Internet Tax for $3.4 Billion?

The federal moratorium on Internet access taxes expires in less than a week, and thanks to foot-draggers in Congress, no tax-ban extension bill is heading to the President’s desk as of yet.

This is bad news for the consumers who’ve benefited from a largely tax-free “on-ramp” to the information superhighway for almost ten years.

Without such a smoothly paved thoroughfare in place, state and local governments would have long since run Internet users off the road by digging numerous tax-swallowing potholes.

The creep of high cell phone taxes over the past decade shows that new technology is often a favorite target for tax-and-spenders. It would be wishful thinking to hope that Internet users would remain untouched by predatory new taxes if the moratorium expired.

Just how hard would the expiration hit consumers? That’s the subject of a recent Issue Brief released by the National Taxpayers Union (NTU).

According to the report, “Logging on to Americans’ Wallets: The Potential Costs of New Internet Access Taxes,” a failure to extend the moratorium could equate to a new annual tax bill of $3.41 billion. Broken down, that’s $58.69 per subscriber per year in unwanted new Internet fees.

Granted, predicting the precise tax rate that states and localities will slap on Internet service is a tricky business. However, NTU was able to develop a reasonable cost estimate based on the number of Internet subscribers in the United States, the average tax rate levied on other communication services, and the average Internet bill.

It’s common sense that any nation seeking to remain technologically and economically competitive shouldn’t punish citizens reaching out into the digital realm with higher taxes. Making the moratorium permanent is such a no-brainer that 242 Representatives — over half the House — cosponsored a bill doing just that.

So where’s the legislative traffic jam? Look no further than the House of Representatives, where Democratic leaders cranked up an underpowered extension of the moratorium that lumbered to passage on October 16. Their clunker of a bill only preserves the moratorium until 2011 and does nothing to help residents of states with grandfathered taxes.

It’s now up to the Senate to do better, and taxpayers are hoping they’ll move on the Permanent Internet Tax Freedom Act (S. 156), which would keep all taxpayers safe from the threat of Internet access taxes once and for all.

Tell your Senators to kick it into high gear and keep the tax man from driving our information-age economy into a ditch. You could be saving yourself from a new $60 Internet tax bill.