Senator: No Tax Breaks For Broadband

U.S. Sen. Lamar Alexander (R-TN), who has led the fight to allow states to tax Internet connections, said Friday the broadband industry needs no special tax breaks from the federal government.

“There were dire predictions that if states were allowed to keep taxing this access that it would become a terrible burden for the industry. Nothing could be further from the truth,” Alexander said on the floor of the Senate. “It is not the American way to subsidize such new inventions; it is the
American way to let them earn their way forward in the marketplace.”

Congress let a five-year moratorium on Internet access taxes expire in
November of 2003. The moratorium expressly exempted ten states that were
already taxing dial-up connections when the legislation went into effect.

Last year, the House of Representatives passed legislation calling for a
permanent moratorium that eliminates the state exemptions and expands access
definitions to include broadband connections. In April, after a long and
contentious debate, the Senate approved a four-year ban on connection taxes
but grandfathers the ten states covered in the original moratorium.

Since then, the Senate and the House have been unable to reconcile their

“For now, I would respectfully suggest that the logical course would be for
the House of Representatives to adopt the Senate modifications,” Alexander
said. “This would provide temporary certainty in this policy area, but it is
an unsatisfactory long-term solution.”

Alexander called the Senate bill a “good temporary compromise” that “makes
clear that state and local governments can continue to collect taxes on
telephone services, including telephone calls made over the Internet.”

He also called for state and local officials to meet with the
telecommunications industry before the opening of the 109th Congress in
January to develop a policy framework to assist lawmakers.

“If this does not happen, I believe we are in for a long debate with the
likelihood of a poor result or even no result,” Alexander said. “That would
serve no one’s purpose.”

Alexander said both sides have legitimate points to make but he thinks the
ultimate debate will be “whether there is any justification for giving
additional government subsidies to the high-speed Internet access industry,
which so far as I can tell must be already the most heavily subsidized new
technology in America today.”

A spokesperson for Sen. George Allen (R-VA), who has argued for a permanent
moratorium on Internet connections, said, “The key reason we have seen such
explosive growth is that we have not taxed the Internet.”

In his floor remarks, Alexander remained adamant that the broadband industry
is ready to stand on its own without government help.

“High-speed Internet access is a fine, remarkable, admirable new technology,
but so was television, so was radio, so was electricity, so was the internal
combustion engine,” he said. “Americans never got a tax break to buy a TV
set and TV manufacturers never got a subsidy, as far as I know, to build
them, yet 30 years after they were introduced to the market, almost 90
percent of Americans owned a television set.”

Alexander said he found it “especially galling” that Congress “would even
consider creating this big tax break for Internet access companies and send
the bill for that tax break to state and local governments.”

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