By yanking a bill from his Senate committee’s calendar, Senator Daniel Inouye (D-HI) is trying to quietly let a moratorium on Internet taxes die out of the sight of the general public.

According to an article at, Inouye, chairman of the Senate’s Commerce, Science and Transportation Committee, thinks that the bill to extend the moratorium needs more work:

Inouye, a Hawaii Democrat, yanked the Internet Tax Freedom Extension Act from a list of bills scheduled to be amended and approved Thursday. Inouye, in a statement, said “further negotiations are warranted.”

Inouye called for senators to work out a reasonable compromise so that the committee “will be able to take swift action in the future.”

The particular bill is S. 1453, the ITFA Extension Act of 2007, co-sponsored by Senator Tom Carper (D-DE) and Senator Lamar Alexander (R-TN).

Back in May of this year, before the deadline loomed, Ars Technica reported on hearings held about the extension:

For some of the people testifying at the committee, there was little question that the moratorium should be made permanent. Verizon VP of State Tax Policy Annabelle Canning testified that her company supported a permanent extension of the moratorium. “At a time when state and local economic development experts are touting broadband as critical to economic competitiveness, new taxes on Internet access could have a chilling effect on broadband investment,” said Canning. Canning further argued that the tax moratorium has been a crucial factor in spurring industry investment in infrastructure, including Verizon’s high-speed FiOS network.

The National Taxpayers Union—to no one’s surprise—also supports making the tax moratorium permanent. Jeff Dircksen, NTU’s director of congressional analysis, said that he believed taxpayers would be better served by “low-tax, pro-free-market policies that encourage economic growth and innovation in the telecommunications sector.” He also pointed out that consumers were already heavily taxed on other communications services. Dircksen cited a study carried out by the Heartland Institute that found that on average, consumers faced a 13.52 percent tax rate for phone (both wireline and cellular) and cable TV access and said that greenlighting the taxation of ‘Net access might put the brakes on broadband adoption in the US.

In 2000, Aaron Lukas of the Cato Institute defended a previous extension:

Opponents of extending the moratorium claim that it disadvantages traditional retailers and that, as more commerce migrates online, states will lose sales tax revenue and be forced to (gasp!) tighten their belts. Both fears are wildly overstated.

…If there’s a budget crunch, the culprit is excessive spending, not insufficient revenue. In an era of almost no inflation, state spending grew by 4.5 percent in 1996, 5 percent in 1997 and nearly 6 percent in 1998. Four states actually increased their budgets by 10 percent or more in 1998. Seven states have permitted spending to mushroom by more than 30 percent after adjusting for population growth and inflation.

…the moratorium is a step in the right direction, sending a signal to tax-hungry politicians that Congress won’t be changing the rules in their favor anytime soon. That’s a much-needed reality check for state officials who seem to believe that their desire for an infinitely expanding tax base trumps the U.S. Constitution.

PC World included a response by Senator John Sununu (R-NH) to Inouye’s tactic:

“The Democratic Leadership in the Senate appears uninterested in protecting Internet users from higher taxes,” he said in a prepared statement. “We introduced a bill to permanently ban Internet access taxes back in January. I just don’t understand the continued delay in action. The clock continues to tick, placing Internet tax freedom in real jeopardy.”

Despite the strong influence of the Internet this campaign cycle — in the form of news sites, bloggers and social networking sites — none of the top tier presidential candidates of either party has as yet issue a statement on the looming expiration of the Internet tax moratorium.

To send Senator Inouye an email expressing your opinion for or against S. 1453, the ITFA Extension Act of 2007, use his official Senate webmail form.

[cehwiedel also writes at]

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