Senators push for Internet tax ban

Three Republican U.S. senators on Thursday called on Congress to pass a permanent Internet tax ban before a moratorium expires Nov. 1.

The current Internet tax moratorium, which Congress has extended twice since 1998, bans taxes on Internet access, as well as other taxes unique to the Internet. It's important for Congress to pass a permanent ban soon before state and local governments begin to tax Internet access, said Senator John McCain, an Arizona Republican.

Those who wonder what impact Internet taxes could have should look to U.S. telephone and mobile phone bills, where taxes are up to 20 percent of the cost, McCain said. "We cannot allow that to happen to the Internet -- likely the most popular invention since the light bulb," McCain said at a press conference.

Several senators, many of them former state governors, have opposed a permanent extension of the tax ban. Earlier this year, Senators Lamar Alexander, a Tennessee Republican, and Tom Carper, a Delaware Democrat, introduced a bill that would narrow the moratorium's definition of Internet access and extend the ban for four years. That bill would close what supporters have called a loophole allowing telecom providers to argue that voice and other services bundled with Internet service shouldn't be taxed.

In addition, nine states that were allowed to maintain their Internet taxes would lose a total of up to $120 million a year under a House of Representatives version of the moratorium extension, The National Governors Association has argued. The House version of the moratorium bill strips these states' exemptions.

If Congress makes the ban permanent, nothing would stop Internet providers from trying to expand the number of untaxed services, David Quam, director of federal relations for The National Governors Association, said in June. "The temporary provision keeps everyone honest," Quam said then.

But Senator John Sununu, a New Hampshire Republican, argued Thursday that a permanent ban is needed. If there's a problem with bundled services, that can be worked out in the bill, he said.

The Internet is "critically important to interstate and global commerce," Sununu said. "It makes no sense to have a national and global communications and business network to be subject to taxes by every state, city, and county in the country."

The news conference came a day after the American Homeowners Grassroots Alliance, an advocacy group, sent letters to Congress calling on lawmakers to extend the tax ban. New Internet taxes would hurt telecommuters and home-based businesses, the group said.

Supporters of a permanent ban say it will help more U.S. residents connect to the Internet, a policy goal of many lawmakers. Asked if they would support another temporary tax ban, the three Republicans rejected that option.

"If it's the right thing to do, we ought to make it permanent," said Senator Trent Lott, a Mississippi Republican.