House Floor Statement of Judiciary Committee Chairman Bob Goodlatte House Consideration of H.R. 3086, the “Permanent Internet Tax Freedom Act” (PITFA)
Chairman Goodlatte: The clock is ticking down on a key law that protects Internet freedom. On November 1, 2014, a temporary moratorium on state taxation of Internet access will expire.
In 1998, Congress temporarily banned state and local governments from newly taxing Internet access or placing multiple or discriminatory taxes on Internet commerce. With minor modifications, this ban was extended three times, with enormous bipartisan support. The most recent extension passed in 2007.
If the moratorium is not renewed, the potential tax burden on consumers will be substantial. The average tax rate on communications services in 2007 was 13.5%, more than twice the average rate on all other goods and services. To make matters worse, this tax is regressive: low income households pay ten times as much in communications taxes as high income households, as a share of income.
The Permanent Internet Tax Freedom Act converts the moratorium into a permanent ban--on which consumers, innovators and investors can permanently rely--by simply striking the 2014 end date.
This legislation prevents a surprise tax hike on Americans’ critical services this Fall. It also maintains unfettered access to one of the most unique gateways to knowledge and engine of self-improvement in all of human history.
This is not an exaggeration. During the 2007 renewal of the moratorium, the Judiciary Committee heard testimony that more than 75% of the remarkable productivity growth that increased jobs and income between 1995 and 2007, was due to investment in telecommunications networks technology and the information transported across them.
Everyone in Silicon Valley knows Max Levchin’s story. He came to America from the Soviet Union at age 16. His family had $300 dollars in its pocket, and he learned English by watching an old TV set he hauled out of a dumpster and repaired. Ten years later, he sold PayPal, the well-known Internet payments platform he cofounded, for $1.5 billion.
That is the greatness of the Internet. It is a liberating technology that is a vast meritocracy. It does not care how you look or where you come from. It offers opportunity to anyone willing to invest time and effort.
That is precisely why Congress has worked assiduously for sixteen years to keep Internet access tax-free. Now we must act again, once and for all.
The Permanent Internet Tax Freedom Act has 228 cosponsors. The Judiciary Committee reported it favorably by a vote of 30 to 4.
Nevertheless, small pockets of resistance remain. They argue that the Internet is no longer a fledgling technology in need of protection. But it is precisely the ubiquity of the Internet that counsels for a permanent extension. It has become an indispensable gateway to scientific, educational and economic opportunities. It is the platform that turned Max Levchin from an impoverished immigrant into a billionaire. The case for permanent tax-free access to this gateway technology is stronger today than it ever has been.
Opponents also claim that this legislation will lower State revenues. Seven states currently enjoy an exemption from the moratorium. This legislation lets these grandfather clauses expire.
But these grandfathered states had no reasonable expectation of maintaining their special status. The original moratorium included a grandfather clause to give states that were then taxing Internet access some time to transition to other sources of revenue. Some discontinued taxing Internet access in support of a national broadband policy. For those that still haven’t, it has been sixteen years, time enough to change their tax codes.
If the revenue grandfathered states now reap is truly essential, it should be straightforward for the state to recoup it through a different form of taxation.
It is important to note that PITFA does not address the issue of state taxes on remote sales made over the Internet. It merely prevents Internet access taxes and unfair multiple or discriminatory taxes on e-commerce, whether inside the taxing state or without.
I would like specifically to thank Mr. Chabot and Ms. Eshoo, Subcommittee Chairman Bachus, and Subcommittee Ranking Member Cohen for their work on and support of this legislation.
This bipartisan legislation is about giving every American unfettered access to the Internet which is the modern gateway to the American dream. I urge all of my colleagues to support it.