Congress moves near final OK of local Internet tax ban

WASHINGTON (AP) – State and local governments would be permanently barred from taxing access to the Internet under a bipartisan compromise the Senate began pushing on Thursday toward congressional approval.

Senators voted 73-22 to overcome a final procedure obstacle and set a later vote that would send the legislation to President Barack Obama. He was expected to sign the bill, which also would revamp trade laws.

The Internet tax provision had broad support, with few senators eager to oppose the bill and open the door to taxing online access during an election year. Senate Majority Leader Mitch McConnell, R-Ky., said the measure would relieve people of “the worry that their Internet access is being taxed.”

Nonetheless, some were resisting the legislation because of trade provisions and because it omitted a proposal that would let states force online retailers to collect sales taxes for their transactions. Senate Minority Leader Harry Reid, D-Nev., said the bill was full of “missed opportunities and half-measures.”

Since 1998, in the Internet’s early days, Congress has passed a series of bills temporarily prohibiting state and local governments from imposing the types of monthly levies for online access that are common for telephone service. Such legislation has been inspired by a popular sentiment that the Internet should be free – along with Republican opposition to most tax proposals.

Until now, states that imposed Internet access taxes have been allowed to continue. Under the bill before the Senate, those states would have to phase out their taxes by the summer of 2020.

Seven states – Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin – have been collecting a combined $563 million yearly from Internet access taxes, according to information gathered by the nonpartisan Congressional Research Service.

The House approved the compromise Internet and trade bill in December, with the backing of nearly all Republicans but just 24 Democrats.

The legislation, especially its trade provisions, has pitted the U.S. Chamber of Commerce and other business groups supporting the bill against opponents including the AFL-CIO and other labor organizations.

Supporters say the measure would strengthen U.S. trading by improving protections for American intellectual property like copyrights and trademarks and upgrading trade law enforcement at the country’s borders.

They also cite provisions reinforcing the government’s ability to head off China and other countries from manipulating their currency to make their exports more affordable, cracking down on imported products made with child labor and accelerating investigations into companies accused of evading the payment of duties.

While some Democrats supported the bill, others complained that its trade protections were insufficient and said negotiators who wrote the compromise weakened it significantly, including the currency manipulation part.

Democrats also disliked provisions barring trade agreements that would curb some efforts to restrict greenhouse gas emissions, a major contributor to climate change, or would force the U.S. to revamp its immigration laws.

For years, the drive in Congress to permanently bar taxes on Internet service has languished alongside another effort to empower states to require online retailers to collect state and local sales taxes for online purchases. Supporters of enhancing the collection of sales taxes for online sales say without that, brick-and-mortar stores face a competitive disadvantage.

In hopes of gaining leverage, senators backing the collection of online state sales taxes have long linked the two efforts.

A breakthrough came this week when McConnell agreed to hold a vote this year on the online state sales tax proposal.

Even so, some lawmakers were upset that the sales tax measure would be considered later, with no guarantee of success.