- The Washington Times - Thursday, October 23, 2003

A group of lawmakers yesterday predicted they will pass a permanent ban on Internet-access taxes, despite growing opposition from cash-strapped state and local officials.

“It is very clear that there is a final assault under way” to kill the proposed moratorium, Sen. Ron Wyden, Oregon Democrat, said in a conference call with reporters yesterday.

Congress passed a ban on Internet-access taxes in 1998 and extended it in 2001. The extension expires Nov. 1. A bill already passed by the House and awaiting a Senate vote would extend the ban on access taxes to include high-speed services such as DSL and cable service, not just standard dial-up Internet access.

Mr. Wyden and Sen. George Allen, Virginia Republican, were scrambling yesterday to round up votes for the ban on Internet-access taxes.

State and local officials object that the proposed moratorium will prevent them from taxing telecommunications services and devastate their budgets.

The Multistate Tax Commission predicted state and local governments could lose $8.6 billion a year by 2006 if Congress approves the proposed ban.

In a separate report released this week, the Center on Budget and Policy Priorities, a think tank representing lower-income families, said state and local governments could lose $2 billion to $9 billion a year in tax revenue if Congress strengthens the existing ban on Internet-access taxes.

Oklahoma Gov. Brad Henry and South Dakota Gov. Mike Rounds asked the Senate leadership this week not to extend the ban on Internet-access taxes permanently.

State and local leaders argue the proposed ban could prevent them from taxing an increasing number of services conducted over the Internet, from Internet telephone calls to movie and music downloads, because the proposed bill is too vague.

“If it’s going to be a permanent moratorium, you have to get it right,” said David Quam, lobbyist for the National Governors Association.

Lawmakers who support the permanent moratorium on Internet-access taxes say they have no intention of banning taxes on telecommunications services, despite charges from opponents.

The escalating dispute has led lawmakers to warn that state and local officials want to weaken the proposed moratorium so they can tax online services such as instant messaging and e-mail, a charge they vigorously deny.

The bitter dispute also includes the Bush administration, which asked Congress this week to approve the permanent moratorium.

Sen. Lamar Alexander, Tennessee Republican, said this week that he will try to prevent passage of the new moratorium because it could gut state coffers.

Rep. Christopher Cox, California Republican, said a permanent tax ban on access charges is the best way to increase the number of Americans who log onto the Internet using high-speed services and help get poor Americans online by keeping costs down.

“We are beginning to make progress getting poorer people online,” Mr. Cox said.

Of the estimated 130 million Americans who have Internet access at home, just 44.7 million or 34 percent, subscribe to high-speed Internet service, according to technology research firm comScore Networks Inc.

Phone companies and Internet service providers also are weighing in by urging Congress to approve the permanent ban.

The debate over access taxes is separate from the unsettled issue surrounding sales taxes on goods and services purchased over the Internet.

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