The Cost of an Internet Access Tax

A ban on Internet access taxes has sailed through the House and is awaiting Senate action before the end of session. The Permanent Internet Tax Freedom Act is a permanent extension of the Internet Tax Freedom Act (ITFA), which was passed in 1998 to prevent local and state governments from taxing consumers for Internet access or levying Internet-specific taxes. By our estimates, letting the Internet Tax Freedom Act sunset could cost consumers $14.7 billion a year in taxes if Internet access were subject to the countless taxes of wireless service. With businesses and families already feeling the brunt of the high taxes and a slow recovery, a new tax could hurt this dynamic part of the economy. With a sunset of ITFA coming in mid-December, some have tried to rope this must-pass bill with the more contentious issue of Internet sales tax. However, taxation of Internet access should be judged on its own merits, separate from the broader issue of taxation on goods sold over the Internet.