Analyzing the Internet Tax Freedom Act: GFOA strongly opposes a permanent extension of the Internet Tax Freedom Act, which was originally enacted to safeguard the Internet when it was a nascent industry.

• Author: Brock, Emily Swenson
• Position: Federal Focus - Government Finance Officers Association

GFOA has paid special attention to the Internet Tax Freedom Act (UFA) since it was introduced in 1998, in an effort to protect the tax bases and fiscal strength of state and local governments. GFOA's membership recognizes the crucial nature of Internet in a community; residential and commercial access to broadband helps attract and retain residents and businesses as well as enabling many municipal operations to revolutionize the delivery of public services. But providing the rights-of-way that allow customers to access the Internet comes at a price to local governments. The ITFA has been temporarily extended several times, allowing federal legislators to take an industry litmus test between each iteration in order to decide the appropriateness of the moratorium. The most recent ITFA would extend the moratorium permanently, an effort that would block local governments from an essential revenue stream generated by a utility that shows no signs of halting its evolution. GFOA strongly opposes a permanent extension of ITFA and has stepped up efforts during this Congressional session to educate elected officials about ITFA's direct and indirect fiscal effects of on local governments throughout the United States.

GROWTH OF THE INTERNET

The purpose of the original bill was to safeguard the Internet, then a nascent industry, from any costs that might harm its growth (1)--but of course the Internet has become an integral part of everyday life across diverse parts of society. Internet use has exploded with the help of the ARRA's federal Broadband Technology Opportunity Project grants and investments made by the Internet service provider industry. Together with the efforts of state and local government groups, these investments have resulted in an industry with a product so widely used that describing it as nascent is incompatible with the data provided by the service providers themselves. The internet is no longer a budding industry; it is a thriving industry with a service relied upon by the global community.

Service providers and analysts report astonishing statistics about the volume of data transmitted over the Internet now and what is expected in the near future. In a recent study, researchers found that a staggering 84 percent of American adults use the Internet to accomplish a host of tasks. (2) They will use the Internet so much that annual global IP traffic is projected to reach 2 zettabytes per year by 2019. (3) (To help understand the magnitude of this number, the report says that by 2019, the gigabyte equivalent of all movies ever made will be streamed every two minutes.) This isn't especially surprising, as more and more traditional cable television subscribers are moving on to streaming video. This creates a cycle--fewer people are paying for cable and satellite television, service decreases, and more people stream movies and television, increasing Internet traffic. (4)

Individuals, businesses, and governments across the globe are increasingly performing tasks online that were once done manually. The so-called Internet of Things is one of the latest iterations (e.g., wearable devices that...