Obama’s New Web Tax

Harold Furchtgott-Roth, a former commissioner at the Federal Communications Commission, has been saying for months that if the Internet is reclassified as a telephone service—as Mr. Obama is urging—Internet users could be forced to pay federal “universal service” fees of up to 16.1%. These fees were initiated decades ago to provide basic phone service, but the services and the number of potential beneficiaries have grown with time.

Now the Progressive Policy Institute reports that state and local regulators would join with the feds in gouging Internet consumers. That’s because states and localities have their own levies that would kick in if the Internet is officially deemed a monopoly telephone network. Authors Robert Litan of the Brookings Institution and PPI’s Hal Singer optimistically expect regulators to reduce the federal levy from the current 16.1%. But the analysts still forecast significant pain for Internet users.

“We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $17 billion in new user fees,” report Messrs. Litan and Singer.

That’s in addition to “the planned $1.5 billion extra to fund the E-Rate program,” which subsidizes schools and libraries. The authors add that the “higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.”

These taxing consequences haven’t received as much attention as they deserve amid the debate over President Obama’s demand that FCC Chairman Tom Wheeler regulate the Internet like a public utility. But if Mr. Wheeler obliges, the new Congress should make clear who’s responsible

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