be straightforward, a contingent of 22 Senators support a separate piece of legislation known as the Marketplace Fairness Act, which they believe should be part of the process in extending the access ban. In 2014, while unsuccessful, some of these Senators even introduced a piece of legislation known as the Marketplace and Internet Tax Fairness Act, which expressly combined the two bills into one.  

The Marketplace Fairness Act would allow states to force out-of-state businesses to collect and remit sales taxes on goods or services purchased online by in-state consumers. But the merits of the bill — which I have deep concerns about with regard to its effect on businesses — is beside the point. It has no chance of passing in the House. Dragging out an extension of the access tax to try and advance the sales measure runs the risk of letting the access ban expire, which would raise costs on all consumers.  

Sen. Lamar Alexander, R-Tenn., a staunch supporter of the Marketplace Fairness Act, once said in 2009, “When we bite off more than we can chew, we don't succeed. Most people who have watched Washington know it can only do one big thing at a time.” The senator and his colleagues should heed these words and take the practical route to advance a permanent ban, which benefits everyone.  

Former presidential candidate Steve Forbes wrote in Roll Call in 2014, “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.” In 2015, the same is true. The Senate should permanently extend a ban on Internet access taxes.  

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

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