A federal agency is thinking about imposing a tax on your Internet access. I will now give you the requisite 15 minutes to freak out. (waits) All done? Good. So, the Federal Communications Commission (FCC) is looking for new ways to funnel money to the Connect America Fund, which aims to provide 19 million Americans with broadband Internet. They already carved out a $4.5 billion portion of the Universal Service Fund (USF), which aimed to expand telephone access, for that exact purpose.
But this goes beyond that. With fewer people making interstate phone calls, which is where revenue has been coming from, and instead choosing to use e-mail, the fund has been drying up. So it’s natural that the FCC is looking to the Internet, as we all have. They have proposed a fee on Internet service providers that would be passed on to the consumers, possibly to the tune of only one or two dollars a month, but enough, says consumer advocate Derek Turner, to turn people off from buying broadband services.
I personally don’t buy that. Except maybe for the hardest-core of anti-government types, a fee that size wouldn’t sway them from the economic benefits of having the Internet at home – especially those who are running businesses. I also don’t buy the FCC’s claim that this fee wouldn’t be a tax, merely “a fee that the providers choose to pass on to consumers.” A tax is a charge or levy imposed by a government, and the ISPs count as tax-paying entities. It’s a tax.
And that’s where we run into some thorny legal challenges. The Internet Tax Freedom Act of 1998 prevents governments, except 10 grandfathered states, from applying taxes to Internet access. ISPs who are supportive of the proposed tax – AT&T, Sprint and Google among them – argue that paying the single fee this way is preferable to paying it based on usage of online services. Consumers would certainly notice this more, and therefore would be more likely to avoid using them, depending on their current usage.
I have often cited low national Internet access as an economic risk factor – maybe six percent of the population isn’t much to you, but 19 million is a lot. And I don’t foresee much comparable economic risk if this fee was applied to Internet bills, assuming it was held to a couple of bucks, much less so than one of the FCC’s other ideas: a text message tax. (14-year-old girls across America have just become interested in fiscal policy for the first time.)
But until they figure out a way to get around the 1998 law, it’s a non-starter. And with a House as hostile to any new taxes than this one, it’s a double non-starter. So you may now cease freaking out.
