Taxing the Internet and Other Games

Last week, the president signed into law a 7 year extension of the moratorium on state and local government internet access taxes.  H. R. 3678, the “Internet Tax Freedom Act Amendment Acts of 2007,” prohibits multiple and discriminatory taxes on electronic commerce including internet access until November 1, 2014. 

Ronald Reagan said, “Governments view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”  He said that to the White House Conference on Small Business in 1986. More that 20 years later, it’s still true.

Use of the internet as well as commerce on it should not be taxed.  There: I said it.  This is a mode of communication and commerce that has equality at its base. A company, large or small, can look and compete in a free market and as long as the product is in demand and the access to the internet is unfettered, they can compete equally.

"The president’s signing of the Internet Tax Freedom Act today represents a historic victory for small businesses, consumers, and all American taxpayers," Roger Cochetti, group director of U.S. Public Policy for the Computing and Technology Industry Association, said. He went on to say, "Congress’ decision to extend the moratorium on Internet access taxes and multiple or discriminatory taxes on internet sales for an unprecedented seven years signals this Congress’ firm belief that the Internet is priceless engine for economic, social and civic advancement in the United States that must not be burdened with discriminatory and abusive tax schemes," Cochetti said.

This is a big step in the right direction because when Congress starts taxing something, it’s never temporary. In 1898, Congress passed a levy of one cent per telephone call to help raise money for the Spanish-American War. By 1990, the tax was up to 3% of your overall telephone bill.

Over the last several congressional sessions — including a bill introduced this year –Congress has made half-hearted attempts to repeal this tax.  (Does anybody remember the last time Congress repealed any tax?  And how are they spending the telephone tax dollars?  They’re probably porking it out in earmarks.)

This federal excise tax on telephone service is only one of many taxes and surcharges that appear on the average phone bill. On average, 20% of the average phone bill is taxes, government fees, and other surcharges imposed or regulated by federal and state governments. I guess “Big Phone Companies” need to be taxed to control their growth — or is it to encourage growth; I’m never sure about that.

Then there’s “Big Oil.”  You know the evil oil and gas companies that are making record profits.  The dirty little secret is federal and state governments are making record tax revenue.  Some lawmakers have called for new “windfall profits” taxes — similar to the one signed into federal law in 1980 by President Jimmy Carter — that would tax the profits of major oil companies at a rate of 50%. Tax collections on the production and import of gasoline by state and federal governments are already near historic highs. The Feds are benefiting far more from “Big Oil” than the oil companies are. Since 1977, the Feds have collected more than twice the amount of domestic profits earned by US oil companies during the same time.

So are we ushering in the era of “Big Internet Taxes?”  For the supposed party of the little guy, the Democrats, all they are doing besides investigating Republicans and “Big Business,” is trying to raise taxes on anything that they can find.  Let’s leave the internet alone.  In 1996, I put the first internet connection in my home.  It was slow and expensive.  Today, I am spending about 1/3 of what I paid in 1996 and the connection is light-speed faster.  That’s what competition does.  If you leave competition in the internet and e-commerce business, then there will be more choices up and down the line and the connections will be faster, better and cheaper.  That is the American Way.

Americans can’t afford to have Democrats in power: we will be taxed to death.  With the temporary tax cuts expiring in the next presidential term and the Democrat leadership proposing the taxation of the internet and everything else that moves there has to be a better way.  And we know what it is: the path that Ronald Reagan took in 1981.

Republicans have not done enough to win back the House of Representatives or the United States Senate.  Republicans were “born to cut taxes and make government smaller” as John Kasich, former Chairman of the Budget Committee in the House of Representatives says. He adds, but “we didn’t do either of them very well.”  Republicans can — must — do a lot better. The alternative is to remain in the political wilderness for the foreseeable future.