Despite the appearance of bipartisan unity in Washington these days, the business of government continues apace. The House of Representatives on Tuesday will vote on a bill to extend the moratorium on Internet taxes by two years. The current three-year moratorium is set to expire on October 21.
The original bill, sponsored by Rep. Chris Cox (R-Cal.), would have extended the moratorium by five years. But an amendment by Rep. Spencer Bachus, (R-Ala.), reduced the permanent moratorium on Internet access charges to only two-years. The Bachus amendment also strikes a provision in the Cox bill that would have prevented 11 states that already impose access taxes from actually collecting the revenues.
Internet taxation came up during the 2000 presidential election. Vice President Al Gore and Gov. George W. Bush came out in favor of extending the moratorium. Both cadidates realized that taxing the Internet meant taxing a new method of commerce, just as many Americans were beginning to enjoy what appeared to be driving a new economic boom. Then the dot.com bubble burst. Now lawmakers are taking a harder look at whether questions of "tax equity" are being addressed and whether they can successfully extract some Internet wealth to fatten state and local coffers.
A new Claremont Institute study examines whether this approach is compatible with the Commerce Clause of the U.S. Constitution, or whether Internet taxation is simply a policy question to be decided by the traditional authority of the states to levy taxes.
Authors Kent Lassman and Anna Bray Duff examine the relevent sections of the Constitution, debates during the Constitutional Convention, Supreme Court cases addressing interstate commerce, and current proposals to tax the Internet.
Lassman and Duff conclude that there are indeed constitutionally permissible methods for taxing e-commerce. The good news, however, is that Congress has the power to prevent further taxation, and even to roll back some existing tax schemes. They describe the constitutional hurdles to be overcome if state and federal authorities should choose to tax Internet commerce.
The bill under consideration on Tuesday is HR 1552.
The Claremont Institute report, "The Internet, Taxation, and the Constitution," by Kent Lassman and Anna Bray Duff is available in PDF format online. You may also order a hard copy for $3.00. Contact Mary Schmall at (909) 621-6825.