Study Highlights Potential Tax Burden Of Net Neutrality

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The Progressive Policy Institute released a study today claiming that President Obama’s net neutrality plan would result in billions of dollars in taxes levied onto the consumer from both Federal and local governments.

The study rests on the idea that if broadband were reclassified as a utility under Title II of the Communications Act, the service “become[s] subject to both federal and state fees that apply to those services.” You can leaf through how the numbers are summed here, but the gist is that various fees and taxes would come into play if Title II were implemented, costing the consumer each month.

The total, yearly cost to consumers could reach $15 billion according to the institute.

Is the critique fair? As TechCrunch has noted in the past, the president’s proposal was light on policy details, so it is not clear if the White House has plans on how to deal with the potential tax issues. Two excerpts, however, may shed some light:

I believe the FCC should reclassify consumer broadband service under Title II of the Telecommunications Act — while at the same time forbearing from rate regulation and other provisions less relevant to broadband services. […]

If the FCC appropriately forbears from the Title II regulations that are not needed to implement the principles above — principles that most ISPs have followed for years — it will help ensure new rules are consistent with incentives for further investment in the infrastructure of the Internet.

So the president at least wants to leave out parts of the regulatory structure that Title II would bring.

It’s obvious that increased tax burden as part of any final net neutrality ruling would be wildly unpopular with Congress — even more unpopular than the idea of net neutrality itself is with the incoming Congressional majority. The two combined would probably cause giffable outbursts on the House floor of year-topping intensity.

(The FCC expects that whatever it passes, legal challenges will ensue, so expect some decent television either way.)

It’s hard to properly vet the above given the simple fact that Title II is complicated law, the president’s plan isn’t fully formed, and what the FCC might pass isn’t clear. But the Institute certainly has introduced a new element into the discussion.

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