Virtual Tax

Cox and Packard find a war they can winagainst a nonexistent tax

In July, the United Nations Development Program (UNDP) released its annual Human Development Report. Included in the 250-plus-page document was a suggestion that one solution to the problem of poor countries being left on the wrong side of the information gap would be to tax Internet usage by richer countries—a so-called "bit tax." A few days after the report came out, dumbfounded by the outcry against the idea of a global Internet tax, the UNDP issued a statement that it has never considered nor will it ever consider imposing a tax on the Internet, pointing out reasonably enough that the UN has no such authority. Because the report was written by an independent panel, it is not an official document of the United Nations. Case closed.

So why are Congressmen Ron Packard and Chris Cox still worried about it?

On Sept. 30, Cox (R-Newport Beach) introduced House Concurrent Resolution 190, the Global Internet Tax Freedom Act. Cox is, of course, the sponsor of the previously passed Internet Tax Freedom Act, which placed a three-year moratorium on new Internet taxes so that a special panel could study the issue. The new resolution calls on the United States to take a clear stand against international taxes on the Internet, with special attention paid to the UNDP's withdrawn suggestion of a bit tax.

"Congress . . . urges the president to oppose any proposal by any country, the United Nations, or any other multilateral organization to establish a 'bit tax' on electronic transmissions," the resolution reads.

A week or so later, Packard (R-Oceanside) sent out an e-mail announcing his decision to co-sponsor Cox's resolution. "Every time you turn around, it seems another government agency or bureaucracy is proposing a tax on the Internet," Packard wrote. "This time, it's the United Nations. . . . The tax would begin at a rate of 1 cent for every 100 e-mails sent and could cost worldwide Internet users more than $100 billion a year! I think you will be pleased to learn that I am actively working to prevent the UN from taxing your Internet access or e-mail."

"As far as we're concerned, we made it clear in July in a very clear and forthright statement that the UNDP has never advocated a bit tax," said Roy Morey, director of the UNDP's Washington, D.C., office. "The Human Development Report has never been intended as a policy statement of the UNDP. It's really just to stimulate thought and discussion about development issues among those who are interested in them throughout the world.

"I thought we had put every last nail we could think of into this, and as far as we're concerned, we have," he added. "We haven't changed our position on this one iota since July."

Nor is the tax proposal all that alien; it bears a certain resemblance to the United States' principle of universal telephone service, in which telecommunications companies are required to provide affordable service to all customers—in essence charging some customers more to subsidize others. Similarly, the E-rate program, signed into law as part of the giant Telecommunications Act of 1996, is designed to give schools and libraries affordable Internet access so that even those who can't afford computers won't be left out of the Information Age.

All of that—and the fact that the UN had withdrawn the proposal—was conveniently ignored when the report was released in July. Conservatives—many of whom hate the UN anyway—got all puffed-up with affront at the mere suggestion of a UN-mandated tax. House Majority Leader Dick Armey (R-Texas) came out with his six-guns a-blazin' and slammed the proposal. The conservative Heritage Foundation got all foamy around the mouth, calling it "another scheme to redistribute the world's wealth through bureaucratic fiat." And when the UNDP issued its clarifying statement, Armey spokesman Jim Wilkinson gleefully told the media, "It looks like we caught them with their hand in the cookie jar, but we got to them before they could take a bite out of the cookie."

So why, three months later, in the middle of its annual last-minute appropriations death match, is Congress even worrying about the issue?

Adam Schwartz, Packard's press secretary, acknowledged that the UN's bit-tax suggestion was pretty much dead in the water but argued that global Internet taxation was still a vital issue.

"There's no way that the UN could enforce a bit tax—it's not an agency that can collect taxes," he said. "But the fact that any form of government would be contemplating such a widespread global tax on a technology that is spreading so rapidly and reaching so many people means the United States would do well to take a stand against that and let the UN know that's not the way to spread technology."

"But doesn't it strike you as kind of a waste of time?" I asked.

"I don't think it's a waste of time at all," Schwartz said energetically. "More than any other single issue, the e-mail tax is by far the most popular issue that people write to Packard on. We receive up to two dozen e-mails a day from our constituents saying that they oppose any tax on Internet access or e-mail. It's certainly an issue that registers pretty loudly with folks who use the Internet and e-mail."

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