The Permanent Internet Tax Freedom Act (HR 3086), which would permanently ban state and local taxes on Internet access, passed the House of Representatives on Tuesday. It is now the Senate’s turn to pass the Internet Tax Freedom Forever Act, and it should do so well before the current tax moratorium expires on November 1st.
Senator John Thune (R-SD), a lead sponsor of the legislation, applauded the House for its passage of the Act, adding that “it’s time for Leader Reid to take up this bipartisan bill to ensure we continue to keep the Internet accessible to consumers across the country and encourage innovation and investment in our global economy.” If the legislation does not pass and the moratorium expires, taxes levied on Internet Service Providers would raise the price of broadband for consumers.
Taxes imposed on any good or service raise the price, resulting in a decrease in the quantity demanded from consumers. Whether taxes are shifted on consumers or businesses, the elasticity of demand and supply allows for both sides of the market to inherit the burden, ultimately leading to less economic activity and growth.
While all taxes are regressive in one way or another because the marginal value of a dollar is much higher the fewer dollars someone has, taxes on Internet access would be especially regressive because it is often the poorest people that do not adopt Internet in the first place. A tax on Internet access could push the price of broadband beyond many of the poorest consumers’ willingness to pay. Even if a person had not adopted prior to the tax being levied, the increase in price would make them less likely to adopt. Allowing for a barrier to connecting the poorest citizens to the Internet seems counterproductive to ending the “digital divide.”
It is very important that the Senate quickly pass the Internet Tax Freedom Forever Act, so the economy can continue to see innovation and growth within the Internet.