A bill that would prevent states and the federal government from slapping taxes on the Internet was approved today by two House subcommittee voice votes.
"Just think what would happen if we let the IRS loose on our nation's technology companies and gave it free reign to develop whatever taxes it wanted," said Telecommunications subcommittee chairman Billy Tauzin (R-Louisiana). "I'll tell you what would happen: chaos."
The Internet Tax Freedom Act would amend the Communications Act of 1934 to establish a national policy against state and local interference with e-commerce, while imposing a moratorium on new taxes that would interfere "with the free flow of commerce via the Internet." Sales, business license, and other taxes would still apply.
Sponsored by representatives Christopher Cox (R-California) and Rick White (R-Washington), the bill glided through both the Commerce subcommittee on Telecommunications and the Judiciary subcommittee on Commercial and Administrative Law. The bill now goes to the full committees, then on to the House floor. The bill has 90 co-sponsors in the House. A similar bill sponsored by Senator Ron Wyden (D-Oregon) is moving through the Senate.
The bills passed the subcommittees with several minor changes by Cox. A new provision clarified the moratorium so that property, common carrier, cable television, and ISP taxes can still be levied. A provision that would have restricted authority by the Federal Communications Commission and state commissions to regulate prices paid by Net subscribers was struck.
The bill calls for the Treasury, State, or Commerce departments to conduct a study of domestic and international Net taxation within four years of the law's enactment and submit the report to the president. The president then has six months to make policy recommendations to Congress. The moratorium will remain in effect for four to six years.
While the Cox/Wyden bill enjoys much support among industry, ISPs, and the Clinton administration, local and state governments oppose it. Groups such as the National League of Cities, the US Conference of Mayors, and the National Conference of State Legislatures have urged members to vote against the bill, saying the measure could inadvertently disrupt an important source of future revenue.
