June 17th, 2009

Stopping Internet Access Taxes in Louisiana

Posted in  Tax  Technology 
Author: Tom Giovanetti || Location: Lewisville, Texas, USA

UPDATE: I found the archived video of the entire hearing. Link is here. (Real Audio) Opposition testimony starts at 1:22:22; my testimony is at 1:25:34

It was a warm and humid morning in Baton Rouge on Wednesday. If it weren't for an air conditioned shuttle van running the 6 blocks between the Capitol Hilton and the state capitol, Louisiana might have become the first state to defy the Internet Tax Freedom Act and implement a discriminatory tax on Internet access . . .

No, I don't think the narrative style is working for this blog entry. I'll go back to a less-dramatic style.

I had the privilege of testifying this morning before the Commerce Committee of the Louisiana Senate on a bill that would have placed a "fee" on Internet access for Louisiana citizens in order to provide additional funding for the Attorney General's office to fight cyber crimes.

That's the official and most charitable characterization. A perhaps more cynical description would be that the Legislature had already slashed the AG's budget, and the AG figure out a way to get some of that money back was to come up with something that could be described as "protecting children from the Internet."

The problem, of course, is that federal law (The Internet Tax Freedom Act) explicitly prohibits such a tax on Internet access.

By all reports the Louisiana Attorney General stubbornly pursued this tact, and refused to consider other means of obtaining funds for his desired programs. Apparently many from industry and other sources tried to work with him to find some way to do it while avoiding the obvious conflict with the ITFA, but he could not be deterred.

Surprisingly, the bill passed the LA House by a strong 81-9 margin, which makes one wonder about the Republicans in the LA House who so quickly voted in favor of a new, illegal tax. (I wonder how many of them signed ATR's pledge but yet voted for this bill?)

Today's action was in the committee of jurisdiction for the Senate, the Commerce, Consumer Protection, and International Affairs Committee.

The AG's office took about the first 2 hours of the meeting to press their case, including victims of abuse and financial fraud. But it was obvious from the beginning that a sufficient number of committee members understood that the issue was clearly whether or not the proposed tax or "fee" was a violation of the ITFA.

The AG staff made a fairly lame and sweeping claim that they had determined that what was proposed would clear ITFA muster because it was a "fee," not a tax. But nobody bought it.

In my testimony, of course, I argued that what was before the committee was exactly the sort of thing the ITFA was designed to prevent, and that there was a reason why none of their colleagues in the other 49 states had tried to do this.

Near the end of the meeting there was some discussion about whether the bill could be amended to come up with other means for financing the AG's efforts, such as some sort of voluntary check box on people's bills for Internet access, but pretty soon it all collapsed, and in the Chairwoman's words, "It's over."

Here you can watch the last 2:13 minutes of the 3 hour hearing on YouTube, in which the bill goes down in flames, much to the consternation of the bill's sponsor and the Attorney General.