[Below is the Introduction to this latest FSF
Perspectives. A PDF version of the complete
Perspectives, with endnotes, is here.
As the government shutdown continues into another week, many are growing anxious for Congress to reach an agreement. Although there are some issues that have the political parties starkly at odds, there is at least one important idea on which both parties - and the public - should agree: Internet access should remain free from taxes.
Thankfully, a bipartisan bill to impose a permanent ban on Internet access taxes has been proposed. House Judiciary Committee Chairman Bob Goodlatte and Representative Anna Eshoo have introduced the Permanent Internet Tax Freedom Act in the House of Representatives, following the introduction of its counterpart in the Senate by Senators Ron Wyden and John Thune. In this sharply divided Congress, especially with regard to fiscal policies, government officials and others across party lines should at least agree that making the ban on Internet access taxes permanent is good for everyone. This is especially so given the vast economic investment, the thriving technological innovation, and the widespread broadband adoption occurring under the current tax-free regime.
Internet access has remained essentially free from tax burdens due to the Internet Tax Freedom Act of 1998. Since its enactment, the Act has contributed to nearly 15 years of economic growth. Today, the telecommunications industry leads investment in the U.S. economy. According to a recent study by the Progressive Policy Institute, AT&T, Verizon Communications, Comcast, Sprint Nextel, and Time Warner, all ranked in the top twenty of non-financial companies making capital investments in the U.S over the past year. The investments of these companies, among others, have allowed 99.5% of Americans to have access to broadband - via landline, wireless, or both - as of the end of 2012.
Technological innovation and the unprecedented development of the Internet since passage of the 1998 Act also demonstrate the success of the current "no access tax" regime. In 2011,a McKinsey study ranked the United States as the most prominent country in the "global Internet supply ecosystem," attaining more than 30% of global Internet revenues and more than 40% of net income. Today, some reports estimate that the "Internet of Everything" could raise the level of the U.S. GDP by 2%-5% by 2025. A recent Cisco report went so far as projecting that over the next ten years there will be $14.4 trillion in "value at stake" in economic benefits for companies and countries that can successfully initiate and execute the "IoE."
Finally, tax-free Internet access has fueled broadband adoption and deployment. Today, the U.S. ranks 8th in the world in high broadband adoption. However, the Government Accountability Office found that in 90 out of 100 cases, a tax on Internet access would affect broadband adoption. Of course, one of the most important factors for companies considering whether to deploy broadband to an area is the expected demand for broadband service. Because adoption rates drive demand, and Internet access taxes affect the ability of citizens to afford Internet access, such taxes could also discourage some companies from deploying broadband.
By enacting the Internet Tax Freedom Act of 1998, Congress recognized the importance of facilitating Internet access, and made it more affordable for consumers to go online. This wise choice has encouraged broadband adoption, deployment, investment, and innovation. Failure to ban the imposition of taxes on Internet access will deter investment, slow innovation, and impose unnecessary costs on consumers.
The Permanent Internet Tax Freedom Act offers an opportunity for Congress to act in a bipartisan way on an important matter for the benefit of all Americans. The enactment of a permanent ban on Internet access taxes provides one way to help ensure continued affordable access to this important resource, as well as to promote leadership in the global economy and the economic success of the digital marketplace.
* Sarah K. Leggin is a Legal Fellow of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland.
A PDF of the complete Perspectives,with endnotes, may be accessed here.