Continuing debate over how to define "Internet access," as well as whether to "shear billions" from state and local governments, has paralyzed a U.S. Senate bill to make the just-expired federal moratorium on Internet access taxation permanent.
"The strongest proponents for a permanent ban want to make sure that all access technologies - from phone lines to DSL to cable modems - get equal freedom from taxation," said the Associated Press at midday November 7, after the two sides scrapped further debate in favor of trying to hammer out a compromise by the end of next week. "Opponents said the definition supporters crafted to incorporate new technologies was too vague and could go too far - eliminating taxes on many types of Internet technologies and telecommunications delivered through the Internet."
Sen. Byron Dorgan (D-South Dakota) told reporters definitions "are everything" when the question is whether "billions and billions of dollars" are to be lost.
Permanent ban supporters have proposed one compromise: temporarily extending the ban for five years, instead of the former three-year moratoriums, "as long as the new bill treats all Internet technologies equally," the AP said.
"If you can have the set of definitions that ensure competitive environment, that you don't favor one set of providers over another," said Sen. Ron Wyden (D-Oregon) to reporters, "I'm willing to consider a very significant concession."
The most recent three-year moratorium on Internet access taxation expired November 1. The House has already passed a bill to make such a ban permanent. And the issue has produced opponents from a few unlikely sources. Republicans who would be presumed in favor of any legislation restricting or barring certain taxes have divided to a certain degree on the question.
Sen. George Allen (R-Virginia), for example, has said those claims that state and local governments would lose billions under a permanent Net tax ban are inaccutate, coming "only…from wanting to tax Internet access."
Tell that to the Cato Institute, the libertarian think tank. Technological policy analysts Adam Thierer and Veronique de Rugy argued in an October paper that state and local governments should be thinking about cutting their spending, too, before exploring "other tax reform options" to solve real or perceived problems at their levels.
"But in doing so, they must abide by the constitutional protections and sensible nexus guidelines that have protected the channels of interstate commerce in previous decades," Thierer and de Rugy argued. "It would be foolish for members of Congress to abdicate their responsibility to safeguard the national marketplace by giving the states carte blanche to tax interstate commercial activities via a collusionary multistate tax compact."
The National Governors Association, which has come out in favor of allowing state and local governments to tax Internet access following a few years of sometimes acrimonious debate, has reiterated its opposition to the now-stalled Senate bill. "Governors operate in a world where they must balance their budgets. By preempting existing telecommunications taxes, (the bill) will force states into the red and further hamper their ability to provide government services," said executive director Raymond C. Scheppach in an official statement.
Indeed, the NGA has no few allies on Capitol Hill. "There's nobody out there who's rushing to tax the Internet," Sen. George Voinovich (R-Ohio) said last month. "It's all a hoax."
But the influential, conservative Heritage Foundation also opposes new Internet access taxes. "Are new technologies a Thanksgiving turkey to be tapped for government coffers?" asked Internet and technology policy analyst James L. Gattuso in a briefing paper. "Or, will policymakers leave their hands off, enabling consumers to reap the full benefits of this golden goose?"
