Click here to read the full testimony.

Click here to read the full testimony.  

To view his comments, Click Here

Well, at least he liked my tie. If you had a chance to catch Wednesday’s Senate Commerce Committee meeting, you would have heard Senator Byron Dorgan of North Dakota and me discussing my taste in neckwear and its potential tax implications. The topic of the hearing was not trends in men’s fashion but instead communications, taxation, and federalism. My full testimony may be viewed here.

As most people who follow telecom issues know, the federal Internet tax moratorium is set to expire Nov. 1st of this year. The moratorium is what keeps most states from imposing fees and taxes on Internet access.

NTU believes that rather than passing another short-term moratorium on these taxes, Congress should adopt a permanent ban. Taxpayers already face sizeable taxes, fees, and other charges for telecommunications services. Some consumers are paying effective tax rates for telecom services that are double those for other goods and services subject to traditional sales taxes. Consumers don’t need to pay more to access the Internet.

Adding new taxes and fees to the Internet or other communications services would be counterproductive for consumers and service providers. The U.S.
currently ranks 15th among OECD countries in broadband penetration per 100 inhabitants. More taxes will further distort the market for these technologies and further delay their widespread adoption.

Senator Dorgan says that he doesn’t want to tax Internet access. He doesn’t think that anyone really does. Of course, he also said this in
2001 when I testified the first time before the Commerce Committee.
Unfortunately for taxpayers, Senator Dorgan sees this issue, in his words, “linked €? with the remote collection of sales and use taxes — or sales tax simplification and harmonization. Dorgan believes that states should be able to come together and simplify their sales tax schemes so that vendors outside of the state where the product will be used will have to collect and remit use tax to the purchaser’s home state.

Currently, if I had ordered my tie online from a store in California, I would have been liable for use tax in the Commonwealth of Virginia. The vendor is not required to collect and remit use tax on my behalf. Senator Dorgan favors the creation of a database that would force this storeowner to impose the correct tax from and then remit it to the appropriate tax authorities in Richmond.

NTU is concerned that harmonizing taxes will kill tax competition among the states and lead to a “race to the top. €? Forty-five states and DC levy a sales tax. In 34 states, localities are allowed to levy an additional — or “add on €? — tax. It seems unlikely that the local officials will allow their state legislatures to wipe out their piece of the sales tax pie.
Instead, if the base rate is 6 percent and localities can impose another 2 percent, then it seems probable that the new rate will be higher than the base.

NTU highlighted several low-tax, pro-free market suggestions for the Committee, including permanent bans on Internet access and cell phone taxes. As for me personally, I told Members of the Committee that a few years from now, hopefully Senator Dorgan and I could discuss the benefits that these pro-taxpayer proposals had created, rather than talk about how my neckwear purchases should be taxed.

There is growing bi-partisan consensus on the importance of broadband investment, deployment, access and adoption. House Speaker Nancy Pelosi’s Innovation Agenda and the Senate Republican High-Tech Task Force both identify broadband deployment as a key national objective.

I told the House committee that I fully support their initiative to create a map to illustrate where Americans have access to advanced communications services and where they do not. This legislation – the proposed Broadband Census of America Act of 2007 – is aimed at pinpointing those areas. It’s a practical way to identify where resources need to be targeted.

In my testimony, I offered suggestions to the Committee on ways to accomplish this goal. These suggestions include:

1. The more comprehensive the map, the more useful it will be. Don’t redefine broadband and arbitrarily exclude some technologies, and, therefore, some areas from the mapping. The map should identify all the various offerings and providers so that policymakers can get a full picture of the marketplace.
2. Use models that are proven to work. ConnectKentucky, a group that also testified today, built a broadband map at the state level through public-private partnerships. This is the best approach to mapping.
3. We believe the Nine-digit ZIP codes won’t get the job done since they don’t correspond to service territories. What’s needed is to identify gaps, as was done in Kentucky.
4. International comparisons are important, but must be clear “apples-to-apples” comparisons that take into account geography and demographics.

I believe that efforts to better illuminate currently unconnected areas of the country are imperative to achieve universal broadband deployment. Truly universal access is a classic example of a national priority that takes public-private partnerships, commitment and innovation.

• Click here for the testimony (Adobe PDF)

• Click here for the testimony (Adobe PDF)

• Click here for the testimony (Adobe PDF)