Posted on 01/20/2003 6:27:50 PM PST by DeaconBenjamin
With the Internet tax moratorium set to expire next November 1, Rep. Christopher Cox, R-Calif., and Sen. Ron Wyden, D-Ore., wasted no time in announcing their desire to continue it; on the first day of the 108th Congress, January 7, they introduced bills in each chamber to make it permanent.
Both the Cox bill (H.R. 1675) and the Wyden bill (S. 52) would make permanent the Internet Tax Freedom Act (ITFA) moratorium on Internet access taxes and "multiple and discriminatory" taxes and would repeal the ITFA grandfather clause that preserves existing state Internet access taxes. Cox and Wyden were the primary proponents of the original three-year ITFA moratorium signed into law in 1998, along with the two-year extension enacted in 2001.
"It sounds like the key players from the moratorium debate, Senator Wyden and Congressman Cox, intend to maintain their leadership on the issue by being first out of the box with legislation," said Mark Nebergall, president of the Software Finance and Tax Executives Council.
"Putting new, unfair Internet taxes on the backs of consumers is not the way to fix state and local budget troubles," Wyden said in a draft press release obtained by State Tax Notes. "It could seriously weaken the growing Internet economy and take jobs away from folks working for small web companies."
Intentions notwithstanding, both bills are expected to face significant opposition -- and not only from the state and local tax officials who have opposed the moratorium all along. Various traditional telecommunications providers object to the original bill's definition of "Internet access," which would be retained under the new legislation.
Telecom providers have argued that under this definition, otherwise taxable services such as cable television and telecommunications will be allowed to escape taxation when bundled with tax-exempt Internet access -- a competitive disadvantage for traditional telecom providers, who pay cable franchise fees and state and local telecom taxes on their bundled services.
"We are concerned because the current definition of 'Internet access' discriminates against telecommunications providers and is difficult to administer," said Annabelle Canning, executive director of tax policy for Verizon Wireless. "We would like to see this definition amended and clarified so that there's a level playing field, and to ensure nondiscriminatory application of federal preemption to all providers of Internet access regardless of the technology used."
America Online Inc., one of the primary advocates of the moratorium, "has now set enormous fees for Internet access on their broadband, so I think it's going to make this issue a lot bigger for the industry," added Frank Shafroth, director of state-federal relations for the National Governors' Association. "You clearly don't have a level playing field."
State and local government groups have also opposed the moratorium since its inception on grounds that it preempts state taxing authority, and argue that repeal of the grandfather clause (retained in the 2001 extension bill) would result in revenue losses for the 11 states whose Internet access taxes were grandfathered under the original ITFA. An estimate released by the National Conference of State Legislatures in 2001 put the cost of Internet access tax repeal for all 11 states at $75 million.
But Nebergall counters that state and local officials "don't want to make the hard choices and cut the lavish spending that they started when tax revenues were high."
Shafroth said he expects more such bills to be introduced this legislative session.
Hmmmm. I often see Republican treason but I almost never see the Dems betray the left... good news I guess.
10-4. The tax sharks have been circling from the beginning and are drooling now that revenues are down. What a great place to begin the "no taxes" push. Let's declare more business areas off-limits to the tax-crazed politicians at all levels of government!
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