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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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This article is over a month old, voting and posting comments is disabled

By conquistadorst on 8/29/2012 9:11:25 AM , Rating: 3
Maybe you're just being sarcastic, but every point you made makes complete sense, actually. Which is why...

quote:
So if you have a desire to live by the beach, don't expect me to pay when a hurricane blows your house off the foundation.
Your homeowner's insurance will be very expensive in high-risk areas, and cheaper in low-risk areas.

quote:
If you decide to live in a flood plain, don't expect me to pay when your house floods.
Yes, high-risk flood plains means your NFP policy will be very expensive.

quote:
If you decide to live in tornado alley, don't expect me to pay when a disaster hits you.
Insurance, again.

quote:
If you live in a mountainous region, don't expect me to pay when a lanslide pushes your house off the side of said mountain.
Insurance, insurance! If you live in a high risk area you'll pay high premiums! This is just proper underwriting! Seriously?

quote:
If you decide to live in the city, don't expect me to pay for your blah, blah, blah...
Maybe you're being sarcastic, but that's why there are local city/town taxes. Because people from other cities/towns aren't expected to pay for your services. Makes sense, no?

So, no. There are things that have their proper place when being "taxed" at the appropriate corporate, federal, state, or municipality levels. The flip side to your argument is where do we *not* stop? How about we both be rational and sit down and we compromise where it starts and stops and you stop making it sound like it's impossible to shake hands across the aisle? Deal?


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