Internet Taxes to Come on Halloween?


By: Warner Todd Huston

You want scary? Try the fact that the moratorium on government taxation of the Internet comes to an end on October 31st. And, in true fright movie fashion, it happens at midnight. One expects a crack and flash of lightning to occur over the Capitol just as the witching hour tolls. But, will there be a wave of villagers with pitchforks to stop it? That’s up to all of us.

At midnight on October 31st, the temporary ban keeping local, state and Federal governments from taxing the Internet will lapse. The House of Representatives voted to extended the ban for four more years but the Senate has yet to act. But, rather than just extending this ban, Congress should rally to make the ban permanent.

This ban does not affect all taxes on the Internet, though. As the Heritage Foundation explains:

The extent of the moratorium is often misunderstood. It does not exempt Internet providers from most taxes of general applicability, such as corporate income taxes or property taxes, and does not exempt Internet sales from general state sales taxes, although the collection of such taxes from out-of-state vendors is problematic. It does prohibit all taxes on Internet access services–such as AOL accounts. Surcharges on Internet bills like those often present on cell phone bills, for example, are prohibited, as are “bit” taxes based on Internet usage. In addition, any taxes that single out Internet services or transactions for special or higher fees are also banned.

And this is just the thing. The Internet has been a source for great growth and wealth building as well as a source for news and information for the people, one that they can utilize to improve their own lives without the filter of a corporation, government or controlling entity upon them.

Should this tax lapse we will open the door to impose overburdening taxes on Internet service providers and consumers just at a time when we should be doing all we can to encourage growth. Taxes necessarily kills growth, to be sure, and now is not the time to begin hampering the growth of the Internet. Especially in light of the fact that the U.S.A. is falling behind in the availability of high speed, broadband Internet connections.

House Member Roy Blunt (R, MO) wants this ban to be permanent.

“If Democrats think that extending the Internet tax moratorium for an additional four years is a good thing, then why not go the extra mile and make it permanent? This is the kind of commitment that our vibrant digital economy needs to stay strong. But it’s not the kind of commitment we’ve seen from congressional Democrats – especially when it comes to keeping taxes low and our economic engine churning.

And why not. If it is working so well now, what is stopping them form making this ban a permanent thing?

Again quoting the Heritage Foundation in its conclusion:

Congress should make the moratorium permanent, rather than simply extending it once again. Requiring yet another renewal debate in 2011, as provided in the House bill, would only lead to uncertainty for Internet firms, consumers, and investors, limiting the ability for access providers and customers to make long-term plans and investments. There is little to be gained by requiring Congress to review the ban again. In effect for nearly ten years, the ban is hardly untested. Of course, Congress would, as always, retain the power to change the terms of the moratorium, if necessary.

If we, the people, allow this moratorium to lapse, we will leave the door open to greedy government tax and spenders to begin taxing our Internet services to death. From cell phones, to PDAs to Internet service at our home computers we will be handing the taxman a whole new area to stick his hand into our pockets.

The American Revolution began over a 2 pence tax on tea. That infant movement created the greatest nation on Earth. Are we going to allow the Internet revolution to be strangled in its crib by taxation? Our Founders invited themselves to the party that ended that tea tax. Are we going to allow Congress not even to invite us to this newest party?

It’s up to you America. Make this Internet tax forever off limits and let’s nurture the infant Internet to adulthood.

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