“The Internet should remain as accessible as possible to all people in all parts of the country — forever,” said Virginia Senator George Allen earlier this week. The issue is whether the Internet Tax Freedom Act, originally passed in 1998, should be expanded and made permanent.
The law prevented states from taxing Internet access and adding additional sales taxes to transactions made over the Web until it expired last weekend.
The motivation behind making these consumer-friendly conditions permanent is sound. The Internet is still not available in many homes.
Despite the obvious benefits available over the Web, low-income households remain disproportionately without access. These households are deprived of Web-based government services, consumer information, educational resources and children’s content many people take for granted.
Reducing the costs falling on consumers, including banning the sorts of taxes commonly levied by localities on cable television and cellular phone providers is a sure way to ensure equal access to the Web.
According to an article on Wall Street Journal Online, only 20 percent of American households subscribe to high-speed access to the Internet. These broadband connections represent the fruition of many predictions made during the dot-com era about what role the Web will have in our lives and our society.
The technology boils down to more choices and options for consumers in everything from digital media on demand to practical video-conferencing. Price obstacles in the form of taxes — which must invariably be passed on to consumers –will only slow the acceptance of the technology.
It is clear the government should promote affordable and unfettered access to the Internet and the informational and consumer benefits it represents. However, it is unfair of the federal government to subsidize the expansion of the Internet at the expense of the states.
Those states and localities that assessed taxes before the Internet Tax Freedom Act was enacted have until now been allowed to continue to levy those taxes.
The expanded act, as it is now being considered in the Senate, no longer allows for these grandfather taxes. Millions of dollars are estimated to be lost.
There are further implications for expanding the act. Opponents of the plan note the provisions of the proposed law could be applied to bundled services such as telephone access. In this case, the cost to states in lost tax revenue could amount to billions of dollars.
While the Internet industry has expanded tremendously in the last five years, it still has a long way to grow. While access providers no longer need the protection that motivated the original Internet Tax Freedom Act, consumers still require government intervention to ensure Internet access continues to expand.
To further this end, Congress is right to seek keeping the final costs to consumers down. However, the potential costs to the states should be considered. Ordering the states to pursue a policy and then leaving them to bear the burden of lost tax revenue alone is unreasonable.
Staff, The Collegiate Times, Virginia Tech.