The U.S. House is expected to vote Tuesday on a bill that would prevent state and city governments from levying taxes on Internet access. The bill is important for a number of reasons. But it also highlights an important tension between Washington and the states — one that affects how we regulate what has become the most important connection technology of our time.
From telephone service to cable TV, state and local governments have historically had an important role to play in regulating media and communications technology. For instance, public service commissions and utility commissions in each state are tasked with setting up and enforcing rules that firms have to follow if they want to play in the local market.
The Permanent Internet Tax Freedom Act, which has the backing of House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and nearly 190 co-sponsors, could take some of that power away, at least on paper. The bill itself is fairly simple: It reaffirms a preexisting ban on Internet taxes. Here’s why that’s significant: Until now, the ban had to be renewed by Congress every so often. But if the ban becomes permanent, Congress would be heading off any attempt by states to tax Internet providers and reassert themselves over those companies.
Think of it this way: If you’re a state government, you likely view ISPs as a potential source of tax income. The only thing standing between you and them right now is Congress, which periodically keeps blocking you on the tax issue. This might inspire some slim but valid hope that Congress could someday allow the ban to expire, returning to you a power that you think you should be able to flex.
Goodlatte’s bill would finally clarify the tax relationship that state and local governments have with Internet providers, which is to say that they will have none. End of discussion.
The legislation would officially make regulating Internet providers more of a federal affair, with all of the consequences that implies. And it wouldn’t be the first time: In fact, just last week, the Federal Communications Commission voted to “strip local governments of the ability to regulate the rates of cable operators,” as FierceCable puts it. And earlier this year, the FCC voted to intervene against state laws that make it harder for publicly-funded Internet providers to get off the ground and grow.
All of this adds up to Washington having a greater control in the regulatory affairs of Internet providers, which induce with higher Internet charges to consumers anyway, by way of corporate taxation.