Keep the Internet Free of Taxes | Commentary
Congress has fewer than 50 days to permanently extend the Internet Tax Freedom Act and prevent an unnecessary and detrimental tax from being inflicted on the American people.
Extending the ITFA should be a no-brainer. The act, passed in 1998 to promote America’s rapidly growing Internet infrastructure, banned state and local governments from taxing access to the Internet, as well as precluding multiple and discriminatory taxes from being imposed on other forms of electronic commerce.
Knowing that taxes would cripple the Internet’s growth, Congress has extended the ban three times since enactment, with overwhelming bipartisan support. And in July, the House of Representatives passed a permanent extension of the ITFA that would do away with time-consuming extensions.
The Senate must not stall passage of the ITFA. Impeding the extension’s passage would endanger affordable access to the Internet for millions of Americans.
The ITFA, by shielding access to the Internet from burdensome taxes, has directly encouraged the rapid growth of the country’s Internet infrastructure, from a budding industry when President Bill Clinton originally signed the bill to an integral part of the everyday personal and professional lives of millions of Americans.
In the past 18 years, the number of Americans who use the Internet, be it on home computers, television sets or mobile devices, grew at an astounding rate, from less than 25 percent to more than 87 percent today. Increased usage means more individuals than ever can acquire information, expand their networks and business opportunities and connect with the world at large.
A study by The Internet Association found that nine out of 10 part-time business owners use the Internet to run their businesses and generate around $141 billion in annual revenue. Debilitating Internet access taxes would stifle these entrepreneurs, limit their business opportunities and could prevent them from making a living and supporting their families.
Internet access taxes would also have a disproportionate impact on lower-income and minority communities, who have traditionally faced high price barriers to broadband adoption. If local and state governments were able to impose their own taxes on access to the Internet, these communities would face even higher costs, further excluding them from the immense benefits access to the Internet offers.
As Internet usage has grown, bandwidth demands have doubled on average every 18 months. Consequently, Internet Service Providers have invested more than $1.2 trillion since 1996 to help increase bandwidth capacity every year. For instance, between the first quarter of 2013 and the first quarter of 2014, the average broadband speed in the U.S. increased by 31 percent. If ISPs are forced to impose new taxes on their customers’ broadband access, Internet service options could be affected.
Failure to extend the ITFA, in short, would reverse the immeasurable gains of the last two decades. The Phoenix Center has estimated that even a miniscule 5 percent tax on Internet access would revert Internet adoption rates back to 2010 levels. A 10 percent tax would send them back to levels last seen in 2008. Ultimately, the burden would be borne by customers, who would face an annual tax that could rise as high as $7 billion overall.
We know firsthand how critical an IFTA extension is: one of us, John Sununu, was the lead sponsor to make original act permanent in 2007 along with the late Sen. Daniel K. Inouye, D-Hawaii. In the words of our former colleague ex-Rep. Christopher Cox, R-Calif., the ITFA was enacted under the principle that access to “information should not be taxed.” This principle still applies today. Americans do not need yet another tax on services essential to their daily lives. The Senate must take its constituents into account and pass a permanent extension of the Internet Tax Freedom Act before it is scheduled to expire on Nov. 1.
John Sununu is a former member of the Senate. Harold Ford Jr. is a former member of the House of Representatives. They are the honorary co-chairmen of Broadband for America, a coalition of members ranging from independent consumer advocacy groups to content and application providers to the companies that build and maintain the Internet.