The Internet Tax Freedom Act

H.R. 3086 and S. 1431 are two versions of the same bill: the Internet Tax Freedom Act. The Act was shepherded through the House Judiciary Committee by Goodlatte with a 30-4 vote, and the Congressional Internet Caucus is pushing hard to get it through the House and Senate before the August recess. 16 years ago, in 1998 when the internet was in its infancy, a moratorium on taxes was declared. 7 states already had some taxes in place, and those taxes were grandfathered in, but no new taxes were allowed. The moratorium has been extended three times, but will expire this November if it’s not extended again. The ITFA would permanently prevent all internet taxes and end the taxes in those seven states as well. Note that the ITFA is not about taxes on items sold via the internet. It refers to taxes on internet access. This means that state and local jurisdictions wouldn’t have the freedom to place sales tax on bandwidth use or on email, on internet access or on the number of gigs used.

The act also prevents multiple taxes on things sold via the internet. Ecommerce sales can be taxed just as brick and mortar sales are, but there can’t be an extra sales tax added for the use of the internet to make the sale or to collect the funds. Economists at the Phoenix Center say that states would, if they were allowed to do so, tax broadband access, and that doing so would cut back on broadband use. The danger here is not only that the U.S. might lose ground technologically compared with other nations, but also that the “digital divide” could become even more serious within the U.S. The “digital divide” refers to the fact that Americans of different socioeconomic backgrounds begin their school and work life with different degrees of access to the internet.

Children from more affluent households grow up as digital natives, swiping across screens as toddlers to see pictures of themselves, watching cartoons on tablets as preschoolers, and sharing YouTube videos from kindergarten with their parents at home. Kids who don’t have computers at home often also don’t have them in their classrooms at school. That hour in a “computer lab” practicing keyboarding skills doesn’t give them the casual skill the kids on the other side of the digital divide so easily gain in the course of their normal days. Taxing internet access could deepen the digital divide, creating a chasm for those kids when it comes to the work world.

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