If the Internet becomes a public utility, you’ll pay more. Here’s why. New Taxes......
If the Internet becomes a public utility, you’ll pay
more. Here’s why.
By Grover G. Norquist and Patrick Gleason January 6, 2015
The Federal Communications Commission is in the middle of
a high-stakes decision that could raise taxes for close to 90 percent of
Americans. The commission is considering whether to reclassify broadband as a
telecommunications service and, in doing so, Washington would trigger new taxes
and fees at the state and local level.
The agency would like to make Internet service a public
utility, placing broadband under Title II regulation of the Communications Act
of 1934. This move would make broadband subject to New Deal-era regulation, and
have significant consequences for U.S. taxpayers.
Under this decision to reclassify broadband, Americans
would face a host of new state and local taxes and fees that apply to public
utilities. These new levies, according to the Progressive Policy Institute
(PPI), would total $15 billion annually. On average, consumers would pay an
additional $67 for landline broadband, and $72 for mobile broadband each year,
according to PPI’s calculations, with charges varying from state to state.
Proponents of broadband reclassification, including the
left-of-center organization Free Press, claim that it would not result in
higher taxes or fees. The recently extended Internet Tax Freedom Act, they
assert, prohibits state and local taxation of Internet service. This is
incorrect, however. The act does not apply to telecom-related fees.
Free Press and other broadband reclassification
proponents also say the new taxes and fees can be prevented if the FCC
designates broadband as an interstate service. A Progressive Policy Institute
report explains why this also is incorrect:
“When the Commission previously considered the
jurisdiction of Internet traffic, it determined that such traffic was ‘largely
interstate,’ but ‘jurisdictionally mixed.’ States routinely tax
jurisdictionally mixed services that are classified as ‘interstate’ for
purposes of regulation. For example, wireless services may not be regulated by
state public utility commissions, but they are subject to a host of state and
local taxes and fees. In several states, interstate wireless revenues are
subject to taxation.”
Late last year, President Barack Obama waded into this
contentious debate. He called for the Internet to be treated like a public
utility. Critics of Obama’s position point out this would reduce investment in
infrastructure and lead to inferior service for consumers. Reclassifying
broadband as a telecommunications service would also stifle innovation and
restrict the openness of the Internet.
The telecommunications industry has invested more than
$1.2 trillion on broadband infrastructure since 1996. As a result, roughly 87
percent of Americans have access to broadband. It would be foolish for
government to discourage the significant investment required to maintain,
expand and improve this infrastructure by subjecting broadband to circa 1930s
regulation. Subjecting Internet service providers to such onerous rules would
depress innovation and penalize Web users.
Not only would higher taxes and fees leave individuals,
families, and employers with less disposable income, a wealth of research
indicates it would be bad for the economy.
John Hood, former president of the John Locke Foundation,
found that keeping state and local tax and regulatory burdens as low as
possible fosters economic growth, when he analyzed 681 peer-reviewed academic
journal articles going back to 1990.
“Most studies find,” Hood stated, “that lower levels of
taxes and spending, less-intrusive regulation…correlate with stronger economic
performance.”
Tax Foundation economist William McBride reviewed
academic literature going back three decades and found, “While there are a
variety of methods and data sources, the results consistently point to significant
negative effects of taxes on economic growth even after controlling for various
other factors such as government spending, business cycle conditions and
monetary policy.”
In McBride’s survey of 26 studies, dating to 1983, he
found “all but three of those studies, and every study in the last 15 years,
find a negative effect of taxes on growth.”
The Federal Communications Commission is expected to make
its decision early this year. After the more than 20 tax increases signed into
law during Obama’s six years in office, the last thing American taxpayers need
is a gusher of new taxes and fees triggered by bureaucrats in Washington.
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