Tax to Fund Net Hookups Under Review

Charges on telephone bills to pay for cheap Internet hookups for schools and libraries could constitute an illegal tax, casting additional uncertainty over the politically touchy program, according to some of the House’s top tax lawmakers. The House Ways and Means Committee’s oversight subcommittee held a hearing on the matter, which is before a federal appeals court in New Orleans. If the court rules that the charges are an unconstitutional tax, as telecommunications companies have argued, the Net program’s financing would be thrown into chaos. The program is paid for by fees the Federal Communications Commission imposes on telecom companies, which pass them on to customers. The FCC’s general counsel argued that the program’s financing “does not constitute an unconstitutional tax” and is consistent with the 1996 telecommunications law that created the program. But one of the agency’s five commissioners, Harold Furchtgott-Roth, disagreed. In response to criticism about the program, the FCC recently cut the amount of money to be spent for the hookups this year by nearly half, to $1.28 billion. No money has been disbursed.