WASHINGTON, D.C. — A debate over
states’ rights ensued in the U.S. House as it looked to permanently
ban state and local governments from taxing Internet access.
INTERNET TAX BAN: The House of Representatives passed a
permanent ban on state and local governments taxing Internet
access.
The House on Tuesday passed the ban via voice vote, placing pressure on
the Senate to pass its version of the Permanent Internet Tax Freedom Act
before Nov. 1, when the current moratorium on Internet access taxes expires.
The Senate version, called the Internet Tax Freedom Forever Act, is awaiting
consideration from the Senate Finance Committee.
Under the original Internet Tax Freedom Act, passed in 1998, 10 states —
Texas, North Dakota, Washington, South Dakota, Hawaii, New Mexico,
Tennessee, New Hampshire, Wisconsin, and Ohio — were “grandfathered” under
the moratorium and allowed to tax Internet access.
Of those 10 states, only three — Texas, North Dakota, and Washington — were
ranked in the top 10 states for economic performance of the American
Legislative Exchange Council’s 2014 “Rich States, Poor States” report. Those
same three states also ranked in the top 10 of Forbes’ 2013 report, “The
Best States for Business and Careers.”
PITFA’s main sponsor, House Judiciary Committee Chairman Bob Goodlatte, a
Virginia Republican, praised Tuesday’s vote in a tweet, saying the ban was
“important for our growing digital economy.”
Advocates for a permanent ban worry taxation of Internet access would slow
broadband subscriber growth.
IHS, an industry research company, reported in December that, by the end of
the first half of 2013, more than 70 percent of U.S. households were
broadband Internet subscribers. The company expected that number to rise to
more than 74 percent of U.S. households by 2017.
A Federal Communications Commission fact sheet from September 2011 reported
broadband subscriber growth, according to research from McKinsey and
Deloitte, was helping to generate new jobs.
“A 7 (percent) increase in broadband penetration could create an additional
2.4 million new jobs,” said the report.
The strongest opposition to the ban, however, came from Democratic Reps.
John Conyers of Michigan and Sheila Jackson Lee of Texas, who expressed
their concern about federal interference in state and local taxation
authorities.
Economists such as James Gattuso, a senior fellow at the Heritage
Foundation, have argued as recent as June 30, however, that the very
structure of the Internet justifies a ban.
“Some have argued that despite the economic dangers, a federal ban on state
Internet taxation would violate state prerogatives,” wrote Gattuso in a
policy brief.
“The tax ban, however, is fully consistent with the principles of
federalism,” said Gattuso.
Federalism is the relationship the Founding Fathers set up between the
federal and state governments, and how each governs its citizens. The
Constitution empowers Congress to legislate over issues involving interstate
commerce.
“The Internet, by its nature, is an
interstate network. The effects of Internet tax policy in one state
are borne not just by that state’s citizens, but by citizens of
other states,” he said.
Jackson Lee and Conyers advocated for a continuation of a temporary
ban.
Jackson Lee’s district includes the inner city of Houston; Conyers
represents a portion of the Detroit area. Both cities are among the
many across the country who have gravely fallen short of meeting
public pension obligations.
Unions whose pensions depend on
cash-strapped city and state governments to collect taxes oppose the
permanent Internet tax access ban. Jackson Lee and Conyers‘
political campaigns have benefited greatly from union member
contributions, according to OpenSecrets.org.
Detroit residents finished voting July 11 on whether to accept
pension cuts as part of a plan to reduce the city’s estimated $18
billion debt. The city, a decayed shell of what was once known as
the “Paris of the Midwest,” declared bankruptcy July 18, 2013,
because it was unable to pay its bills, which included its public
pension obligations.
Proposed cuts, The New York Times reported in May, were not popular
among the city’s retired employees.
Houston is considering suing the firm that advised the city to make
changes to its firefighters’ pensions in 2011, according to the
Houston Chronicle. The city says the advice made the firefighers’
pensions unaffordable.
Concerns over Goodlatte’s permanent ban on Internet access taxes did
not fall solely along partisan lines.
Texas Republican Rep. Joe Barton, whose district includes Arlington,
also raised concerns that the bill would negatively affect the
cities he represents.
IHS recently reported the Dallas-Forth Worth metro area, including
Arlington, was one of the fastest growing metros in the U.S.,
according to the Star-Telegram.
Goodlatte told Barton they would work together to sort out the
issue. People associated with major energy and telecommunications
companies — headquartered in Barton’s district — have financed his
campaigns.
Contact Josh Peterson at jpeterson@watchdog.org. Follow Josh on
Twitter at @jdpeterson
Josh Peterson
Josh Peterson is a DC-based tech reporter for the Franklin Center's
Watchdog.org news site. Peterson previously spent two years at The
Daily Caller covering tech and telecom regulatory policy as the
publication's Tech Editor. During that time, he focused on
cybersecurity, privacy, civil liberties, and intellectual property
issues, and in addition to covering political protest movements.
Prior to joining The Daily Caller in October 2011, Peterson spent
time in DC researching and reporting on technology issues in
internship roles with Hillsdale College's Kirby Center, Broadband
Breakfast and The National Journalism Center, and The Heritage
Foundation. Peterson has a B.A. in Religion and Philosophy from
Hillsdale College. He is also a musician and music enthusiast, and
an avid martial artist.
