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Bush administration endorses eternal Net tax ban

The day before a preliminary Senate vote to extend a soon-to-expire prohibition on Internet access taxes, Commerce and Treasury chiefs urge something more lasting.

A soon-to-expire ban on Internet access taxes must be made permanent by Congress, two cabinet-level Bush administration officials urged Wednesday.

In a joint statement, U.S. Department of Commerce Secretary Carlos Gutierrez and Treasury Department Secretary Henry Paulson said the "vast potential economic and social benefits of electronic commerce" depend on immortalizing an almost decade-old moratorium on Internet access taxes and discriminatory e-commerce taxes.

Commerce Secretary Gutierrez

"Preventing the taxation of Internet access will help sustain an environment for innovation, ensure that consumers continue to have affordable access to the Internet, especially high-speed Internet, and strengthen the foundations of electronic commerce as a vital and growing part of our economy," they said.

The officials' statement is likely geared toward lighting a fire under a U.S. Senate committee scheduled to vote Thursday on a bill that would merely extend the tax ban for four more years, as opposed to making it everlasting. President Bush in the past has also .

Treasury Secretary Paulson

If the moratorium is allowed to expire on November 1, states would be allowed to levy taxes on digital subscriber line, cable modem, wireless and even BlackBerry-type data services. They would also be free to charge different tax rates for goods sold on the Internet and goods sold offline. It's unclear how many states would have immediate plans to enact such laws, though, if the ban lapses.

Because none of the pending permanent tax ban bills has been called up for a vote in the Senate Commerce Committee on Thursday, a temporary extension appears more likely. That approach represents a compromise of sorts with state and local officials who have balked at the idea of never having the opportunity to revisit the potential for Internet access taxes as a revenue source. (Some states are still allowed to levy such fees because of "grandfather" provisions in existing law.)

Both Sen. Daniel Inouye (D-Hawaii), who leads that Senate panel, and Senate Majority Leader Harry Reid (D-Nev.), who exercises ultimate control over the Senate's voting schedule, have pledged to renew the ban, but neither has gone so far as to call for making it permanent--in contrast to some of their Republican colleagues on the chamber's High Tech Task Force.