Internet tax… a good idea?

A little history

Back in 1998 there was a moratorium placed on internet taxation. Simply put, lawmakers decided that they didn?t want to come to a decision on the whole issue of Internet taxation just yet. On November 1st 2003, the moratorium expired, leaving states open to begin taxing however they see fit.

However, only a few state legislatures are in session at the moment. This is good news, as lawmakers won’t have much time to draft anything before the year is over. Oregon Senator Ron Wyden is co-sponsor of a bill that would have broadened the ban on Internet taxes. It was killed just before the senate ended this year?s session. The bad news is, congress won’t be addressing this until they resume in 2004. This will give states additional time while congress drags its feet and senators change the language and drum up support for their potential cash cow.

One tactic that is being used is to define the Internet as a telecom based business. If this is successful, then states can tax the Internet using existing telecom laws and models. By doing so, they avoid having to put the tax measure up for vote by the people.
How would the internet be taxed?

There are two schools of thought when it comes to Internet taxation. One is to tax the Internet Service Providers. This could be a tax on Internet access, a charge per email message, a web hosting tax, or countless other possibilities.. The other is a sales tax or transaction tax. This would be in addition to the current state sales taxes.
Why are either of these a bad idea? Well let’s take a look the purpose of taxes. Taxes should be paid by the people who enjoy the services they provide. For example, education benefits everyone; therefore everyone should pay taxes for education. Roads benefit drivers who pay taxes on the gas required to power cars. Hikers pay fees at trail heads for the benefit of rangers maintaining those trails. What would Internet taxes be used for? Whatever the state wants to use them for. Would the money go to improving the Internet or subsidizing access for the poor? I doubt it. As a matter of fact, this would only increase the so-called digital divide. If taxes are levied against the Internet, access and use will become more expensive and put it out of the reach of poorer Americans, who might otherwise benefit from the educational and economic opportunities that the Internet provides.

The second method of taxation would be sales taxes. How would an Internet sales tax work? Based on the locality you are buying from? Or based on where the business you?re buying from is located? And again, where would the money collected go?
The solution?

One possible solution to the Internet tax problem, would be a nominal fee on all email that is sent. Let’s say ten cents on every 100 emails sent. For me this would be about fifty cents a month max. This would help cut down on spammers and the money could be used to help low-income families get Internet access.

However, as it stands now, some senators see the Internet as a potential cash cow and something they are loosing revenue on. Loosing revenue? It’s not their money to start with!

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The views expressed here are solely those of the author and do not reflect the beliefs of Digital Trends.


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