PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Making the Internet Tax Freedom Act Permanent

By at 9 January, 2015, 9:54 am

The moratorium on internet taxes has been extended five times. There is bipartisan support for making the ban permanent, and hopefully the new Congress will just do it early in the first session.

The moratorium on internet taxes has been renewed and extended five times by the Congress. There is bipartisan support for making the ban permanent, and hopefully the new Congress will just do it early in the first session.

by Raymond J. Keating-

In 1998, Congress wisely placed a moratorium on states and localities taxing Internet access and placing multiple or discriminatory taxes on electronic commerce. Unfortunately, the Internet Tax Freedom Act was a temporary measure.

The moratorium has since been renewed five times – in 2001, 2004, 2007, for a short period of time in 2014, and then again in December as part of the spending bill extended to October 1, 2015.

In July 2014, the House of Representatives had passed the “Permanent Internet Tax Freedom Act,” but it failed to come to a vote in the Senate. Unfortunately, the bill was held hostage, being linked to a measure that would allow states and localities to extend their sales tax reach across borders by forcing online retailers to collect taxes in some 9,600 taxing jurisdictions across the nation. That, of course, would amount to a massive tax grab by government, with the burdens of tax collection mounting for entrepreneurs and businesses. Thankfully, the House of Representatives opposed the massive sales tax increase.

On January 9, 2015, a bipartisan group of U.S. House members spearheaded by House Judiciary Chairman Bob Goodlatte (R-VA) and Rep. Anna Eshoo (D-CA) introduced H.R. 235, the Permanent Internet Tax Freedom Act (PITFA). Hopefully, the House will soon act on this legislation and the Senate will quickly follow.

The Permanent Internet Tax Freedom Act certainly is an important issue for entrepreneurs and the economy. Two findings highlighted in the Senate version of the bill in the last Congress – the Internet Tax Freedom Forever Act sponsored by Ron Wyden (D-OR) – are spot on correct:

  • “Small business owners rely heavily on affordable Internet access, providing them with access to new markets, additional consumers, and an opportunity to compete in the global economy.”
  • “Economists have recognized that excessive taxation of innovative communications technologies reduces economic welfare more than taxes on other sectors of the economy.”

As noted by the new Chairman of the House Small Business Committee Steve Chabot (R-OH), an original cosponsor of the just introduced PITFA: “When Congress first enacted the Internet tax moratorium in 1998, the Internet was still in its infancy. Since then, free from the stifling effects of taxation, the Internet has grown exponentially, becoming a significant driver of economic activity and growth and an essential component of our daily lives. By making the moratorium permanent, we can foster the Internet’s future growth and innovation, while helping to ensure that Internet access remains affordable for millions of Americans.”

It’s time for the new Congress to deal directly and cleanly with the issue, and make permanent the Internet Tax Freedom Act’s ban on taxing Internet access and placing multiple or discriminatory taxes on electronic commerce. It’s both fair and sound economics.

_______

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. 

News and Media Releases