RealTime IT News

Lawmakers Clash on Net Access Ban

WASHINGTON -- Lawmakers favoring a permanent and expanded Internet access tax ban on e-commerce and online services said Monday that their opponents favor a "whole new raft" of taxes on technology users.

The stepped-up rhetoric comes after state executives attending the winter meeting of the National Governors Association joined U.S. Senators Lamar Alexander (R-VA) and Thomas Carper (D-DE) to urge Congress to amend the Internet Tax Non-Discrimination Act (S. 150). The group wants to keep access tax laws temporary and narrow in definition.

That prompted a swift response from bill sponsor Sen. Ron Wyden (D-OR). "No matter how the proponents of this new legislation describe it, they are making the same old argument: that Internet access is a cash cow and they think states should start milking," Wyden said in a statement.

Wyden and George Allen (R-VA) introduced S. 150 on Jan. 13, 2003, calling for a new federal policy permanently banning access taxes on Internet connections across a variety of platforms.

Congress approved the original Internet Tax Freedom Act in 1998 and imposed a three-year access tax moratorium on dial-up connections to spur U.S. Internet growth. Ten states already taxing access were exempted. In 2001, Congress extended the moratorium another two years. That ban expired on Nov. 1, 2003.

Senate and House technology leaders moved the Allen-Wyden proposal swiftly through the legislative process. The House of Representatives approved the measure in September. The Senate Commerce and Science Committee approved the bill in August.

Since then, the two senators have been unable to assuage colleagues' fears over the cost to the grand-fathered states losing their access tax revenue and the real or perceived state revenue losses under the expanded access definitions.

Even when a national access tax moratorium was in place, some state and local taxing authorities began taxing high-speed connections bundled in telecommunications services such as DSL.

The Congressional Budget (CBO) says the broadened access definitions will result in lost state and local revenue but can't put a dollar figure on the amount because the CBO "cannot estimate the magnitude or the timing" of the Allen-Wyden measure.

Alexander and Carper estimate state losses in the billions.

Wyden says states "have yet to provide examples of real financial injury. States can't lose millions of dollars they were never allowed to collect in the first place. Opponents of S. 150 are just looking to open the barn door to a whole new raft of taxes on technology users."

Alexander wants to extend an access tax moratorium another two years and to "make a change to minimize discrimination" between telephone and cable company Internet connections. Grandfathered states would still be allowed to tax all Internet access.

"Our argument is that our two-year extension . . . with one adjustment to level the playing field between telephone companies and cable companies, is better for the country than a permanent installation of a very broad definition, so the issues are duration and definition," Alexander said.

Allen asked Monday, "Do we want to continue to grow and expand our economy, our small businesses and educational resources or do we want to impose a stifling tax on consumers? I believe the Internet should remain as accessible as possible to all people, in all parts of the country."

Alexander's proposal is gaining traction, House and Senate staff members closely associated with the moratorium legislation told internetnews.com late last week.

"At the end of the day, there will be a moratorium on Internet access taxes, it's only a matter of how many years and what gets covered by the ban," said one.