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New taxes won’t be jacking up US broadband subscribers’ bills, if Congress votes as expected in the coming days.
The US House of Representatives is scheduled to vote Friday, and the Senate Monday, to pass customs and trade enforcement legislation that includes a permanent moratorium on a tax for Internet access. If passed, the bill will permanently ban state and local governments from imposing new taxes on Internet access, including broadband service.
The ban would be good news for broadband consumers, who wouldn’t see tax-related price hikes on their bills. The legislation would also phase out taxes over four years in seven states — Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin — where local taxes were imposed on Internet access before a federal moratorium was passed in 1998.
Most broadband customers have never been taxed for Net access. Back in ’98, when the Internet was just gaining steam, Congress passed the Internet Tax Freedom Act, prohibiting state and local governments from adding taxes to Internet bills. The is in contrast to wireless customers, who on average pay an additional 11.5 percent a month for taxes and fees on their wireless service.
The moratorium was put in place to avoid high costs that would turn off subscribers. But the fix was only temporary, and every few years the law has had to be renewed. With the latest temporary Internet Tax Freedom Act set to expire in a few days, broadband providers and consumer advocates have warned that without a law banning these taxes for good, consumers could see their bills increase.
“An 11.5 percent tax applied to a $100 monthly data plan would add another $204 to a subscriber’s bill over a year,” Peter Davidson, a senior vice president for government affairs at Verizon, said in a blog post Wednesday. “All in all, broadband subscribers could be on the hook for as much as $16 billion each year just for their ability to access the Internet.”
Davidson added that local governments may jump on the opportunity to tax Internet access, especially following the adoption of the Federal Communications Commission’s Net neutrality rules earlier this year, which put broadband in the same legal category as traditional telephone service. Verizon and other broadband providers have argued that this classification opens the door to all kinds of new taxes and fees on broadband service, which ultimately raise prices for consumers. The broadband industry is suing the agency over the rules, and a decision in the case is expected in the spring.
“The decision to place broadband access service in the same category as telephone service means that without ITFA [the Internet Tax Freedom Act] in place, the door will be open for state and local governments to try to extend the taxes they already collect on telephone and wireless voice services to broadband access service,” Davidson said.
President Barack Obama is expected to sign the legislation. He’s supported previous renewals of the moratorium.
“This is a big deal,” said Daniel Castro, vice president of the Information Technology & Innovation Foundation. “For the first time, the rule won’t sunset, and we won’t have to rely on Congress to renew it.”
