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CNET News
Data, Net tax plan divides Republicans
By Declan McCullagh
A recent congressional report saying that new taxes could be levied on all
Internet and data connections is pitting two influential groups of
Republicans against each other.
Sixteen members of Congress have slammed a suggestion from Congress' Joint
Committee on Taxation that a tax originally created to pay for the
Spanish-American War could be extended to all Internet and data connections
this year.
In a letter to the committee sent Tuesday, the House members said they
were "perplexed" that the committee would "gratuitously suggest tax
increases" that would slow the growth of the U.S. economy. The committee is
headed by two Republicans, Sen. Charles Grassley of Iowa and Rep. William
Thomas of California.
"Consumers who now enjoy freedom from regressive taxes on Internet access
are not tax cheats," the letter says. It charges the committee with finding
ways to justify tax hikes when its report was supposed to be about
identifying people who were dodging taxes.
"I think the problem lies not with the senators but with staff that is
involving itself gratuitously in proposals to raise taxes on the Internet,"
Rep. Chris Cox, a California Republican who signed the letter, said in a
telephone interview with CNET News.com.
George Yin, the tax committee's chief of staff, was not immediately
available for comment.
Currently, the 3 percent excise tax applies only to traditional telephone
service. But because of technological convergence and the dropping
popularity of landlines, the Joint Committee on Taxation said extending the
century-old tax to broadband and data links was an "option."
The committee's report, published in late January, said that tax law could
be rewritten so the telecommunications levy would cover "all data
communications services to end users," including broadband; dial-up; fiber;
cable modems; cellular; voice over Internet Protocol (VoIP) and DSL, or
digital subscriber line, links. Another option it listed was extending the
tax only to VoIP providers, including Internet-only ones like Skype.
Congress enacted the so-called "luxury" excise tax at 1 cent a phone call
to pay for the Spanish-American War back in 1898, when only a few thousand
phone lines existed in the country. It was repealed in 1902, but was
reimposed at 1 cent a call in 1914 to pay for World War I and eventually
became permanent at a rate of 3 percent in 1990.
Republicans signing the letter to the tax committee include Chris Cannon,
R-Utah; Walter Jones, R-N.C.; Chip Pickering, R-Miss.; Ron Paul, R-Texas;
Jeff Miller, R-Fla.; Mark Foley, R-Fla.; Mike Rogers, R-Mich.; Fred Upton,
R-Mich; Patrick McHenry, R-N.C.; Jerry Weller, R-Ill.; Rob Simmons,
R-Conn.; Charles Bass, R-N.H.; and Vito Fossella, R-N.Y.
Two Democrats, John Lewis, D-Ga. and Anna Eshoo, D-Calif. also signed the
letter.
Members of the Joint Committee on Taxation include Orrin Hatch, R-Utah;
Max Baucus, D-Mont.; John Rockefeller, D-W.Va.; and representatives Bill
Thomas, R-Calif.; and Charles Rangel, D-N.Y.
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R. A. Hettinga