...only by making the moratorium permanent will Congress remove the market uncertainty that stands as an obstacle to closing the digital divide in this country. U.S. House Temporarily Extends Internet Tax Moratorium, Misses Opportunity to Make it Permanent

The U.S. House of Representatives this week overwhelmingly passed a four-year extension to the moratorium that prevents states and localities from taxing Internet access.  The current moratorium is set to expire on November 1.  That's the deadline by which the Senate must act and the President must sign a bill into law before revenue-hungry state and local politicians pounce. 

At first blush, the House's action appears to be good news for consumers.  Should the Senate follow suit, most Internet users can look forward to four more years of no new taxes on their monthly Internet access bills, as well as on the goods and services they purchase over the World Wide Web.  

As House Speaker Nancy Pelosi stated, "By voting to continue the tax moratorium, the House will help to promote innovation, affordable Internet access, and broadband services for American consumers and businesses.  Americans must not face a toll road when they get on the information superhighway." 

Well said.  But what she and others in the House leadership failed to mention as they publicly patted themselves on the back was the fact that they employed a procedural trick to circumvent the wishes of a bipartisan majority of their colleagues who favor making the moratorium permanent.  

Pelosi and company scheduled the vote on H.R. 3678, the legislation passed by the House, under suspension of the rules.  The procedural move, usually reserved for non-controversial legislation, doesn't allow for consideration of any amendments.  Therefore, it ensured that a permanent tax ban couldn't be considered.  Never mind the wishes of the 238 House members who are co-sponsoring competing legislation to make the moratorium permanent.    

"Democrats had an opportunity ... to put themselves firmly on record in opposition to taxing the Internet and impeding the rapid growth of our still-developing digital economy," said House Minority Whip Roy Blunt (R-MO), frustrated that the leadership blocked a vote on a permanent Internet tax ban.  "The message they sent instead is that, while taxing the Internet may be something they want to do in the future, it's not something they have the political capital to do in the present." 

The issue now moves to the Senate. A group of Senators, led by Minority Leader Mitch McConnell (R-KY), John Sununu (R-NH), Ted Stevens (R-AK) and John Ensign (R-NV) have been pushing hard for a permanent extension of the moratorium, but it's widely expected that Senate Majority Leader Harry Reid (D-NV) will follow the lead of his House counterparts and force a quick vote on the four-year extension of the tax ban. 

That's a shame.  

Don't get us wrong.  Another temporary extension of the moratorium is certainly better than allowing it to expire outright.  But only by making the moratorium permanent will Congress remove the market uncertainty that stands as an obstacle to closing the digital divide in this country.

According to a study by the Government Accountability Office, a mere 11 percent of households with incomes below $30,000 have broadband service.  It doesn't take a degree from the Wharton School of Business to know that additional costs for such service in the form of taxes, whether now or in the future, not only makes high-speed Internet access that much less affordable to lower income families, but also discourages private investment in extending costly broadband infrastructure to rural and poor parts of the country.

More fundamental, as former Senator George Allen (R-VA) recently wrote in the Washington Times, "The guiding principle of the Internet tax moratorium has always been that the Internet should remain as accessible as possible to all Americans in all parts of the country forever." 

As the Internet continues to grow as a critical tool for information, education, medicine, commerce and everything else in our daily lives, that guiding principle will ring just as true four years from now as it does today and did in 1998 when Congress passed the first Internet tax moratorium.

October 19, 2007
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