Last month, the House of Representatives gave consumers a little love when lawmakers voted to make a long-standing ban on Internet access taxes permanent.
The moratorium, otherwise known as the Internet Tax Freedom Act, prohibits states or their political subdivisions from imposing taxes on Internet access or from applying multiple or discriminatory taxes on electronic commerce. But unless Majority Leader Harry Reid, D-Nev., and the U.S. Senate take up a measure to extend the ITFA protections, this important act will expire Nov. 1.
State and local governments who view the expiration of ITFA as a way to raise revenue through new taxes to replenish their overspent coffers are clamoring over this legislation. They are bolstered by arguments from the likes of some who argue that Congress has no business trying to boost the consumption of Internet access at the expense of state and local revenues. The Internet, according to them, is no longer the nascent industry that needs exemption from taxation in order to grow and flourish.
While these arguments may tug at the heartstrings — or reverberate the fiscal purse strings — they fail to take into account the adverse impact Internet access taxes would have on broadband adopters. These are the very folks Congress, states and cities worked to bring online so they could benefit from and contribute to the welfare-enhancing services and opportunities available on the Internet.
As early as the Telecommunications Act of 1996 — a now-antiquated piece of legislation that must be updated — Congress instructed the Federal Communications Commission and state regulators to encourage broadband deployment to all Americans.
Following President Barack Obama’s American Recovery and Reinvestment Act in 2010 came the adoption of the National Broadband Plan, which redirected Universal Service funding to support broadband Internet deployment, in addition to the nearly $4 billion already being spent on adoption efforts.
These subsidies, programs and good old-fashioned private competition have worked to bring more Americans online. The Pew Research Center estimates Internet adoption in the United States has increased from only 14 percent in 1995 to a whopping 87 percent in 2014.
With the success of these investments from the federal, state and local levels, why should we take a step back in expanding access by creating a new barrier for Americans to overcome? The Phoenix Center estimates that even a mere 5 percent tax on Internet access would undo the past four years of adoption gains. At 10 percent, adoption rates could fall back to 2008 levels. Given that wireless tax rates typically hover between 12 percent and 17 percent, depending on the state, we could be looking at a much more significant drop in adoption rates than what would occur if the ITFA expires.
Furthermore, given the over-indexing of people of color who use mobile broadband to access services online, I would argue that imposing a tax on Internet access across all devices is not sound economic policy.
According to the Pew Research Center’s Internet Project, 92 percent of African-American adults have a cellphone and 56 percent of African-American adults have a smartphone. Mobile broadband access is the primary mode of accessing the Internet and electronic commerce for this group, as evidenced by lower adoption rates among African-Americans for broadband service at home.
Meanwhile, Pew reports that while 87 percent of white Americans make use of the Internet, 80 percent of African-Americans are traveling that same information superhighway. The gap in broadband access is wider, where 74 percent of whites have adopted broadband at home while the percentage of African-Americans who have Internet connectivity at home is 62 percent. Internet access taxes would only exacerbate this Internet adoption gap.
Fortunately, there is broad consensus in Congress that there must be a permanent extension of ITFA’s moratorium on new taxes. A permanent moratorium on taxing Internet access would help more Americans get online and bolster our economy.
The House of Representatives has already acted. It is time for Sen. Reid to heed consumers’ calls and make ITFA a priority in the September session. With just a few legislative working days remaining this year, the Senate must act on ITFA before it is too late.
Alton Drew is an Atlanta-based policy analyst and attorney.