WASHINGTON – State and local governments would be permanently barred from taxing access to the Internet under a bipartisan compromise that Congress is a step away from sending to President Barack Obama.
The Senate was expected to vote Thursday to approve the language, part of a wide-ranging measure that would also revamp trade laws.
The Internet tax provision had broad support, with few senators eager to oppose the bill and open the door to taxing online access during an election year. Nonetheless, some were resisting the legislation because of trade provisions and a long-running dispute over a separate proposal on taxing online sales to consumers.
Since 1998, in the Internet’s early days, Congress has passed a series of bills temporarily prohibiting state and local governments from imposing the types of monthly levies for online access that are common for telephone service. Such legislation has been inspired by a popular sentiment that the Internet should be free – along with Republican opposition to most tax proposals.
Until now, states that had already imposed Internet access taxes have been allowed to continue. Under the bill the Senate was considering, those states would have to phase out their taxes by the summer of 2020.
Seven states – Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin – have been collecting a combined $563 million yearly from Internet access, according to information gathered by the nonpartisan Congressional Research Service.
The House approved the compromise Internet and trade bill in December, with the backing of nearly all Republicans but just 24 Democrats. Despite two requests, White House press aides did not provide an administration position on the measure.
The legislation – especially its trade provisions – has pitted the U.S. Chamber of Commerce and other business groups supporting the bill against opponents including the AFL-CIO and other labor organizations.
Supporters say the measure would strengthen U.S. trading by improving protections for American intellectual property like copyrights and trademarks and upgrading trade law enforcement at the country’s borders.
They also cite provisions reinforcing the government’s ability to head off China and other countries from manipulating their currency to make their exports more affordable, cracking down on imported products made with child labor and accelerating investigations into companies accused of evading the payment of duties.
“We must stop being a patsy for those who take advantage of us. They need our markets,” said Sen. Jeff Sessions, R-Ala.
While some Democrats supported the bill, others complained that its trade protections were insufficient and said negotiators who wrote the House-Senate compromise weakened it significantly, including the currency manipulation language.
“You can’t call something a trade enforcement bill that doesn’t do anything meaningful to address currency manipulation,” said Sen. Sherrod Brown, D-Ohio.
Democrats also disliked provisions barring trade agreements that would curb some efforts to restrict greenhouse gas emissions, a major contributor to climate change, or would force the U.S. to revamp its immigration laws.
For years, the drive in Congress to permanently bar taxes on Internet service has languished alongside another effort to empower states to require online retailers to collect state and local sales taxes for online purchases. Supporters of enhancing the collection of sales taxes for online sales say without that, brick-and-mortar stores face a competitive disadvantage.
In hopes of gaining leverage, senators backing the collection of online state sales taxes have linked the two efforts.
A breakthrough occurred this week when Senate Majority Leader Mitch McConnell, R-Ky., agreed to hold a vote this year on the proposal making it easier for states to collect sales taxes for online transactions. Even so, some lawmakers were upset that the Internet sales tax measure would be considered later, with no guarantee of success.
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