By Larry Jones
April 25, 2005

Proposals were introduced in both houses of Congress April 19 that would permanently ban state and local taxes on Internet access fees, multiple and discriminatory taxes. A similar proposal died last year after running into strong opposition. Although the House adopted the measure, it was never considered by the Senate, due in large part to strong opposition from the Conference of Mayors and other state and local groups. So, instead of adopting a permanent ban, Congress approved a three-year extension last year (through November 1, 2007) of a temporary moratorium that has been in effect since 1998.

The Conference opposed the measure last year because it would have expanded the definition of Internet access and prevented state and local governments from collecting taxes on telecommunications services. Further, with enormous changes occurring in the telecommunications industry, it would be unwise to agree on a permanent fix at this time. Adoption of the measure would have amounted to a huge revenue loss for state and local governments. The Conference will again work with other state and local groups to oppose a permanent ban for the same reasons as stated for last year.

The same lawmakers who introduced the permanent moratorium last year reintroduced proposals this year. Senators George Allen (VA) and Ron Wyden (OR) introduced the proposal (S. 849) in the Senate, and Representatives Christopher Cox (CA) and Chris Cannon introduced the proposals (H.R. 1684 and H.R. 1685) in the House. While the Senate bill contains a grandfather clause that protects state and local governments with existing taxes on Internet access fees and digital subscriber lines (DSL), one of the House proposals contains the protection and the other does not. The House leadership has not decided which bill to move.

Although the time frame for moving a bill in the House and Senate is uncertain, Cox and Cannon are confident a permanent moratorium could move fairly quickly through the House without any problems. On the other hand, Allen and Wyden have acknowledged that passage in the Senate could be difficult. However, they pledged to work to move the bill as quickly as possible and to look for opportunities to attach it to the telecommunications rewrite and other legislative proposals.