Congress debating tax on high-speed Web use

September 27, 2007|By Jim Puzzanghera | Jim Puzzanghera,LOS ANGELES TIMES

WASHINGTON -- A monthly phone bill of $50 includes as much as $10 in taxes. And some in Congress warn that consumers soon could be hit with similar assessments for high-speed Internet access.

For nearly a decade, the lines carrying the Internet into homes and businesses have been a virtual tax-free zone. But that could change Nov. 1, when a federal ban on Internet access taxes expires.

Almost everybody agrees the politically popular moratorium should be extended to encourage continued investment in the high-speed lines crucial to delivering phone calls and video. But changing Internet usage has complicated the issue.

"If Americans want to know what their Internet access bill will look like if this moratorium expires, all they need to do is look at their phone bill," said Republican Sen. John McCain of Arizona, who wants to extend the moratorium.

But as phone and TV services increasingly are delivered over the Internet, state and local governments worry that more of their tax revenues will disappear because of the federal moratorium.

Instead, the U.S. Conference of Mayors, the National Governors Association and other local government groups want to narrow the definition of Internet access put in place in 1998, which could be interpreted to cover anything delivered online, and to make the extension temporary in case technology again overtakes the law.

The groups also want Congress to continue to allow nine states - Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas, Washington and Wisconsin - to collect Internet access taxes in place before 1998.

There is strong bipartisan support in Congress for a permanent extension of the access tax ban. But Sens. Thomas R. Carper, a Delaware Democrat, and Republican Lamar Alexander of Tennessee are pushing a compromise that a Senate committee will consider today.

The bill calls for a four-year extension, continuing the grandfather provision for the nine states, and a limited definition of Internet access. The legislation tries to ensure that Internet access remains tax-free while removing the potential loophole for companies that bundle online phone and TV service with Internet access, Carper said.

Jim Puzzanghera writes for the Los Angeles Times.

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