Permanent Ban On ISP Tax Passes House Judiciary

The House Judiciary Committee has approved a bill that would make permanent the moratorium on Internet access taxes and multiple discriminatory online taxes.

The vote was 30 to 4 on the Permanent Internet Tax Freedom Act (HR 3086), and followed the defeat of an amendment proposed by ranking member John Conyers (D-Mich.), that would have simply extended the moratorium another four years, and removed a provision eliminating the grandfathered taxes of seven states who had those access taxes in place before the 1998 passage of the initial moratorium.

Several Democrats argued that a permanent ban was favoring the broadband sector, was a violation of states' rights, and did not allow Congress the flexibility to review the ban periodically to see if it was still necessarily, given that it was passed when the Internet was a fledgling. They also pointed out that removing the grandfather clause could mean hundreds of millions of lost revenues in those seven states—including over $300 million in Texas alone—which would mean states would turn elsewhere for the money, impacting other sectors.

Bill backers countered that the grandfather clause had been a way to give those states time to transition to other sources of revenue, and they had had 16 years to do so.

Committee chairman Bob Goodlatte (R-Va.), argued that the Internet’s ubiquity was even more reason to insure that an ISP tax did not threaten its continued growth and prosperity.

A bipartisan group of House committee and subcommittee chairmen and ranking members introduced the bill in September 2013. It is backed by cable and telco ISPs.

A Senate version of the bill, S. 1431, was introduced by Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.).

The Internet Tax Freedom Act has been extended three times since 1998. It is currently scheduled to expire Nov. 1, 2014.

Cash-strapped states and local governments are always looking for new revenue sources, but the bill would make sure that would not include taxes on access to the Internet. That would make sense given that the government has made a priority of promoting Internet access and adoption and keeping the cost down. Several Democrats, led by Conyers, argued that permanently preventing a state from levying a tax on an entire economic category was going too far. Republicans countered that the Congress could eventually decide that a tax was permissible, but that the bill simply changed the bias toward not taxing unless that determination was made.

"With today’s action, the House Judiciary Committee has taken an important step toward heading off Internet access taxation,” said CTIA: The Wireless Assocation. “We hope the full House will follow suit as soon as possible.”

"Failing to extend the current Internet tax moratorium by November 1st risks driving up the cost of connectivity," said National Cable & Telecommunications Association president Michael Powell. "We urge the Congress to quickly pass this important legislation so that American consumers and businesses will continue to be protected from any additional taxes and fees that could raise the price of Internet access and slow the rapid adoption of broadband services."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.