Fear about future tax revenue shortfalls at the state and local levels helped derail a congressional push Tuesday for a permanent federal ban on Internet access taxes. Instead, a nearly unanimous House voted for a more modest four-year moratorium.
With the current moratorium set to expire at the end of the month, the House voted 405 to 2 to extend the politically popular exemption until 2011. Although there is a strong bipartisan consensus that Internet access should be tax-free, the length of the extension remains controversial as the types of services available online continue to evolve. That threatens to stall the legislation in the Senate.
Hoping to keep up with changing telephone technology while salvaging the city’s budget, the Los Angeles City Council voted unanimously Tuesday to put a $243-million telephone utility users tax on the Feb. 15 presidential primary ballot.
Worried that a pending court ruling could eliminate the 40-year-old tax, the council agreed to ask voters to preserve it and, to ward off future lawsuits, grant the city the power to tax telephone services that have not yet been invented.
A four-year extension is a more than fair deal for an industry whose claim to special tax treatment is tenuous at best. The Internet is not in danger of being stifled by a few extra dollars tacked on to subscribers’ monthly bills. The latest justifications for treating Internet services differently from clothing, food or numerous other goods and services that states and localities choose to tax is to spur the build-out of broadband access and reduce the “digital divide,” the gap between the rich and poor when it comes to Internet access.
These arguments are bogus. […] It is quite a stretch for providers that have fought the development of broadband networks by municipalities now to claim to be agitating on behalf of the underserved poor.