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Keep the Internet Tax-Free

By Grover Norquist

Right now the Internet is like a really cool town with something for everyone. There is shopping and history and places to hang out. But in just a few weeks, the Internet as you know it could become a very different place. The mob is moving in. With the current moratorium on Internet taxation coming to an end on November 1st, states and municipalities will start imposing taxes on the Internet. Sure, they will claim that everyone can go about their business as usual, but now everyone will have to pay them each time they want to have a conversation or even just walk down the street.

Luckily for taxpayers, there is bipartisan support for extending the current Internet tax moratorium permanently. Even state groups like the National Governor's Association support temporarily extending the ban on taxing the Internet.

However, there are already a handful of states that were allowed to keep the taxes they had on Internet users in place when the ban was originally approved in 1998. It comes as no surprise that more big-spending state governments are lining up to join them if the moratorium is allowed to lapse. Some states, like Michigan and Texas are claiming the right to tax Internet access now under their tax structure that targets the gross receipts of companies in their states.

Individuals logging on to stay in touch with family and friends would not be the only taxpayers hit by Internet taxation if the door is opened this fall. Small businesses are increasingly online. Taxing Internet access would add another layer onto the burden businesses already face. A heavier burden on businesses means a heavier restraint on economic growth, job creation and higher prices.

So why is an extension not enough? The specter of possible Internet taxation further down the road presents a disincentive to the same businesses and entrepreneurs that have brought the Internet this far to continue innovating.

Another temporary hold on taxing the Internet is like letting the mob walk through the town telling people "Don't worry, I'm not going to rob you today. But I'll be watching you and we'll reassess the situation next week." Chances are the threat of taxation in the future will put a damper on the willingness of businesses and entrepreneurs to invest in new technologies.

The need for a permanent ban on Internet taxation is widely acknowledged. Earlier this week 40 conservative and taxpayer groups sent a letter to Congress calling for a permanent extension of the Internet tax moratorium. In addition to national groups like Americans for Tax Reform, the National Taxpayers Union, and Americans for Prosperity, organizations representing taxpayers across the country joined the call for a permanent ban on taxing Internet access.

The letter, which can be viewed in its entirety at www.atr.org, stresses the importance of keeping the Internet tax-free, stating, "The Internet prospers today as the result of unshackled innovation and technological growth unfettered by government taxation or regulation. Although policies up to this point have temporarily put a hold on government interference, passing a permanent ban on Internet taxation would send a signal that the Internet is open for further growth and development. Taxing access and Internet activities would not only hinder the expansion of technology that fuels our modern economy, but it would also rebuild communication barriers among families, hamper growing businesses, and negatively impact our lives in countless ways."

The last thing taxpayers need is to open the door to Internet taxation. A temporary extension of the moratorium, although better than letting in the mob right away, is not enough to encourage further innovation and growth of the digital economy. Now is the time to send a message that taxing the Internet is never a good idea. Let's keep the mob out of our town.

Grover G. Norquist is president of Americans for Tax Reform and author of the forthcoming book, Leave Us Alone (HarperCollins).

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