Allen Bill Would Exempt Internet from Federal Excise Tax
Sen. Allen (R-Va.) introduced legislation Mon. that would ban application of the federal excise tax (FET) to Internet access. He led Senate efforts last year to pass the temporary Internet tax moratorium, and reemphasized Mon. his commitment to keeping taxes off the Internet. Allen said he would push this session to make the Internet tax moratorium permanent. “It’s important to stake a flag in the ground,” said Allen: “This hill [the Internet] is going to stay tax free.”
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The FET doesn’t apply to Internet access now, but the Congressional Joint Committee on Taxation asked in Jan. if the levy should be applied to Internet communications. Allen said passing his legislation would make it harder for the Senate to apply the tax on the Internet because it would have to repeal his measure and then enact the tax. The measure has no fiscal impact, he said. Allen said he was favored full repeal of the FET, established in 1898 to fund the Spanish-American War.
Sen. Wyden (D-Ore.) signed on to the bill, called the “Federal Internet Tax Prohibition Act.” It’s expected to be referred to the Senate Finance Committee. Wyden said he also would support any effort to prevent FET from applying to VoIP. Allen said he wasn’t planning on introducing VoIP legislation, since a bill on the issue is expected from Sen. Sununu (R-N.H.). He added he would likely co-sponsor Sununu’s measure.
Allen has a busy week scheduled on IT-related issues. On Thurs., the Senate Commerce Committee will mark-up Allen’s Minority Serving Institution Digital & Wireless Technology Opportunity Act (S-432), which would provide $250 million for historically black, Hispanic and other minority-focused universities and colleges. Also Thurs., Allen is scheduled to introduce antispyware legislation.
The Computing Technology Industry Assn. (CompTIA) sponsored the briefing where Allen said he would introduce the legislation. CompTIA said the bill would help IT and broadband continue to grow in the U.S. and would especially help small businesses, where IT taxes can be disproportionally heavy. Tony Lachick, a panelist at the event and pres. of CTintegrators of Clifton, Va., said communication costs average about $80 a month for each of his 5 employees, whereas communication costs for large Fortune 1,000 companies usually average about $20 a month for each employee. The VON Coalition also said it supports the bill.
The event featured speakers from opposing sides of the political spectrum supporting the bill. Grover Norquist, Americans for Tax Reform Pres., said if enacted, the bill would make it easier to make the Internet tax moratorium permanent. Robert Atkinson, Progressive Policy Institute vp, said he almost always disagrees with Norquist on tax issues, but said this situation is different because the bill would advance rollout of broadband service.
Initially a luxury tax, Allen said, FET is now a regressive levy that disproportionally affected the poor. Norquist also favored repealing the FET and also said legislation should be passed prohibiting the states from assessing higher taxes on telecom services than other activities. For instance, Norquist said, a state could apply its sales tax to telecom service, but not tax it at a higher rate. He said the idea is based on law that prohibits states from assessing higher property taxes on railroads and pipelines than other assets. Atkinson said he had supported repealing FET when there were budget surpluses, but can’t support repealing it while the govt. runs a deficit.