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Proposed legislation in Congress would curb the digital-download taxes, or "iTaxes," currently levied by 23 states and the District of Columbia.

The Digital Goods and Services Tax Fairness Act is sponsored by the bipartisan team of Reps. Rick Boucher (D-VA) and Lamar Smith (R-TX). According to Boucher, it's needed because "unfair, multiple, and inconsistent taxation of these digital goods and services will increase costs for U.S. businesses and make them less competitive in the global economy." Some states tax music downloads by as much as 20 percent. Endorsements have poured in from Apple, AT&T, Electronic Arts, Cox, Verizon, T-Mobile, and Time Warner Cable.

The bill would require states to formally approve iTaxes, rather than allow tax collectors to levy them without authorization. It would prohibit taxing digital medical, education, or energy management services. And it would prevent "multiple and discriminatory taxes" at rates higher than normal sales taxes.

While the proposal may have gathered wide support among the digital intelligensia, it is bad news for states which are cutting budgets amid declining tax revenue and desperately looking for new sources of revenue.

See news.com.