(Alexandria, VA) -- With a looming vote on the Internet Tax Moratorium in the future, Congress must act to protect taxpayers and enact free-market telecom reform, according to Jeff Dircksen, Director of Congressional Analysis for the 362,000-member National Taxpayers Union (NTU), who testified today before the Senate Committee on Commerce, Science, and Transportation.
Dircksen offered four main policy points to Chairman Daniel Inouye (D-HI) and other members of the Senate Commerce Committee:
- Taxpayers already face sizeable taxes, fees, and other charges for telecommunications services: Research shows that users of telecommunications services already face a state and local tax burden of 13.74 percent. This rate has risen to 14.17 percent, however. Now, the average monthly bill for telecommunications services is $188.17, with average taxes and fees of approximately $20.77.
- Additional taxes on telecommunications services would be counterproductive: The United States is already sorely behind the rest of the developed world in broadband access, ranking 15th, far behind countries like Iceland and Korea. In addition, a 1 percent hike in the price of wireless service leads to a 1.29 percent drop in demand. Congress should encourage demand by reducing taxes and fees.
- Current Supreme Court precedent has protected taxpayers: Any attempt to make taxes fairer across state lines will eventually lead to a "race to the top" for tax rates. Congress should abide by the Supreme Court's 1992 Quill decision which held it unconstitutional to impose taxes on out-of-state purchases.
- Congress should follow pro-market pro-taxpayer reforms: Dircksen recommended the following Congressional action: a permanent ban on Internet access taxes, a ban on levying new discriminatory taxes on wireless services, repeal the remainder of the phone excise tax, adopt business activity tax simplification legislation, and reexamine unproductive and wasteful subsidies.
"Given the potentially destructive impact that expanding or raising Internet and telecommunication taxes could have on this important economic sector, the remedy could not be clearer," Dircksen concluded. "Congress and the states should declare this tax territory permanently off limits."
Note: For further details on Internet taxation, visit www.ntu.com.