Senate OKs extension of internet tax ban

The U.S. Senate yesterday voted overwhelmingly to extend an internet-tax ban for four years, stopping short of endorsing the permanent ban approved earlier this year by the House. The two chambers now must try to work out their differences over an issue that pits the telecommunications industry against state and local governments.

For educators and education advocates, the issue cuts two ways. If Congress winds up enacting a permanent tax ban, more parents and other school stakeholders might be able to afford high-speed internet access at home, giving more students the opportunity to use broadband technologies to extend their educations beyond the traditional school day. On the other hand, banning such taxes permanently could deprive schools of much-needed revenue, especially at a time when school leaders are struggling to balance their budgets.

These are just two of the issues facing the nation’s lawmakers as they debate legislation that would prohibit states from taxing internet service providers.

Congress first blocked state and local taxes on the services that connect consumers to the internet in 1998. The ban lapsed while lawmakers tried to rewrite it and cover new high-speed and wireless connections, generally known as broadband.

The Senate settled its differences on April 29, voting 93-3 to restore the tax ban for four years.

“This bill will ensure that consumers will never have to pay a toll when they access the information highway,” said Senate Commerce Committee John McCain, R-Ariz. “Plainly and simply, this is a pro-consumer, pro-innovation, and pro-technology bill.”

President Bush had asked Congress to permanently ban the levies. He said the Senate’s action moved the nation closer to banning the taxes to “help make high-speed internet services more affordable, increase the number of broadband users, and enhance our nation’s economic competitiveness.”

Senators made multiple changes to ease concerns of some governors-turned-senators who worried the ban could drain billions in tax dollars from state and local governments.

One change clarified that the ban did not apply to state and local taxation of voice telecommunication services, including Voice over Internet Protocol, or VoIP. That technology allows consumers to use the internet to make telephone calls.

Some senators had worried that without the change, telecommunications companies could evade virtually all taxes as they migrated their communication systems onto the internet’s backbone. Other senators wanted to ensure that states couldn’t find loopholes to tax not-yet-imagined wireless and broadband connections.

Sen. George Allen, R-Va., said the strong consensus about the ban’s technological scope settled April 29 could make it easier to negotiate for a ban longer than four years, but he added the House needs to accept the “reality” of some senators’ unease with a permanent ban.

States that already had started taxing internet connections before the 1998 ban preserve their right to continue collecting the payments under the Senate bill.

The Senate voted 59-37 to kill a proposal that would have extended the same rights to states that started taxing high-speed Digital Subscriber Line (DSL) connections after the 1998 tax ban. Those states imposed the taxes by arguing that DSL, which is delivered through a phone line, could be treated the same way as telephone services.

Sen. Ron Wyden, D-Ore., said those DSL taxes violate the spirit of the 1998 law, which aimed to lower the cost of the internet and speed its spread through all communities.

The 17 states with DSL taxes have two years to phase them out.

The bill is S. 150.


Information about S. 150

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