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  • Conservatives Worry Congress Will Trade One Internet Tax For Another

    Although there is little chance of comprehensive tax reform any time soon, some believe Congress could take smaller steps, such as preventing new Internet taxes.

    “Keeping tax off the Internet is a clear example of a strategy that is open to bipartisan support,” Steve Forbes argues in an op-ed for Fox News. “It is backed by many Republicans, but was originally endorsed by President Clinton during his second term.”

    There are two major efforts currently underway in Congress related to Internet taxation: one would permanently extend a temporary ban on state and local Internet access taxes known as the Internet Tax Freedom Act (ITFA), and another enabling states to collect sales taxes on Internet purchases residents make from out-of-state sellers, known as the Marketplace Fairness Act (MFA).

    Forbes claims that while permanently extending the ITFA would benefit both consumers and the economy, Congress “could put the brakes on one of the fastest growing segments of our economy” if it passes the MFA. (RELATED: Chaffetz Greases Wheels for Online Sales Tax)

    “Barring states from imposing taxes on broadband access would directly benefit users,” he argues, “especially those in lower-income brackets for whom the Internet is a crucial avenue to education, opportunity, and upward mobility.”

    The MFA, on the other hand, he describes as “an ill-conceived proposal” that not only sets “a dangerous precedent in the expansion of taxing authority,” but would also “bury smaller Internet sellers under a mountain of red tape and compliance costs, while increasing the price of online purchases.”

    Separating the two issues, however, will not be quite that simple, according to an op-ed in the Deseret News by Hon. Christopher Coursen, former counsel for the Senate Commerce Committee and an advisor in the Ronald Reagan and George H.W. Bush administrations.

    Both bills were revived this year from previous sessions, where they had languished due to the insistence of some legislators on combining them into a single package, and Coursen says the same tactic is again being discussed in the current Congress by MFA supporters looking to piggyback on the popularity of a permanent ITFA extension. (RELATED: Internet Tax Ban Passes House, But Could Stall in Senate)

    Whereas there is overwhelming, bipartisan support in both houses of Congress for making ITFA permanent, the MFA is far more controversial, drawing support primarily from legislators that represent states with no income tax, and therefore a greater reliance on sales tax revenues.

    “For all the beneficiaries of the Internet tax ban, this spells trouble and must be stopped,” Coursen asserts, though he also concedes that, “the MFA certainly has merits.” (RELATED: Supply Side Founding Father Boosts E-Commerce Sales Taxes)

    “Regardless of what legislators or constituents think of … online sales tax legislation,” he says, “There is simply too much at stake for consumers, already dealing with extensive add-on fees, to conflate the issues and risk the expiration of ITFA.”

    Follow Peter Fricke on Twitter

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