Posted on 06/04/2007 12:35:31 PM PDT by George W. Bush
The era of tax-free e-mail, Internet shopping and broadband connections could end this fall, if recent proposals in the U.S. Congress prove successful.
State and local governments this week resumed a push to lobby Congress for far-reaching changes on two different fronts: gaining the ability to impose sales taxes on Net shopping, and being able to levy new monthly taxes on DSL and other connections. One senator is even predicting taxes on e-mail.
At the moment, states and municipalities are frequently barred by federal law from collecting both access and sales taxes. But they're hoping that their new lobbying effort, coordinated by groups including the National Governors Association, will pay off by permitting them to collect billions of dollars in new revenue by next year.
If that doesn't happen, other taxes may zoom upward instead, warned Sen. Michael Enzi, a Wyoming Republican, at a Senate hearing on Wednesday. "Are we implicitly blessing a situation where states are forced to raise other taxes, such as income or property taxes, to offset the growing loss of sales tax revenue?" Enzi said. "I want to avoid that."
A flurry of proposals that pro-tax advocates advanced this week push in that direction. On Tuesday, Enzi introduced a bill that would usher in mandatory sales tax collection for Internet purchases. Second, during a House of Representatives hearing the same day, politicians weighed whether to let a temporary ban on Net access taxes lapse when it expires on November 1. A House backer of another pro-sales tax bill said this week to expect a final version by July.
"The independent and sovereign authority of states to develop their own revenue systems is a basic tenet of self government and our federal system," said David Quam, director of federal relations at the National Governors Association, during a Senate Commerce committee hearing on Wednesday.
Internet sales taxes
At the moment, for instance, Seattle-based Amazon.com is not required to collect sales taxes on shipments to millions of its customers in states like California, where Amazon has no offices. (Californians are supposed to voluntarily pay the tax owed when filing annual state tax returns, but few do.)
Ideas to alter this situation hardly represent a new debate: officials from the governors' association have been pressing Congress to enact such a law for at least six years. They invoke arguments--unsuccessful so far--like saying that reduced sales tax revenue threatens budgets for schools and police.
But with Democrats now in control of both chambers of Congress, the political dynamic appears to have shifted in favor of the pro-tax advocates and their allies on Capitol Hill. The NetChoice coalition, which counts as members eBay, Yahoo and the Electronic Retailing Association and opposes the sales tax plan, fears that the partisan shift will spell trouble.
One long-standing objection to mandatory sales tax collection, which the Supreme Court in a 1992 case left up to Congress to decide, is the complexity of more than 7,500 different tax agencies that each have their own (and frequently bizarre) rules. Some legal definitions (PDF) tax Milky Way Midnight candy bars as candy and treat the original Milky Way bar as food. Peanut butter Girl Scout cookies are candy, but Thin Mints or Caramel deLites are classified as food.
The pro-tax forces say that a concept called the Streamlined Sales Tax Agreement will straighten out some of the notorious convolutions of state tax laws. Enzi's bill, introduced this week, relies on the agreement when providing "federal authorization" to require out-of-state retailers "to collect and remit the sales and use taxes" due on the purchase. (Small businesses with less than $5 million in out-of-state sales are exempted.)
It's "important to level the playing field for all retailers," Enzi said during Wednesday's hearing.
While it's too early to know how much support Enzi's bill will receive, foes of higher taxation are marshaling their allies. Sen. Ted Stevens, an Alaska Republican, said Wednesday that he'd like "to see an impregnable ban on taxes on the Internet."
A taxing question
Pro-tax and antitax forces are jockeying for position before a Net access tax moratorium expires in November. Also on the table: a proposal to usher in mandatory online sales taxes.
Enzi bill: Ushers in mandatory sales taxes on Internet purchases.
S. 156: Renews expiring access tax moratorium permanently.
H.R. 1077: Renews expiring access tax moratorium permanently and eliminates grandfather provision permitting nine states to collect taxes.
H.R. 763: Renews expiring access tax moratorium permanently.
Jeff Dircksen, the director of congressional analysis at the National Taxpayers Union in Alexandria, Va., said in written testimony prepared for the hearing: "If such a system of extraterritorial collection is allowed, Congress will have opened the door to any number of potential tax cartels that will eventually harm rather than help taxpayers."
Internet access taxes
A second category of higher Net taxes is technically unrelated, but is increasingly likely to be linked when legislation is debated in Congress later this year. That category involves access taxes, meaning taxes that local and state governments levy to single out broadband or dial-up connections. (See CNET News.com's Tech Politics podcast this week with former House Majority Leader Dick Armey on this point.)
If the temporary federal moratorium is allowed to expire in November, states and municipalities will be allowed to levy a dizzying array of Net access taxes--meaning a monthly Internet connection bill could begin to resemble a telephone bill or airline ticket with innumerable and confusing fees tacked on at the end. In some states, telephone fees, taxes and surcharges run as high as 20 percent of the bill.
These fees that states levy on mobile phones, cable TV and landlines run far higher than state sales taxes at an average of 13.3 percent, cost the average household $264 a year, and total $41 billion annually, according to a report published by the Chicago-based Heartland Institute this month. Landlines are taxed at the highest rate, 17.23 percent, with Internet access being virtually tax free, with the exception of a few states that were grandfathered in a decade ago.
Dircksen, from the National Taxpayers Union, urged the Senate on Wednesday to "encourage economic growth and innovation in the telecommunications sector--in contrast to higher taxes, fees and additional regulation" by at least renewing the expiring moratorium, and preferably making it permanent. Broadband providers like Verizon Communications also want to make the ban permanent.
But state tax collectors are steadfastly opposed to any effort to renew the ban, let alone impose a permanent extension. Harley Duncan, the executive director of the Federation of Tax Administrators, said Wednesday that higher taxes will not discourage broadband adoption and his group "urges Congress not to extend the Act because it is disruptive of and poses long-term dangers for state and local fiscal systems."
Sen. Daniel Inouye, the influential Democratic chairman of the Senate Commerce committee, said: "Listening to the testimony, I would opt for a temporary extension, if at all."
If the moratorium expires, one ardent tax foe is predicting taxes on e-mail. A United Nations agency proposed in 1999 the idea of a 1-cent-per-100-message tax, but retreated after criticism. (A similar proposal, called bill "602P," is, however, actually an urban legend.)
"They might say, 'We have no interest in having taxes on e-mail,' but if we allow the prohibition on Internet taxes to expire, then you open the door on cities and towns and states to tax e-mail or other aspects of Internet access," said Sen. John Sununu, a New Hampshire Republican. "We need to be honest about what we're endorsing and what we're opposing."
They think it’s their money to waste on their “pet projects” and that we have no claim on it despite we’ve worked hard for our money.
Looks to me like the Republicans aren't being bashful about imposing internet taxes either. Has Enzi changed parties or are Republicans who propose new taxes exempt from criticism?
Tax the internet/email... I see this story every year.
Dems are working on it now. When we least expect it they will pass a bill and it will be too late to comment on it.
Another way of controlling the masses and replenish the public coffers for more unnecessary spending.
I think the scumbag politicians should stop referring to us as tax payers and citizens and start referring to us as cash cows. No more taxes!!!!!!I’m taxed/tapped out!
Hello...anybody listing???
bookmark
The media never allows the parasites to be debated as part of Social Security reform. These are able bodied people in their thirties who live off the working folks. That part of it never enters any politician’s mind. Instead, they always want more of our money, from the people who work for a living. The politicians are like dope fiends themselves, and they spend money like crackheads in an alley.
Same here, lurker. I buy things that I would not buy if I had to go someplace to get them. Plus I waste time that I had better uses for previously. I refuse to give the gov't taxes on my pathetic s-l-o-w dial-up which is all that is available since I live in the sticks. I pay more than enough for it already. Time to take a stand if this goes into effect.
” Even if the retailer doesn’t collect sales tax, the purchaser is responsible for sending in the “Use Tax” to his home state.)
So...where are all the people screaming for enforcement of THESE laws?”
The problem with the state and use taxes is that the states vastly overestimate the amount of tax owed. In maine the latest claimes from the state totaled thousands of dollars of internet sales for every man, woman and child in the state to reach their total.
This is simply more government greed.
Email should not be taxed, and you would see a revolt on that one.
However, after 13 years its pretty clear online commerce is well established and it no longer should be exempted from the taxes that other businesses must pay.
The only solution is TRUE campaign finance reform. Give each Congressional candidate $1 million. Incumbent or challenger. That's it. No more, and no one is allowed to contribute a single dime. Incumbents who use office expenses to campaign will be thrown out of office. No warnings or appeals. End of special interests and whores for the highest bidder. No rich candidates like Perot or Bloomberg to steal a seat. Make incumbents totally vulnerable.
Of course Congress would never agree to this, so the states have to amend the Constitution themselves without Congress.
That won't work either, once internet is delivered over power lines.
Does the technology exist for someone to build a satelite based system, so folk could download data like we download GPS location info? If a satelite system is possible, then the country could still get their service and the government could whine about it as the deliver would be offshore.
The 900 pound gorilla in the china ship is.. eBay.
I don’t get it though - and I see this a lot - somebody (Stuff4U) sells a used item - say, a 45 record album of Zeps “Hey, Hey, What Can I Do”, or vintage T-shirt, or whatever, doesn’t matter. But the point is - it’s a *used* item.
“Tennessee residents add 6.5% state sales tax.” Why? Sure, the seller is just covering their assets, but the fact is, the taxes were already paid on that item.
But what’s going to happen when it’s mandatory and uniform across the board? A lot of taxes are being collected that aren’t being paid into the state? Is that what it is? “Level the playing field” translates to “optimize revenue stream.”
Elections have consequences.
Not to be overly pessimistic, but between all the BS with Immigration and Global Warming etc. I just don't think we much matter. Clearly the Libs and RINOs rule the day.
The beginning of the end for the internet.
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