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Governors press for limits on Net tax ban

Several U.S. governors said Monday they would seek to scale back a congressional effort to ban taxes on Internet access, saying it would cost them billions of dollars in annual revenue.
/ Source: Reuters

Several U.S. governors said Monday they would seek to scale back a congressional effort to ban taxes on Internet access, saying it would cost them billions of dollars in annual revenue.

At a conference in Washington, three U.S. governors said their budgets could be devastated by a bill that would prevent them from taxing the monthly fees that Internet providers like EarthLink Inc. charge customers.

Though few states currently tax Internet access, the bill could end up eating into revenues from telephone service, music sales and other activities that are already migrating to the Internet and could be bundled with access fees in the future, they said.

The bill amounts to "putting a federal stop sign onto a state road," said Arkansas Gov. Mike Huckabee, a Republican.

Huckabee was joined by Wisconsin Gov. Jim Doyle and Pennsylvania Gov. Ed Rendell, both Democrats, who said the ban could force them to raise other taxes and fees.

A better approach would be to simply extend the more limited, temporary ban that expired last year so policymakers can figure out how to handle new services like Internet telephony, they said.

Congress sought to make a temporary ban on access taxes permanent last year and widen it to include high-speed cable and DSL service.

That version, backed by a long list of business groups, would also eliminate access taxes that were in place in some states before the temporary ban first took effect in 1998.

The bill passed the House of Representatives last year but stalled in the Senate, and the temporary ban expired in October.

Aides said any action in the Senate was unlikely for several weeks.

Two former governors now serving in the Senate, Tennessee Republican Lamar Alexander and Delaware Democrat Tom Carper, said they were picking up support for a renewal of the temporary ban.

Virginia Sen. George Allen, a sponsor of the permanent tax ban, would be willing to consider ways to focus the ban exclusively on access fees, an aide said.

But opponents are seeking to make the issue more complicated than it needs to be, said Allen aide Heidi Frederickson.

“This is an issue that deals with consumers, and that’s where Sen. Allen’s focus is,” Frederickson said. “Sen. Alexander is clearly focused on the governors, as this press conference today reveals.”