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Democrats kill proposal for permanent Net tax relief

But key committee does unanimously approve four-year extension of a law that generally prohibits state and local governments from taxing Internet access services.

A key U.S. House of Representatives panel on Wednesday unanimously agreed to extend a ban on Internet access taxes for another four years--but not before rejecting proposals to make the tax permanent or extend it for a lengthier stretch of time.

At issue is a law dating back to 1998 that generally prohibits state and local governments from taxing Internet access, including DSL (digital subscriber line), cable modem and BlackBerry-type wireless transmission services. It also prohibits "discriminatory" taxes that treat products sold on the Internet differently than those in brick-and-mortar stores, but it does not deal with the separate issue of imposing sales taxes on goods bought online.

The current law is set to expire November 1, and Republicans have complained that their Democratic colleagues are moving too sluggishly to renew the expiring rules.

At Wednesday's House Judiciary Committee debate, Rep. Bob Goodlatte (R-Va.) proposed a series of amendments attempting to make the prohibition more lasting--first a permanent ban, then an eight-year extension, then a six-year one. He argued those timetables were preferable to give companies certainty and to encourage broadband adoption by more American households, particularly lower-income families.

One by one, the politicians present shot down the amendments. Each of the votes was along party lines, with Republicans voting in favor of the lengthier prohibitions and Democrats shooting them down, with the exception of Rep. Zoe Lofgren (D-Calif.). Her tech-heavy district contains companies that strongly support a permanent Internet tax moratorium.

Goodlatte couldn't resist pointing out that a number of the original Democratic sponsors of a permanent Internet tax ban bill--including Reps. Rick Boucher (D-Va.), Loretta Sanchez (D-Calif.) and Steve Cohen (R-Ohio)--rejected his amendments. Committee Chairman John Conyers (D-Mich.) also repeatedly voted against the extended-ban proposals.

"The Internet is still growing; it's still an ever-expanding tool," Conyers said in defense of his voting choices. "So limiting the ability to revisit and re-examine the effects of the moratorium to a longer period will prevent industry, states and localities and consumers from reaping the true benefits of such rapidly expanding technology."

Update 2:45 p.m. PDT: The committee almost approved the Goodlatte amendment proposing an eight-year extension. But after several minutes of political gymnastics, all that changed.

Here's the short version: In an initial vote, that amendment passed 20-18. But that turn of events seemed to flabbergast Conyers, who promptly fumbled to propose an amendment of his own, apparently containing a four-and-a-half year extension. Then former Judiciary Committee Chairman Jim Sensenbrenner (R-Wis.) questioned whether such an amendment had actually been written ("in proper form," as he put it) and was available for a vote. Conyers acknowledged the clerk had not yet received the text but indicated it was on its way.

Then one of the Democrats who voted in favor of that amendment came to the rescue, inexplicably requesting a revote and scaring up enough ayes to do so. The second time around, the eight-year extension failed by a 22-17 tally.

After the vote, Goodlatte condemned the Democrats' "procedural tactics" as "simply unacceptable."

"I believe the will of the House is clear--a strong, bipartisan majority of members want a permanent ban on these burdensome taxes," he said. "Unfortunately, the actions of the Democrats on the House Judiciary Committee do not reflect the Congress' commitment to ensuring the Internet is free from excessive taxation and regulation."

The bill's next stop is the House floor. It wasn't immediately clear when the Senate, which is on recess this week, plans to take up its version.