- - Wednesday, September 17, 2014

ANALYSIS/OPINION:

Congress has long been derided as a body crippled by score-settling, grandstanding and ideological skirmishing. Washington insiders may disagree with this assessment of how dysfunctional our nation’s capital has become, but to taxpayers the evidence is clear. Lawmakers cannot get together to pass an important piece of legislation that protects a vital service and actually enjoys widespread support among members of both major parties.

The legislation is known as the Permanent Internet Tax Freedom Act, and it would reauthorize an existing federal law that prohibits state and local governments from imposing hefty taxes on monthly subscriptions for Internet service.

Rather than getting the straightforward path to passage it deserves, the bill — which was passed in the Republican-led House in July before stalling in the Democrat-controlled Senate — became the victim of a time-honored but perverse practice on the Hill: legislative hostage-taking.

A group of senators, led by Democratic Majority Whip Richard J. Durbin, Illinois Democrat, effectively held up passage of Internet-tax ban in an effort to force House Republicans to support an unrelated and controversial measure that would empower states to collect sales taxes outside their borders, primarily on online purchases.

This brazen display of political brinkmanship — tying the fate of a pro-taxpayer bill to a big-government tax-collection scheme — may well result in millions of Americans receiving notices in the mail from their Internet-service providers saying that their monthly bills will go up by as much as 20 percent, according to some estimates.



This is no way to govern and no way to treat taxpayers and consumers, who now find themselves in a state of limbo. That is why lawmakers must rescue the Internet-access taxes ban from its captors, and enact it with no legislative strings attached.

Time is of the essence here. The current law banning local and state taxes on Internet access expires on Nov. 1. If Congress fails to extend the ban on these taxes, the impact on Americans will be enormous: a total of at least $7 billion in new taxes nationwide, according to Center on Budget and Policy Priorities.

It is remarkable that Congress has allowed things to get to this point. The Internet Tax Freedom Act was originally enacted in 1998 and then reauthorized by Congress on three separate occasions — in 2001, 2004 and 2007 — with overwhelming bipartisan support.

The reason the law has had such strong support from both Democrats and Republicans in Congress is simple enough. Since the early days of the Internet, lawmakers have understood that its potential for innovation and growth could be hampered if the government erected barriers to online access, whether in the form of regulations or taxes.

The evidence seems to strongly suggest that policymakers in Washington have been taking the right approach — until now.

Consider the rapid adoption of Internet use by average Americans in recent years. In 2000, only 41.5 percent of American households had Internet access. Last year, the proportion had risen to an impressive 70 percent, according to a 2013 Knight Foundation report.

Making online access more expensive through new taxes threatens to undermine this positive trend at a time when the Internet has become a vital tool for Americans who rely on it for countless tasks — from paying bills and renewing licenses to booking trips and enrolling in college courses.

More than that, taxing online access will almost certainly exacerbate the so-called “digital divide” that has left many households of limited financial means behind in the Internet age.

Consider that the Knight Foundation found that the price of Internet access appears to be a major factor in keeping 18 percent of Americans off-line. That echoes a 2013 U.S. Department of Commerce report, which found that 28 percent of the nearly 38 million households without Internet access blamed cost as the main obstacle to their ability to go online.

If members of Congress are not swayed by these appeals, they should consider their own political fate. This is no ordinary year. It is an election year. The prospect of new taxes on the Internet would certainly add to the frustration and anger with Washington that is already surging across the nation. It is worth noting that some Internet service providers are said to be preparing to send out notices to their customers before Election Day.

Lawmakers should do the right thing and enact a “clean” permanent ban on Internet-access taxes — if not for the good of the American taxpayer, then for their own political survival.

Pete Sepp is the president of National Taxpayers Union.

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