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Alternatives considered are to tax text messages or have a higher flat fee on phone lines

So far an "internet tax" has remained a contentious issue.  Efforts to tax the physical service have flopped in Congress and are not scheduled for discussion until at least 2014.  Meanwhile, states have made headway in forcing online retailers to pay sales taxes, with some Congressional Democrats are calling for a nation policy enforcing sales tax on the internet.  Such efforts are generally tremendously unpopular among the general U.S. population who already feel overtaxed.

I. Taxing the Pipes

But President Barack Obama's iteration of the U.S. Federal Communications Commission (FCC) is nonetheless considering a tax on internet services, which would funnel money into the Connect America Fund -- the fund commonly referred to as the president's "national broadband" plan.

The Fund aims to connect rural regions and pump up service speeds in existing regions.

But to get there the FCC says it may need to levy a tax on existing services, a proposal it's currently accepting public feedback [PDF] on.

The Telecommunications Act of 1996, signed into law by President Bill Clinton (D), was the precursor to the current fund.  It created the Universal Services Fund (USF), a fund paid for by taxes on phone bills.  The program was a mild success; bring telephone service to many new regions.  At first it was well funded and the taxes remained small, thanks to people making more (expensive) long distance calls in the 1990s.

As IM, emails, and video chats replaced long distance calls over the last decade, the FCC has had to raise phone bill taxes to keep up with the USF funding requirements -- including increases under President George W. Bush (R).

Late last year President Obama installed a series of changes, overhauling the fund as the "Connect America Fund" and changing its objective from increasing landline telephone connections to increasing broadband internet connections.  But the new program is in jeopardy as many people are ditching the landline and trimming their phone plans.

FCC internet tax
The FCC wants a new internet tax to make up for a dwindling funding from phone line taxes.
[Image Source: Hang the Bankers]

The FCC's proposed alternatives to the internet service tax include a tax on cell phone text messages, or changing over to a flat tax fee on each phone line (currently phone taxes are collected in a more Constitutionally friendly manner, only taxing interstate phone calls).

II. Plan Has Some Big Supporters

Julius Genachowski, commissioner of the FCC comments, "Today we propose three goals for contribution reform: efficiency, fairness, and sustainability.  And we underscore that any reforms to the contribution system must safeguard core Commission objectives, including the promotion of broadband innovation, investment, and adoption."

Internet software service providers like Google Inc. (GOOG) are receptive of the plan, saying it makes sense than taxing internet software services like Gmail.  Writes Google in its response to the plan, "[Google] strongly supports expanding the [Universal Service Fund] contribution base to include broadband Internet access services."

"Saddling these offerings with new, direct USF contribution obligations [from internet software service providers] is likely to restrict innovative options for all communications consumers and cause immediate and lasting harm to the users, pioneers, and innovators of Internet-based services."

internet pipes
Google supports the proposal to "tax the pipes", but it won't likely be officially floated as this is an election year. [Image Source: Simon Norfolk]

Despite Google's enthusiasm for "taxing the pipes", others take quite the opposite perspective.  Derek Turner, research director for Free Press comments to The Hill, "If members of Congress understood that the FCC is contemplating a broadband tax, they'd sit up and take notice.  For folks who are thinking about adopting broadband, who have much lower incomes or don't value broadband as much—that extra dollar on the margins will cause millions of people... to not adopt.  I don't anticipate that the chairman would move to adopt a drastic overhaul ahead of the election."

Indeed, in an election year the Obama administration will likely be wary of levying a new tax on U.S. consumers.  Thus the decision of whether to pull the trigger on the new broadband tax will likely be made early next year by the next President -- be it Obama or Mitt Romney.

Sources: FCC [PDF], The Hill

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By foolsgambit11 on 8/28/2012 8:51:30 PM , Rating: 2
Just like every "pure" economic or political philosophy, including democracy (which is why we don't have a pure democracy) and capitalism (which is why we don't have pure capitalism). They all rely on laughably simplistic views of human nature, and don't survive first contact with reality.

RE: Time to press the reset button on this presidency.
By croc on 8/29/2012 3:04:40 AM , Rating: 3
The people, acting in their own interests, would never have built your rural electrification system, or your highly (for a reason) vaunted interstate transportation system. There is a place for a national government to do national things, that are in the national interest. YOU wouldn't do them, because why should YOU pay for your neighbour's road?

Now, I don't know what you call it when everyone gets together to do something that is good for all, not just themselves, but it sure ain't capitalism. And whatever it is, it doesn't live in the US of A anymore. I got mine mate. Fcuk Off!

By Reclaimer77 on 8/29/2012 12:08:20 PM , Rating: 1
You're the coolest hippie ever :) +6 post

By Rott3nHIppi3 on 8/29/2012 11:35:07 AM , Rating: 2
And for the record...

Initial federal planning for a nationwide highway system began in 1921 when the Bureau of Public Roads asked the Army to provide a list of roads it considered necessary for national defense.... not really in the interests of "holiday travelers," sort of speak.

By Cerin218 on 8/29/2012 6:28:37 PM , Rating: 1
Commerce would have built the interstate transportation system. Most civilizations have figured out that they need commerce to survive. And the easier they make commerce the better their area becomes.

Of course realize that the States formed the Federal Government and charged it with Defense, Infrastructure, and diplomacy. The instate freeways were built to support defense. And as such fulfilled both Defense and Infrastructure criteria. The States realized that it was easier to get a central entity to plan this. Of course the Founding Fathers knew that too powerful a central entity would result in what they experience and why they left England. But the lazy and stupid among us want and to some degree NEED a central entity and are willing to give up their freedom for the security of being cared for. So you are right that there is a place for the Federal government. Many of us disagree how much power and responsibility that entity should be granted.
Captialism has nothing to do with that as capitalism is an economic structure, not a political structure.

By Ringold on 8/30/2012 3:51:23 AM , Rating: 2
Now, I don't know what you call it when everyone gets together to do something that is good for all, not just themselves, but it sure ain't capitalism. And whatever it is, it doesn't live in the US of A anymore.

That's a little hyperbolic; again with my earlier comment on expecting anything but bleeding-heart passion from a liberal I guess. I'm pretty sure infrastructure is still being built, maintained, the FAA is still monitoring airspace for us all, etc. If nothing else, defense is the ultimate, pure public good (those participating get nothing but a paycheck in return for the possibility of death, for people they've never met), and thats obviously still being done.

As for other points, the other people covered it mostly, but I'll point out that, by FAR, the best roads in my part of my state are toll roads, and I'm perfectly happy paying to access them. A funny thing happens when entities have ownership over and a profit motive in maintaining infrastructure.. They maintain it!

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