Internet Tax Freedom Act: As more services transition from telecommunications and cable to broadband, the scope of what the ITFA covers will greatly expand, even if the ITFA’s current language remains unchanged. To protect the tax bases and fiscal strength of state and local governments, we could not support anything more than a short-term extension of the ITFA, which would provide more time for the full scope of the transition from telecommunications/cable to broadband to occur, and a better sense of the costs that ITFA preemption on state and local governments would impose to be more reliably and meaningfully assessed. GFOA opposes legislation that would make permanent the Internet Tax Freedom Act’s (ITFA) moratorium on state and local government taxes on internet access.
When ITFA was first enacted in 1998, the Internet access and commerce industries were in their infancy and only beginning to be significantly available to households. The intent of the moratorium was to give the then-nascent Internet industry time to grow and become established. However, even at that time, Congress recognized that the ban should not be permanent. In addition, estimates of previous versions of this bill provided by the Congressional Budget Office indicate that, if enacted, the Permanent Internet Tax Freedom Act would cost state and local governments hundreds of millions of dollars in lost revenue. These are revenues that local governments rely upon to fund essential services in their communities, including well-trained firefighters and police officers; investments to fix aging infrastructure; schools, parks, community centers and libraries to support youth. Finally, as the telecommunications and cable service industries increasingly transition to broadband, it is important that State and local governments are not preempted from their ability to govern their own tax structures. Over time, the ITFA would arbitrarily exempt this fast growing sector of the economy from taxation, and unfairly shift the burden of supporting essential local services onto other businesses and residents in a community.
2016 Update: The fiscal 2016 omnibus spending bill extends the Internet Tax Freedom Act for just one year. This one-year extension is welcome in contrast to the alternative – a permanent extension of the ITFA,, which GFOA strongly opposes.
Congressional champions of a permanent ITFA extension actually snuck the language of their bill (HR 235/S 431) into an unrelated measure (HR 644), which the House approved on December 11. However Senate leadership soon realized that they lacked the votes to pass the a measure with permanent ITFA language included in it, thanks to a swift and direct information campaign from the GFOA, our state and local government association partners, and a coalition of Senators who support our position on ITFA. Our successful advocacy efforts stalled Senate consideration of HR 644 until February 2016. Ahead of the vote GFOA is asking our members to send letters to their Senators urging them to oppose HR 235/S 431 – the Internet Tax Freedom Forever Act and strip the language of this measure from the conference report on HR 644.
A draft letter that empahsizes the crucial request to strip PITFA language from HR 644 is available for your use HERE.
The ideal time to send this letter is late 2015, early 2016 while your member is at home and Congress is in recess.
Please work with your state and local elected bodies to use these materials and share them with your federal elected leaders today! Please also share any formal correspondence you send to your federal electeds on this issue with Emily Brock, Senior Policy Advisor at the Federal Liaison Center.