The Wall Street Journal’s editorial yesterday, titled “The Senate That Taxed the Internet,”could just very well be called “The House That Left Gaping Loopholes.” In response to the House’s passage of a permanent extension of a ban on Internet access taxes, the Journal bizarrely claimed that “a cabal of state tax and local collectors” may lobby the Senate into taking this bill “hostage.”
How exactly? Through a compromise bill, announced by 3 Democrats and 3 Republicans late Tuesday night, that would merge the essentials of this Act with a proposal to close a loophole that has allowed online retailers, like eBay, to sneak out of paying a sales tax. The Senate had approved an Internet sales tax last year, but the House didn’t act. These senators are now trying to attach it to the popular moratorium.
This new bill is far from what the Journal calls a hostage crisis. It’s a genuine opportunity for compromise — the thing reasonable people do when they give a little and take a little. Co-sponsor Sen. Mike Enzi (R-Wyo), underscored this sentiment, saying simply, “They’re a perfect fit.”
The extension of the Internet access tax moratorium is backed by many Republicans and some Democrats — including Sen. Ron Wyden (D-Ore), who told me “you don’t apply discriminatory taxes to things you want more of.” They understandably don’t want to raise prices when over a fourth of American households still don’t have access to the web. But other Democrats have focused on the $7 billion a year of revenue forgone with the moratorium’s extension. This revenue, as argued by the Center for Budget and Policy Priorities, could be used to improve schools and libraries, places with public Internet access. But in the new bill, those Democrats win too: Closing the sales tax loophole is a victory for tax fairness, and may raise up to $23 billion annually in revenue. Each component of the bill is grounded in key party principles: one of unfettered access, and another of equality of treatment. No new taxes are imposed, as Republicans want; an existing one is justly applied, as Democrats demand.
Anti-tax advocates are afraid that the Senate won’t act and the current moratorium will expire on Nov. 1. Pro-revenue Democrats, eager to close the loophole, see this bill as the last chance in decades to pass an Internet sales tax. Let fear drive them together. This consolidated bill might be among the few worthy laws this Congress will enact. As former Mississippi Republican Gov. Haley Barbour warned in May, ideological purity is the enemy of victory.