Press Releases

Carper Introduces 2-Year Ban on Internet Access Taxes

Legislation Will Protect Consumers and States, Promote Internet Development

Feb 10 2004

WASHINGTON (Feb. 10, 2004) - Standing up for consumers and the interests of cash-starved states, Sens. Tom Carper, D-Del., joined Lamar Alexander, R-Tenn., and others today to introduce new legislation that would extend a moratorium on Internet access taxes. The Internet Tax Ban Extension and Improvement Act would extend for two years a recently expired law barring state and local taxes on Internet access. The legislation ensures a level playing field among competing technologies, expanding the 2001 Internet tax ban so that all modes of Internet access - including dialup, cable modem and broadband connections - remain tax-free. "Our legislation is the solution to finding a sensible way to protect consumers and promote Internet development," said Carper, who was joined at a Wednesday news conference with Alexander, Sen. Dianne Feinstein, D-Calif., and Sen. Kay Bailey Hutchison, R-Texas. "The bill preserves the original intent of the 1998 ban without writing an overly broad, permanent extension into law. The Internet tax moratorium people know and love has worked admirably for five years, providing consumers with tax-free access to the Internet. Our bill would make sure it does the same for the next two years." Carper said competing legislation [S. 150], offered by Sens. George Allen, R-Va., and Ron Wyden, D-Ore., would write a confusing definition of Internet access into law - even as a host of credible organizations have said they don’t understand the definition's ramifications, particularly for cash-starved states. The Congressional Budget Office said S. 150 could result in "substantial revenue losses for states and local governments," but it could not give a revenue estimate because the definition in S. 150 is so murky. Likewise, the National Conference of State Legislatures in January backed off its support of the Allen-Wyden bill because, according to a spokesman, "they don't know what [the bill means]." Carper said S. 150 includes such a broad definition of Internet access that it could exempt from taxation a host of business-to-business transactions, phone service, and music and movie downloads. That would be a huge tax cut for large corporations and the telecommunications industry, but it would leave consumers footing the bill for the new tax increases that would have to passed to make up for the revenue shortfalls. "Our bill is a true tax cut for consumers who use the Internet," said Carper. "It's the Allen-Wyden bill that amounts to the real tax increase. Their bill would force cities and states to raise income and property taxes to make up for revenue losses. We shouldn't be sacrificing firefighters, teachers and healthcare services so big businesses can see another unnecessary and undeserved tax break."