Inexpensive Internet

internetCongress’ decision to extend the prohibition on states taxing Internet access through early 2015, stinks. Taxing the Internet is great tax policy because few households will reduce their demand for the Internet because it’s taxed. Inability to avoid taxation is part of what makes a tax good, because as quantity demanded falls, which it doesn’t here, consumer welfare falls by more than the tax because of those who cancel service.

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