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States To Consider Ways To Spur Private Broadband Investment

January 5, 2017

According to Watchdog.Org, in order to stimulate new private investment in broadband infrastructure, several state legislatures this year could consider plans to eliminate the sales tax on the equipment necessary to build and operate Internet networks. As Watchdog editor and reporter Johnny Kampis notes, 23 states already have taken this step.

The Peach State is one place where lawmakers could consider eliminating the tax. Georgia Public Policy Foundation President Kelly McCutcheon said this move should be a no-brainer since the state exempts the raw materials used in manufacturing from the sales tax. McCutcheon told Kampis, “[T]he equipment used to build broadband networks should be no different” and noted that “economists agree you shouldn’t apply a sales tax to a business input.”

McCutcheon also argued that the fact that Georgia levies a tax on telecom equipment while some of its neighbors do not puts the state “at a disadvantage when larger providers are looking to expand.” To illustrate, Watchdog cited a report from T-Mobile that found “that in a state with the tax … each dollar invested would purchase less than 92 cents of telecom equipment …” Dollars go much further in the 23 states without a tax.

According to Kampis, the National Conference of State Legislatures also has recommended eliminating the sales tax on equipment. The NCSL noted that several states should consider reforms because they “have antiquated property tax systems that have not been modernized since the telecommunications industry evolved from a regulated monopoly marketplace.”

Tax reforms also are popular in Alabama. According to Kampis, state Sen. Clay Scofield could reintroduce a bill in the state legislature that would exempt broadband telecom facilities from taxation for ten years. The bill also would “exempt materials or equipment used by those facilities from the state’s sales and use tax and offer an income tax credit equal to 10 percent of the investment in broadband network facilities.”