On the Friday before Thanksgiving, Congress gave Internet users an early Christmas present. But it’s only good for three more years.
Congress passed a four-year ban (one year retroactive) on taxes assessed on the fees that Internet users pay to service providers such as AOL and Earthlink. And with nearly two-thirds of the American public online, this is a useful present that won’t cost taxpayers anything.
But it may be a fleeting gift because Congress had the chance to make the ban permanent but didn’t.
Why? Because there were members of the Senate who complained that states needed a way to make up for revenues they foresee losing when telephone services move to the Internet. Other members of the House, still looking for ways to separate taxpaying Internet users from their income, want a bill allowing the discriminatory taxation of online sales.
These ideas deserve a lump of coal.
A tax on Internet providers will slow the spread of the Internet among the people; discriminatory taxes on sales over the Internet will slow the growth of sales. And a tax on telephone and other services that the Internet can provide more cheaply will mean less of those services.
Why lawmakers would want to stunt the growth of the single greatest driver of the economy in the past decade and a half is both shocking and all-too-predictable. The answer is they don’t want to cut off future sources of income to support their profligacy.
Most Internet tax proposals wouldn’t rake in huge amounts of new money now, but they might in the future. And if Congress keeps turning out pork-filled budget agreements—and the president keeps signing them—like it just did, members will want and need to tap new resources.
The Internet is Congress’ ace in the hole. But for now, at least, Congress wants the Internet free from taxes. And that’s a Christmas gift we all can use.