Connections to the Internet would remain tax-free under a bill the House passed yesterday.
The legislation, passed with bipartisan support, makes permanent a ban on taxing Internet connections. A temporary ban on the taxes, first enacted in 1998, expires Nov. 1.
New language clarifies that all types of Internet access — ranging from dial-up connections and high-speed DSL to cable modems — cannot be taxed.
“This bill would broaden access to the Internet, expand consumer choice, promote certainty and growth in the IT (information technology) sector of our economy and encourage the deployment of broadband services at lower prices,” said Rep. Christopher B. Cannon, Utah Republican.
Treasury Secretary John W. Snow and Commerce Secretary Donald L. Evans said in a joint statement that the ban will “help create an environment for innovation and will help ensure that electronic commerce remains a vital and growing part of our economy.”
Rep. Christopher Cox, California Republican, described the original moratorium as “something of an experiment” and declared it a success. Keeping Internet access tax-free will give more people access, he said.
“It’s just a little bit too expensive for a lot of people,” Mr. Cox said. “A nick here, and a little bit of nickels and dimes here, would add up to a serious amount of taxation for most people.”
The House yesterday also passed a bill that would cut taxes $12.7 billion over the next decade. It aims to encourage charitable giving.
The nine states that impose a communications tax on Internet connections stand to lose $80 million to $120 million a year, according to the National Conference of State Legislatures.
Several Texas Democrats opposed the bill, including Rep. Gene Green, who said the state would lose $45 million a year in tax revenue.
“I don’t need to remind my colleagues of the fiscal crisis that our states are currently finding ourselves in, including the state of Texas,” Mr. Green said.
A similar Senate bill, approved by a committee and awaiting floor debate, would give states that tax Internet connections three years to phase them out and find new sources of revenue.