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Ban on Net access taxes might cost isles millions

WASHINGTON » Hawaii could lose about $20 million a year in tax revenue if a federal bill that prevents state and local governments from taxing access to the Internet becomes law.

The U.S. House of Representatives voted Tuesday to ban Internet access taxes in the seven states that now collect them, including Hawaii.

The federal government placed a moratorium on new Internet access taxes in 1998, but state governments that already taxed Internet access were allowed to continue doing so. Seven states were allowed to keep Internet access taxes, including Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin, according to the nonpartisan Congressional Budget Office.

Together they would lose "several hundred million dollars annually" if they were no longer allowed to collect the taxes, CBO said.

The Center on Budget and Policy Priorities estimates Hawaii’s forgone revenue at almost $20 million using 2012 numbers, according to Erika Tsuji, state communications director for U.S. Rep. Tulsi Gabbard.

Under the bill passed Tuesday, Hawaii and the six other moratorium-exempt states would no longer be able to collect the taxes.

The bill now goes to the Senate, where it has support from a key Demo­cratic senator.

"The Internet Tax Freedom Act enabled the growth of a flourishing digital economy and hundreds of thousands of new, good-paying jobs," said Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee. "In my view, when you have something that works, that has stood the test of time, you ought to make it permanent."

Several House Demo­crats spoke against the bill, but they allowed it to pass on a voice vote, which means members did not re­cord whether they were for or against the bill.

Rep. John Conyers of Michigan, the top Demo­crat on the Judiciary Committee, complained that cities and states that already tax access to the Internet would lose much-needed revenue under the bill.

"This federal prohibition on state taxing authority is contrary to federalism and the sovereign authority of states to structure and manage their own fiscal systems," said a statement by the National Governors Association.


Star-Advertiser reporter Dave Segal contributed to this story.

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