Zack Hutchins
Director of Communications

For Release — April 26, 2004


ALBANY—The Business Council is strongly opposing new federal legislation that would allow states and localities to impose taxes on the Internet.

The bill, S.2084, sponsored by U.S. Senator Lamar Alexander (R-Tennessee) and U.S. Senator Tom Carper (D-Delaware), would allow state and local governments to impose a tax of up to 15 percent on consumers purchasing Internet access.

The Business Council is supporting alternative legislation that would permanently ban Internet taxation, S.150.

Both bills were proposed as a replacement for a moratorium on Internet taxes that prohibited state and local governments from taxing Internet providers. That moratorium expired in November of last year.

The just-expired moratorium on state and local Internet taxation was created in 1988 and extended in 2001. New York Senator Charles Schumer voted for the extension, and Senator Hillary Clinton voted against it.

Business Council President Daniel B. Walsh assailed S.2084 in April 21 letters to both of New York's U.S. senators.

"We don't need more taxing options in New York State," Walsh wrote. "The Internet is not a luxury for businesses. It is a necessity for global competition. Adding costs to an essential service goes directly against what we are trying to do to bring down state and locally imposed costs."

The bill would raise the cost to consumers who use the Internet, according to the Consumer Internet Access Coalition. The bill would also "hide the tax from them because it allows the tax to be imposed on the Internet backbone."

Internet service providers, who would be taxed, would be forced to raise the price they charge the consumer for Internet access services, the coalition said. S.150, in contrast, would permanently ban Internet taxation.

New York State already has the highest per-capita state and local taxes in the nation, research by The Public Policy Institute of New York State and many other organizations has shown.

For example, in its Tax Watch '04 series published in late 2003, The Institute showed that New York's combined state and local tax burden is 48 percent higher than the average for all states. The Tax Watch '04 series also showed that New York's property taxes as of 2000, the last year for which figures were available, were 50 percent above the national average on a per-capita basis, fourth-highest in the nation. The Institute is the research affiliate of The Business Council.

And at a December 2003 symposium cosponsored by The Institute, Charles Brecher of the Citizens Budget Commission (CBC) compared states' local tax burden per $1,000 of personal income. By this measure, he said, New York's combined tax burden is the highest in the nation, and 26 percent above the average of 12 other states, the 10 largest plus Connecticut and New Jersey.