Title II reclassification harms innovation and the poor

On Wednesday, the Federal Communications Commission (FCC) released a proposed rule to reclassify broadband Internet as a common carrier under Title II of the Communications Act. The draft’s release marks the beginning of a new chapter in the ongoing saga to re-impose network neutrality after the FCC’s Open Internet Order was struck down by the DC Court of Appeals last year — a push to force Internet Service Providers (ISPs) to treat all traffic on the net equally, preventing them from charging for priority access.

While this principle of fairness may seem reasonable at first glance, the harsh truth is that not all traffic is created equally. Net neutrality’s aim to impose one-size-fits-all policy on the Internet threatens to slow the pace of technological innovation. Furthermore, subjecting ISPs to the same outdated regulations at telephone companies threatens to decrease online access for low-income individuals by subjecting ISPs to telecom taxes. Lawmakers should speak up against the FCC’s dangerous power grab before it’s too late.

Net neutrality would make sense in a world where all website traffic was equal. In the real world, however, popular sites like Netflix and YouTube receive significantly more traffic than others and, as a result, consume significantly more bandwidth. To be specific, Netflix and YouTube account for over half of all peak-hour download traffic, often leading to slower connection speeds across ISP networks.

As a result, ISPs like Comcast have asked some of the most notorious traffic hogs for payment so customers can enjoy priority streaming speeds on their sites — a reasonable request given the unreasonable amount of bandwidth they consume. Consequently, Netflix has coughed up the dough, resulting in a 66 percent increase in connection speed through Comcast’s network since January 2014. Net neutrality would kill such a mutually beneficial trade by forcing ISPs to treat websites like Netflix equally despite their unequal consumption.

Read the rest at The Hill…

Obama’s corporate tax reform needs improvement

On Sunday, the White House released the president’s proposed budget for fiscal year 2016, which includes a major corporate tax overhaul aimed at repatriating profits American companies earn abroad. At first glance, the proposal seems like a win-win for both the private and public sector by increasing government revenue and encouraging companies to invest in their U.S. operations. However, if implemented, the plan would only be a minor tweak to a fundamentally broken corporate tax code that puts American companies at a competitive disadvantage in the global economy.

Currently, the U.S. operates on a so-called “worldwide” system of corporate taxation, meaning that American companies are liable to pay U.S. taxes on profits they earn anywhere in the world on top of whatever taxes they owe to the country they earned the profits at. The U.S. corporate tax code is already a major obstacle for growth in itself with the a top statutory rate of 39.1 percent — the highest among OECD countries. Considering the additional taxes an American corporation would have to pay a foreign government, it could easily lose half of profits abroad.

As such, the tax code allows for American corporations to indefinitely defer their tax payments to the US so long as their earnings are not repatriated. In other words, American corporations can make money abroad free from the federal government’s reach so long as they don’t use it to pay U.S.-based employees or invest in domestic operations. As such, many American corporations like Apple, Google, Twitter, and Facebook have majorly expanded operations in lower-tax countries like Ireland, which currently holds a 12.5 percent corporate rate, while choosing to indefinitely defer tax payments to the U.S.. Consequently, American corporations have accumulated over $2 trillion of overseas earnings of which Uncle Sam has not received a cent.

Read the rest at Watchdog…