The return of Congress to Democrat control may finally bring Internet taxes to the U.S. Too bad, since resisting Internet taxes has always had bipartisan support.
The Internet tax ban expires this year, making it a hot topic for this week’s congressional Internet Caucus discussions. Recently Senate Commerce Committee Chairman Daniel Inouye (D-HI) said “Listening to the testimony, I would opt for a temporary extension [of the ban], if at all.” Other Senators propose carving out telecom service bundles from the Internet tax ban.
Yet the Internet tax moratorium has never interfered with state, local, or federal taxes on telecom services. Cable bills clearly reveal state and county sales taxes, communications tax, “government costs”, and cable “right of way fees” on a cable high speed Internet bundle.
The Internet tax moratorium blocks “multiple and discriminatory” taxes on the Internet—so carveouts for taxing “bundled” telecom-over-the-Internet will give a green light to jurisdictions ready to slap multiple taxes on Internet services. Carveouts don’t close a loophole for taxpayers, but open a big pro-tax loophole for bureaucrats.
We’re told that unless taxes follow the shift to Web-based commerce, as fast as possible, governments will be “starved of revenue.” But state revenues grew an average of 5% between 2000 and 2005, despite the Internet Tax Moratorium. Cato’s Chris Edwards points out that without the post-9/11 slump, revenues would’ve been even higher. States, like Washington, get more revenue from a better economy. They have lots of tax-raising tricks, and haven’t suffered from not also having discriminatory Internet taxes.
If Internet taxes were the Way of the Future, the U.S. would indeed be falling behind. Since we aren’t, doesn’t that mean avoiding new taxes on Internet commerce helps, not hurts, the U.S. in global competition?
Europe, for instance, is indeed “ahead” with VAT on Internet services and taxes on digital downloads.
If the U.S. wants to “harmonize” policies with Europe and tax the Internet, don’t expect America to remain the prime catalyst for global growth.