The WasteWatcher: The Staff Blog of Citizens Against Government Waste

The Clock is ticking on Internet Taxation

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Less than six months from now, citizens across the country could face new taxes.  That is when the moratorium banning taxes on Internet access and discriminatory duplicate taxes on Internet services expires.  While legislation to make the moratorium permanent has been introduced with bi-partisan support, the clock is ticking leading up to the November 1, 2014 expiration.

Since 1992, when the general public was given access to the Internet, the use of the Internet has grown exponentially through computers, tablets, Smartphones and other devices.  In 1998, the Internet Tax Freedom Act was enacted, and has been extended three times, and now the Internet has become embedded in the daily life of most Americans.  Free from the worry of paying additional taxes just to access the Internet, consumers increasingly go online using different devices to perform a variety of everyday tasks including shopping, job searches, and schoolwork.  However, should the Internet tax moratorium expire, this could change.

A May 7, 2014 article in the Wall Street Journal estimated that an average household could pay an additional $50 to $70 per year if their state or local government decided to apply either their sales or telecommunications taxes to Internet access.  In addition, telecommunication companies are already seeking guidance from states on whether they will be expected to start collecting taxes on Internet access or services prior to potential implementation on November 2, 2014, should the moratorium be allowed to expire.  The article further suggested that the delay in passage could stem from the desire by some in Congress to attach a "separate, more controversial bill" to the legislation.  However, as the clock ticks down to the expiration of the Internet tax moratorium, these desires must be weighed against the financial impact further delays will cause.

The final impact of additional taxes for Internet access is not known, but as noted in CAGW’s recent report, Telecom Unplugged:  Ushering in a New Digital Era, among the many problems with taxing the Internet is that when something becomes more costly, people will engage in less of it.  As the economy will undoubtedly continue to be more digitally-focused, America has a lot to gain from keeping online activities unshackled from the burdens that come from excessive taxation on the Internet.

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