Should the Internet be taxed?
That's the question facing the Senate this week, as it debates whether it should extend a ban on state and local taxes on Internet connections. The Senate last
week postponed a vote to extend the ban, which had been enacted in 1998 and expired Nov. 1. The House of Representatives has already approved a ban, and the White House has made it clear it would
like to see the ban restored. But there are a few sticking points in the Senate.
One of the issues is whether the Internet is special enough to make it tax- free. In a year when state and local
governments are so bereft that they could use new sources of revenue, should they be forbidden to tax connections like AOL and NetZero?
The argument for lifting the ban has to do with
precedent, and not just because states need quick cash. In 1998, broadband hadn't popped yet. Most still dialed up to get online, with telephone connections already being subjected to tax. And the
Internet wasn't anywhere near the penetration it is today. You could make the argument that Internet penetration has spread faster without taxes than it would have with them, although that's not the
most compelling reason to keep the Internet tax-free. Telephone and cable TV have grown just fine under taxation. Consumers find it useful and the technology grew, regardless of taxation.
There's the problem. Why should the Internet get a free pass from state and local taxes? It's certainly not on training wheels anymore. Why should dial- up and broadband connections escape taxes
but not DSL or handheld wireless, as some have suggested?
While no one likes paying taxes, just about everyone sees the value. The fiscal crises that state and local governments are facing make
it reasonable to start looking at alternatives. Just as corporations are finding through the last downturn, there's only so much cutting that can be done before core operations, and the ability to
grow, are compromised. It's not government's role to run a profit, but more revenue will have to come in if it is to come closer to balancing the budget.
After so many government tax breaks, is
it time for the Internet - and those of us who use it - to give some of that back?
-- Paul J. Gough