The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Running Down the Clock on Internet Taxes

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.


Nothing like waiting until the last minute to do something important. That is exactly what is happening on the Hill this week. The Internet Tax Freedom Act (ITFA) is set once again to expire at midnight on December 11, 2015.

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, ITFA was enacted and has been extended five times. 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.

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.  A September 30, 2015 report by the American Action Forum found that lifting the ban on Internet access taxes could cost consumers up to $16.4 billion.

The conference report to H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015, includes a provision that adds language from H.R. 235, the Permanent Internet Tax Freedom Act (PITFA), which overwhelmingly passed the House of Representatives on June 9, 2015. H.R. 644 also addresses the needs of the seven states (Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin) who were grandfathered from the ban on Internet taxes, because they had already imposed taxes prior to November 1, 2003. Under H.R. 644, these states would have until 2020 to phase out taxes on Internet access. Congress is expected to consider H.R. 644 this week. It is important that language from PITFA remain in the bill, so that consumers across the country have peace of mind that their Internet access will not be taxed.

As Tom Schatz and I noted in CAGW’s 2014 book, 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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