Kelly William Cobb

How the FCC Plans to Tax the Internet

Posted by Kelly William Cobb on Tuesday, March 16th, 2010, 3:42 PM PERMALINK

Crossposted from

Today, the Federal Communications Commission (FCC) released its National Broadband Plan (PDF), an outline for the federal government to become significantly more involved in universal broadband access. The plan, which the FCC estimates will cost $350 billion, claims it pays for itself (a point already called into question), but the plan itself calls for raising taxes on the Internet, as well as enacting some that have yet to exist.

First, the plan expressly calls for a digital goods tax:
Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment. (pg. 58)
Instead, how about “not enacting a tax would remove one barrier to online entrepreneurship and investment”? To date, 18 states have enacted laws to tax digital goods and services, like downloaded music, books, and ringtones, within their own borders. A national framework could amount to spreading this nationwide, permitting all states to begin taxing digital goods and even allowing states to collect taxes on e-commerce made across their borders (something currently deemed unconstitutional by the U.S. Supreme Court in Quill v. North Dakota).
Secondly, the National Broadband Plan calls for significant expansion of the Universal Service Fund (USF), a tax on urban and suburban consumers redistributed predominantly to rural areas. Currently, phone companies, including wireless and VoIP, “contribute” to the fund (read: are involuntarily taxed and pass the tax onto consumers). The goal is to expand this to all types of telecom service, including Internet service, and to shift this pool of money toward subsidizing the cost of broadband. The executive summary states that the FCC will “reform current universal service mechanisms to support deployment of broadband and voice,” and adds on pg. 136:
Stage Two: accelerate reform (2012–2016)
- The FCC should broaden the universal service contribution base.
Translation: tax Internet access to fund the USF as well.  While it goes on to state that “the FCC should manage the total size of the USF to remain close to its current size,” this goal of fiscal responsibility is clearly last on the list of priorities. Five days ago, just before the plan was announced, the FCC raised the USF tax to 15.3% – a record high. The USF started at only about 5.5% in 1998 and rose by 4% over the next decade. Since President Obama’s new FCC took over in 2009, it’s risen by 5.8%.
Third, the plan calls for Congress to “consider providing optional public funding…such as a few billion dollars per year over a two to three year period.” You know, tax-and-spend just a few extra billion here, a few billion there. Whatever gets it done.
However, on the bright side, the plan does call for expanding the Research and Experimentation (R&E) tax credit (pg. 122) to help service providers expand private investment in broadband. The report notes that a permanent 5% R&E credit would lead to a 10% to 15% increase in private spending to boost broadband research and deployment.
So, there you have it. At best, you’ll have a 15.3% tax on your Internet service and a tax every time you buy a digital good online. Tax credits like the R&E incent broadband deployment, while the digital goods and USF tax hikes simply raise the overall cost of service and activity in the digital realm, per the FCC’s own admission. One can’t help but wonder how higher taxes on consumers and industry – instead of more tax credits – will effectively expand broadband access.

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Voter Fraud in the Name of Tax Hikes

Posted by Kelly William Cobb on Wednesday, March 10th, 2010, 3:58 PM PERMALINK

The Democrat controlled Washington Legislature has been licking their lips over the prospect of drastically raising taxes ever since voters approved Initiative 960 back in 2007.  The measure established a 2/3 supermajority vote for the legislature to raise taxes.

Well, in late February, tax-and-spend lawmakers got their wish and voted to suspend the I-960 roadblock, singlehandedly opening the floodgate for recent tax increases.  The vote against I-960 was especially important for House Majority Leader Lynn Kessler, who led the recent $680 million tax hike vote in the House.  It was so important for her agenda in fact, that she committed voter fraud to help pass it on a narrow 51-47 margin.

Above is a picture of House Majority Leader Kessler voting to suspend I-960.  The only problem is she's voting on behalf of Rep. Jeff Morris, her absent seatmate, after she had already cast her vote.  The Evergreen Freedom Foundation, which broke the story, has evidence that this occurred multiple times on the House floor during this and other votes.

These actions are downright fraudulent and an embarrassing display of corrupt governance by lawmakers who evidently feel nothing but contempt for representative democracy.  If Washingtonians wanted a pseudo-Kingdom where Rep. Kessler and friends could rule however they saw fit, they wouldn't have established a legislature in Article 2 of the State Constitution, or the House rules that bar such practice.  Further, if Washingtonians wanted what Rep. Kessler must commit voter fraud to achieve (namely at least $680 million in higher taxes), they wouldn't have approved I-960 requiring the 2/3 supermajority rule for tax hikes in the first place.

In other news, Washington State's Constitution under Article II, Section 9 also allows the House to expel a member found in contempt for violating the rules - again with a 2/3 vote of the chamber.  Maybe Rep. Kessler can lend her skills to lower that standard to a simple majority vote as well.  Then they can hold another vote - this time to throw her out.

H/T Evergreen Freedom Foundation

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California Lawmakers Really Want to Tax the Internet

Posted by Kelly William Cobb on Tuesday, February 23rd, 2010, 11:47 AM PERMALINK

Originally posted on

Last year, when Gov. Arnold Schwarzenegger vetoed a proposal (AB 178) to extend the sales tax to all online sales, the California legislature vowed a rematch.  That time has now come.

Currently in Special Session, lawmakers have taken the language from last year's measure and inserted it into a new bill (ABX8 8), pushing a tax hike under the guise that they are simply clarifying current tax law.  The affiliate nexus tax (or "Amazon" tax) has been tossed back and forth between legislative chambers, but now is scheduled for final passage in the State Assembly.

While vetoing the bill last year, Gov. Schwarzenegger rightly noted that it will cause much more harm to California businesses than it will do to raise revenue. Since the bill assumes out-of-state retailers who advertise with in-state websites are obligated to collect tax, those out-of-state retailers can simply sever their relationships with California companies.  This means no tax collected for the state, a huge profit loss for California based advertisers, and another subsequent decline in tax revenue collected from these advertisers' profits.

This appears to be of less concern to money-hungry lawmakers in Sacramento than to maintaining current spending levels. Proponents claim the bill will raise $150 million, knowing full well for reasons above that the measure will actually raise next to nothing.  The only possible justification then is to fake tax revenue numbers to maintain current spending baselines, almost guaranteeing at least a $150 million "budget shortfall" next year - all while hurting California businesses and consumers.  This is objectively horrible and deceptive public policymaking.

In recent days, the Governor has stated his reluctance to sign off on the same bill he vetoed for good reason last year. Should this pass the Assembly, we hope he carries this veto out.

CLICK HERE to write your state lawmakers in opposition to etaxes.  Also, click here for ATR's letter to Gov. Schwarzenegger urging him to veto the bill should it pass and click here for ATR's alert to the legislature.

For more information, follow Stop eTaxes on Twitter and Facebook.

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FCC: We'll Just Give Ourselves Authority to Regulate the Internet

Posted by Kelly William Cobb on Tuesday, February 16th, 2010, 1:58 PM PERMALINK

As we’ve mentioned before, the Federal Communications Commission (FCC) has begun an unprecedented foray into a hitherto untouched area: Internet regulation. The socialist organizations Free Press and Public Knowledge, along with new FCC Chairman Julius Genachowski, have long waged a campaign for “Net Neutrality,” which would lay the foundations for government regulation of the Net and how information travels through the lines to your home. Now realizing the FCC might not have the legal authority to do so, these groups have proposed completely redefining how the FCC treats the Internet to pursue this ambitious power grab.
For years, the FCC has determined that the Internet be regulated as an “information service” under Title I of the Communications Act (see here, here, here, and here). But since this classification only gives the FCC ancillary and tenuous jurisdiction to regulate the Net, there is now talk of simply reclassifying it as a Title II service – placing it under the same regulatory structure as traditional phone lines that dates back one hundred years.
So, what would this mean? Say goodbye to free markets and competition that has brought Internet to over 95% of Americans and developed at least six current choices of Internet service (from cable to wireless broadband).  Say hello to vague and unprecedented legal authority that would turn the Net into a series of dumb, government controlled pipes and permit the FCC to virtually regulate how fast your Internet is, how your Internet is priced, and even whether you would have to pay the same ridiculous taxes and universal service fund charges currently levied on your landline phone bill. The justification for the change? An “open” Internet. Yes, that same terrific and open Internet you already enjoy.
As FCC Commissioner Robert McDowell stated so eloquently, “innovation and investment in broadband did not come about due to a government mandate.”  We couldn’t agree more. The Internet has become the marvel it is today by keeping the FCC’s hands off it entirely.

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Virginia and Colorado Online Tax Bills Take Interesting Twists

Posted by Kelly William Cobb on Thursday, February 11th, 2010, 1:27 PM PERMALINK

Originally posted at

A Colorado measure aimed at requiring consumers to pay tax on all online purchases took an interesting and disturbing twist on Wednesday. As we previously reported, the Colorado House passed an unconstitutional bill (HB 1193) to require out-of-state Internet retailers to collect tax on Coloradoans, known as the affiliate nexus or “Amazon” tax. Yesterday the Senate also approved the measure, but not without making some significant changes.

Colorado’s Senate stripped the etax bill of sections that require retailers to collect the tax, and instead expanded upon a section that would permit the state Department of Revenue to subpoena these retailers to collect personal and private information about their Colorado customers. The goal is to collect sales receipts from consumers so that the state can go after Coloradoans who owe “use tax,” which is tax collected on out-of-state purchases. Companies that don’t comply (read: protect your information) are fined significantly. Ironically, the intent of the bill is to raise revenue for the state, but it includes over $200,000 in annual appropriation to the Department of Revenue to go after consumers and out-of-state businesses.
Meanwhile, across the country, and braving the east coast winter storm, the Virginia Senate Finance Committee on Wednesday met and signed off on an affiliate nexus tax bill requiring out-of-state retailers to collect tax on Virginia residents. Perhaps most interesting was the bill’s fiscal impact statement, which for the first time of any state all but explicitly told legislators to oppose the measure, as the state would likely lose tax revenue:
When similar legislation was enacted in Rhode Island and North Carolina, large online retailers ended their affiliate programs. If this were to happen as a result of this bill, there would be no additional revenue from the enactment of this bill. In fact, by ending the affiliate program with Virginia vendors, such vendors would likely lose business and remit less Retail Sales and Use Tax to Virginia.
The fiscal statement also warned that enactment of the measure could trigger a costly lawsuit, similar to the lawsuit currently in New York challenging the law’s constitutionality.
Click here for ATR's letter to the Senate Finance Committee.

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Utah Legislators Paving the Way for Higher Taxes

Posted by Kelly William Cobb on Monday, February 1st, 2010, 2:10 PM PERMALINK

Like most Utahans, ATR was pleased to hear Gov. Herbert in his State of State address declare that the best path for Utah is “continued fiscal restraint and to not raise taxes.” This hasn’t stopped the persistent talk of tax hikes in the capitol, however.

 Over the past five years, state spending has grown by 41% in Utah – even when indexed for inflation. In that light, it’s easy to explain why the state is set to overspend revenues by $700 million this year. Instead of bringing this spending in check, however, lawmakers have proposed a litany of tax hikes including:
  • A $1.30 per pack cigarette tax hike. On average, smokers have a median income of little more than $36,000, about 30 percent less than non-smokers. That hasn’t stopped lawmakers from pushing a $94 million tax hike onto lower income individuals.
  • Establishing a progressive, three-tiered income tax with a top rate of 7% – abolishing the state’s 5% flat tax.
  • A 10-cent gas tax hike set to cost consumers over $100 million.
  • Eliminating the sales tax vendor credit for another $20 million tax hike.
  • Raising the tax on food to match the state’s general sales tax rate.
Utah residents: CLICK HERE to write your lawmakers now and urge them to take these tax hikes off the table.
(photo by Paraflyer)

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Colorado Legislature Kicks Off 2010 with an eTax

Posted by Kelly William Cobb on Thursday, January 28th, 2010, 10:32 AM PERMALINK

Originally posted at

Here we go again!  Colorado has officially became the first state this year push a bill to collect taxes on all internet purchases.  Yesterday, the House Finance Committee considered "affiliate nexus tax" legislation in a hearing amongst a number of other tax proposals.  The measure would require out-of-state online retailers with no physical presence in the state to collect taxes on Colorado residents.

While the bill is a tax increase on consumers and a significant burden on online businesses (and interstate commerce), it also will likely fail to raise revenue.  Last year, when the bill passed in Rhode Island, the tax was estimated to raise no additional tax revenue and this has been confirmed by the Department of Revenue.  In fact, there was even a bill introduced in Rhode Island this year (House Bill 7071) that would repeal the tax.

Unlike other nexus tax bills, however, Colorado's House Bill 1193 goes one disturbing step further to allow the Department of Revenue to issue subpoenas to any out-of-state business that would require them to provide personal information about their Colorado customers.  Who doesn't love sharing their personal information including possibly credit card numbers and purchase details with the government?  Presumably, it would allow the state to come after residents to collect "use tax" on the products.  Even worse, if a business doesn't provide the information and chooses to protect the proprietary information of their customers, they can be held in contempt.  It also would apply regardless of the fact that the same internet tax bill is currently being challenged as unconstitutional in New York.

Similar bills have also been introduced in New Mexico, Virginia, and Mississippi this year.  No matter where you live, click here to write your state legislature now and oppose taxes on internet commerce.

Also, click here for a copy of ATR's letter to the Colorado House Finance Committee opposing the eTax.

For more information, visit or follow us on Twitter (@eTaxes) and Facebook.

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Ghost of Tim Kaine Seeks to Raise Price of Spirits

Posted by Kelly William Cobb on Wednesday, January 27th, 2010, 2:28 PM PERMALINK

On the campaign trail, Gov. Bob McDonnell proposed a terrific idea to bring the Commonwealth of Virginia additional revenue: privatize state-run liquor stores. In 2002, the Wilder Commission estimated that selling off ABC stores would generate more than $500 million in revenue, not including another $115 million saved from eliminating overhead.

 In complete contrast, when former Gov. Tim Kaine left office he proposed a budget that contained a multitude of tax and fee increases to raise revenue. But buried deep in this budget was another disturbing revenue raiser: a 2% markup in the price of distilled spirits. Currently, Virginia’s controlled state status makes it the monopoly seller of liquor, meaning no private retailers can even touch it. So, when the state wants more money, it can just artificially inflate the price – in this case a whopping $8 million markup.
The two paths outlined by Gov. McDonnell and former Gov. Kaine are utterly contradictory. Selling the state-run alcohol beverage stores not only brings in more revenue and gets the state out of the business of selling spirits, but it allows the free-market – not the state – to determine the price of alcoholic beverages. This is an idea that should be employed by other states that have monopoly control of liquor stores. Unfortunately, however, to date no effort has been made by policymakers to remove this ridiculous price control mechanism out of the current budget.
Last fall, the voters of Virginia rejected Kaine’s agenda of higher taxes, fees, and markups by electing a governor that campaigned on a platform of limited governance. ATR strongly supports Gov. McDonnell’s plan to privatize the Commonwealth’s ABC stores and urges lawmakers to remove the markup on spirits from the budget.
Also , click here for ATR’s letter warning of taxes masquerading as “fees” and “markups” in the Virginia budget.
(photo by Vidiot)

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Yet Another Tax Hike Laden Budget for New York

Posted by Kelly William Cobb on Thursday, January 21st, 2010, 6:17 PM PERMALINK

This week, Gov. David Paterson announced his executive budget proposal and it contains pretty much everything New Yorkers have come to expect from their ineffective government: higher taxes, increased spending, and very few structural reforms.
New York is projecting to overspend revenues by $7.4 billion this year, after a massive 8% spending increase last year. And while the governor claims his budget relies on $5.5 billion in spending cuts, the budget will actually increase by another $800 million. To fund this spending boost in the middle of a recession? One billion dollars in higher taxes and fees, including:
  • $1 per pack cigarette tax increase ($218 million)
  • 3% severance tax on oil extraction from the Marcellus and Utica shales
  • Tax on “sugary” soft drinks ($465 million)
  • Numerous taxes and surcharges on healthcare providers ($240 million)
In fairness, the governor’s budget does take some steps in the right direction. First, the budget cuts school aid by $1.1 billion. New York education spending is 61% higher than the national average. School district employee salaries are 71% higher and benefits 109% higher. The budget also contains $1 billion in Medicaid and government run healthcare cuts and over $1 billion in cuts to state agency operations.
New York residents: CLICK HERE to write Gov. Paterson and your lawmakers now. It’s time to cut spending even further and completely take tax hikes off the table.

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