Panelists See Link Between Net Taxes, Broadband

October 04, 2007

by Winter Casey

National Journal’s Technology Daily
PM Taxes

Reprinted with permission

Taxing Internet access would hurt the rollout of high-speed Internet service in the country, panelists said Thursday at a Capitol Hill event.

Senate Republican High-Tech Task Force Chairman Gordon Smith, R-Ore., said history proves that whatever is taxed is discouraged, so allowing a moratorium on taxing Internet access to expire Nov. 1 would discourage broadband penetration.

During an event hosted by the U.S. Chamber of Commerce and the TeleCONSENSUS coalition, Information Technology and Innovation Foundation President Rob Atkinson said if the moratorium expires, he expects 41 states would be taxing Internet access within two or three years. Karen Kerrigan, president of the Small Business and Entrepreneurship Council, added that thousands of local jurisdictions also would attempt to tax Internet access.

Atkinson said it is a contradiction for some lawmakers to be seeking a U.S. broadband policy to increase penetration as Congress weighs whether to allow the moratorium to expire. He said there is a strong chance that imposing an access tax would curtail broadband deployment.

Atkinson said if Congress passes an extension of the moratorium instead of a permanent ban, as industry is urging, the political climate could be different when the moratorium expires again.

But David Quam, the federal relations director at the National Governors Association, said two studies show that broadband deployment and taxing Internet access are not linked.

State officials tend to oppose a permanent ban, as it would interfere with state power to collect taxes. Some also argue that the Internet has grown tremendously since the ban first became law in 1998, so the moratorium no longer is justified.

On Tuesday, Sen. John Sununu, R-N.H., introduced legislation that would make the moratorium permanent. Another Senate bill, S. 156, calls for making the moratorium permanent, while a third measure, S. 1453, would extend the tax ban for four years.

Panelists during the luncheon discussion spoke about the importance of government incentives and investment to encourage broadband.

John Rutledge, chairman of Rutledge Capital, said China understands the importance of broadband. In addition to broadband, China is making major investments in information technology, looking to increase its productivity and grow its economy. Rutledge also noted that China is building universities at a “ferocious rate.”

Members of the House Republican leadership on Thursday sent a letter to Speaker Nancy Pelosi, D-Calif., calling for passage of legislation to permanently extend the moratorium.