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House Bill Would Ban Connection Taxes

U.S. Rep. Anna Eshoo (D-Calif.) introduced legislation Wednesday to permanently extend the temporary ban on Internet access taxes. The bill is the House companion to legislation recently introduced in the U.S. Senate by Ron Wyden (D-Ore.).

The current moratorium expires on Nov. 1. Originally passed in 1998, Congress has twice extended the moratorium, most recently in 2004 for another three years, but lawmakers have never permanently banned access taxes.

The Permanent Internet Tax Freedom Act of 2007 would not only ban taxes on Internet connections but also prohibit double taxation of products or services bought over the Internet. It would also bar discriminatory taxes that treat Internet purchases differently from other types of sales.

"Passage of this legislation will ensure, once and for all, that the growth of Internet access and e-commerce will not be hampered by unwarranted taxation," Eshoo said in a statement.

Co-sponsored by Rep. Bob Goodlatte (R-Va.), the bill has the additional endorsement of 19 Republicans and 14 Democrats.

"I have long supported efforts to eliminate Internet access taxes and other discriminatory taxes on electronic commerce," Goodlatte said in his statement. "Such taxation would create onerous and unfair burdens on industry, hinder technological development and slow economic growth."

The legislation defines Internet access to include dial-up, DSL, cable modem or wireless connections. The legislation does not attempt to remove the grandfather clause in the current law exempting the 12 states that were taxing Internet access before 1998.

In 2004, attempts to strip away the grandfather clause sparked a fight in the Senate that led to the moratorium expiring before lawmakers agreed to drop the provision.

"The moratoriums previously enacted by Congress have contributed greatly to the expansion of Internet access and online innovation, and it is highly appropriate to act now to ensure that future growth is not stifled," Rep. Rick Boucher (D-Va.), a co-sponsor of the bill, said in a statement.

Proponents of the moratorium –- permanent or otherwise –- claim the ban has helped spread the adoption of the Internet. In 1998, 36 percent of U.S. adults reported using the Internet. Last year, that number grew to 73 percent -- an all time high -- according to an April 2006 Pew Internet & American Life Project Report.

Eshoo's bill gained the immediate endorsement of the U.S. Telecom Association.

"If Congress were to let this important moratorium expire, the likely resulting increase in state and local taxes on Internet access, would limit consumer choice, force some customers to pay more for high-speed service and could discourage broadband adoption," U.S. Telecom President and CEO Walter McCormick said in a statement.

The bill has been referred to the House Committee on the Judiciary, on which Reps. Goodlatte and Boucher serve.



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