    [House Hearing, 112 Congress]
    [From the U.S. Government Publishing Office]

                       WIRELESS TAX FAIRNESS ACT OF 2011

    =======================================================================

                                    HEARING

                                   BEFORE THE

                       SUBCOMMITTEE ON COURTS, COMMERCIAL
                             AND ADMINISTRATIVE LAW

                                     OF THE

                           COMMITTEE ON THE JUDICIARY
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                       ON

                                   H.R. 1002

                                   __________

                                 MARCH 15, 2011

                                   __________

                               Serial No. 112-22

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

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                           COMMITTEE ON THE JUDICIARY

                          LAMAR SMITH, Texas, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        HOWARD L. BERMAN, California
    HOWARD COBLE, North Carolina         JERROLD NADLER, New York
    ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
    BOB GOODLATTE, Virginia                  Virginia
    DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
    STEVE CHABOT, Ohio                   ZOE LOFGREN, California
    DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
    MIKE PENCE, Indiana                  MAXINE WATERS, California
    J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
    STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
    TRENT FRANKS, Arizona                  Georgia
    LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
    JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
    TED POE, Texas                       JUDY CHU, California
    JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
    TOM REED, New York                   LINDA T. SANCHEZ, California
    TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
    TOM MARINO, Pennsylvania
    TREY GOWDY, South Carolina
    DENNIS ROSS, Florida
    SANDY ADAMS, Florida
    BEN QUAYLE, Arizona

          Sean McLaughlin, Majority Chief of Staff and General Counsel
           Perry Apelbaum, Minority Staff Director and Chief Counsel
                                     ------

           Subcommittee on Courts, Commercial and Administrative Law

                     HOWARD COBLE, North Carolina, Chairman

                   TREY GOWDY, South Carolina, Vice-Chairman

    ELTON GALLEGLY, California           STEVE COHEN, Tennessee
    TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
    TOM REED, New York                     Georgia
    DENNIS ROSS, Florida                 MELVIN L. WATT, North Carolina
                                         MIKE QUIGLEY, Illinois

                          Daniel Flores, Chief Counsel

                          James Park, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 MARCH 15, 2011

                                                                       Page

                                    THE BILL

    H.R. 1002, the ``Wireless Tax Fairness Act of 2011''.............     3

                               OPENING STATEMENTS

    The Honorable Howard Coble, a Representative in Congress from the
      State of North Carolina, and Chairman, Subcommittee on Courts,
      Commercial and Administrative Law..............................     1
    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Ranking Member, Subcommittee on Courts,
      Commercial and Administrative Law..............................    12
    The Honorable Trent Franks, a Representative in Congress from the
      State of Arizona, and Member, Subcommittee on Courts,
      Commercial and Administrative Law..............................    17

                                   WITNESSES

    The Honorable Zoe Lofgren, a Representative in Congress from the
      State of California
      Oral Testimony.................................................    13
      Prepared Statement.............................................    15
    Scott R. Mackey, Partner, KSE Partners LLP
      Oral Testimony.................................................    18
      Prepared Statement.............................................    21
    Bernita Sims, Councilwoman, City Council of High Point, North
      Carolina
      Oral Testimony.................................................    40
      Prepared Statement.............................................    42
    Harry Alford, President and CEO, National Black Chamber of
      Commerce
      Oral Testimony.................................................    45
      Prepared Statement.............................................    47

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Prepared Statement of Kurt Zellers, Speaker of the Minnesota
      House of Representatives, submitted by the Honorable Howard
      Coble, a Representative in Congress from the State of North
      Carolina, and Chairman, Subcommittee on Courts, Commercial and
      Administrative Law.............................................    60
    Prepared Statement of the Federation of Tax Administators,
      submitted by the Honorable Howard Coble, a Representative in
      Congress from the State of North Carolina, and Chairman,
      Subcommittee on Courts, Commercial and Administrative Law......    65

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Article entitled ``Taxing cellphones as a luxury good is
      outdated,'' by Timothy Noah....................................    72

                       WIRELESS TAX FAIRNESS ACT OF 2011

                                  ----------

                            TUESDAY, MARCH 15, 2011

                  House of Representatives,
                        Subcommittee on Courts,
                     Commercial and Administrative Law,
                                    Committee on the Judiciary,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 1:37 p.m., in
    room 2141, Rayburn Office Building, the Honorable Howard Coble
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Coble, Gallegly, Franks, Reed,
    Ross, Cohen, Conyers, Johnson, Watt, and Quigley.
        Staff present: (Majority) Daniel Flores, Subcommittee Chief
    Counsel; Travis Norton, Counsel; John Hilton, Counsel; Allison
    Rose, Professional Staff Member; Ashley Lewis, Clerk;
    (Minority) James Park, Counsel; and Norberto Salinas, Counsel.
        Mr. Coble. The Subcommittee will come to order.
        We will make our opening statements brief as we usually try
    to do because of the time frame. There will be action on the
    floor subsequently.
        I am pleased to be an original cosponsor of H.R. 1002, the
    ``Wireless Tax Fairness Act of 2011''. There are over 290
    million wireless subscribers in the United States. Wireless
    service is important whether your car breaks down on the
    highway and you need to call for help or you are a small
    business with traveling salesmen who use e-mail and telephone
    to remain in contact. In recent years, many American families
    have dropped their land line and use wireless service as their
    primary telephone.
        With wireless service so widespread in today's society,
    State and local taxing authorities have begun to impose higher
    tax rates on wireless service than on other goods and services.
    In part, this is a vestige of the Ma Bell era when telephone
    companies could impose high taxes under a regulated monopoly
    structure. But as States and localities continue to find
    themselves in financial distress, some have continued to single
    out wireless subscriptions as a source of additional revenue.
    In Nebraska, for example, a consumer pays a 19 percent tax on
    his wireless bill compared to the general sales tax rate of 7
    percent. In my home State of North Carolina, the consumer pays
    almost 2 percent more in taxes on wireless than on other
    services. There is no principled reason why State and local
    taxes on wireless service should be higher than taxes on other
    services. Such high taxes are akin to so-called ``sin'' taxes
    such as those imposed on liquor and tobacco products.
        The Wireless Tax Fairness Act would impose a 5-year
    prohibition on any new wireless taxes. Current wireless tax
    rates, even if discriminatory, would not be changed by this
    bill, and I think that is probably the right way to go. Thus,
    State and local revenue projections would not be affected
    unless a State wants to admit that it is planning a new
    discriminatory wireless tax in the near future. This bill would
    give States breathing room to reform their wireless tax policy
    at the State and local level.
        This bill would also reduce the tax burden on America's
    small businesses, most of which rely on wireless service for
    employee communication and e-mail. It would enable small
    businesses to use the money they would have paid in taxes to
    create jobs and grow the economy.
        I am pleased to support this legislation and recognize the
    Ranking Member, the distinguished gentleman from Tennessee, Mr.
    Cohen.
        [The bill, H.R. 1002, follows:]

                                   __________
        Mr. Cohen. Thank you, Mr. Chairman. I appreciate your
    scheduling this bill for a hearing. It is a very important
    bill. Last September, in the not too distant past in what some
    of my colleagues call the good old days when I was Chairman of
    this Subcommittee, we passed out a similar bill, H.R. 1002, the
    ``Wireless Tax Fairness Act.'' I supported the legislation
    similar in the 110th and 111th, and I am an original cosponsor
    of this legislation.
        If enacted, this would impose a 5-year moratorium on any
    new discriminatory State or local taxes on mobile services,
    mobile service providers, or mobile service property. The
    legislation's near-term goal is to protect consumers of
    wireless services from further increases in their wireless tax
    burden during the moratorium.
        In the long run, my hope is the moratorium will lead to a
    comprehensive set of principles for State and local taxation of
    all telecommunication services regardless of platform that all
    the relevant stakeholders can agree to voluntarily. This way
    Congress would not need to repeatedly revisit this issue on how
    States tax communication services. My fear is that, absent such
    a comprehensive solution, Congress may be compelled to impose
    one that leaves none of the stakeholders happy. Hopefully we
    can all get together.
        The fact is the tax structures of many States fail to
    account for the advent of wireless communications, cultural
    lag. And this failure by States will inure to our constituents'
    detriment.
        Wireless communication services have become exponentially
    more integral to the daily lives of Americans over the last
    decade. As of the end of 2008, more households chose wireless
    service over land line service as their sole source of voice
    communications and this trend has only continued since then. I
    know not too long ago, I looked at people that only had
    wireless communications and thought that was like Star Wars.
    Now I am one of those people.
        Particularly troubling is the possibility that
    discriminatory State taxation of wireless telecommunication
    services has a disparate impact on racial and ethnic
    minorities. According to the Washington Post, 60 percent of
    Latino and African Americans access the Internet using wireless
    services which is a rate higher than the population as a whole
    and ``others'' groups. Therefore, the burden of higher taxes on
    wireless services fall disproportionately on their shoulders.
    And wireless service, in general, is a regressive tax, and
    something State and local governments too often easily resort
    to is regressive taxes that hurt the most under-represented
    people and the most needy people in their jurisdictions.
        Having been a State Senator for 24 years in a State that
    has a regressive tax system and a local elected official also,
    I am not insensitive to the concerns of State and local
    governments, but I do believe they need to use the main tools
    at their disposal which is property taxes and income taxes and
    sales taxes and not necessarily find these new regressive taxes
    to hurt minorities and other folks.
        I am mindful of the resentment that local governments might
    feel when Congress intervenes, but nevertheless in this
    circumstance, I think we are looking out for the little fellow
    and that needs to happen and fairness. Sometimes the State
    governments are right and sometimes they are wrong, but in this
    one I think they are wrong.
        Representative Lofgren has been the prime sponsor. I
    appreciate she is going to be a witness today and she has been
    a stalwart person on this. She probably had wireless phones way
    before I even thought about it back when I was thinking they
    were Star Wars. She is so advanced.
        At this time, H.R. 1002 is really a modest bill. It does
    not seek to override existing discriminatory State taxes on
    wireless services. It simply seeks to prohibit new
    discriminatory taxes for the next 5 years. All the
    stakeholders, include the telecommunication industry and the
    State and local governments, should use the moratorium to find
    a long-term solution to the taxation of communication services
    fair to everyone and bring us into the 21st century.
        I thank all our witnesses but particularly Ms. Lofgren who
    has been such a leader on this issue, and I look forward to
    their testimony.
        Thank you, Mr. Chairman. I yield back the remainder of my
    time.
        Mr. Coble. Thank you.
        Does the gentleman from Michigan want to be recognized, Mr.
    Conyers?
        Mr. Conyers. No, thanks, sir. I am troubled by the bill,
    but I do not have an opening statement.
        Mr. Coble. I thank you, sir.
        As I said in my opening statement, I think it is
    significant to note that the current rates would not be
    changed. I think that makes good sense.
        Now, there was some confusion surrounding this. I did not
    know that Ms. Lofgren was to be a witness. It was her
    understanding that she was to be a witness. So I have agreed to
    let her give her statement, and I would like for the Members
    probably not to question her because of the interest of time.
        I think I would also indicate that the distinguished
    gentleman from Arizona, Mr. Franks, is the lead Republican on
    this bill. Am I correct, Mr. Franks? So you and Ms. Lofgren
    have shared that.
        So Ms. Lofgren, why don't you give us your statement? Then
    we will recognize the witnesses who will appear before us.

      TESTIMONY OF THE HONORABLE ZOE LOFGREN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Ms. Lofgren. Thank you very much, Mr. Chairman, and thank
    you for your flexibility on the miscommunication. I understand
    that my full statement will be made part of the record, so I
    will just make a few brief comments.
        This is the third Congress where I have introduced this
    bill, and I want to especially thank Mr. Franks, who is the
    principal cosponsor, for his cosponsorship but also for the
    hard work that he has put into this measure and getting
    cosponsors to the measure as we have introduced it.
        Mr. Coble. Well, Ms. Lofgren, if you would yield, I
    appreciate you saying that, and after your statement, if Mr.
    Franks wants to be heard for his opening statement, we will do
    that as well.
        Folks, I am not trying to rush anybody. We are all on a
    tight timeframe because of floor action. So you proceed, Ms.
    Lofgren.
        Ms. Lofgren. Thank you very much.
        When it comes to taxes, we know that not only are taxes a
    source of revenue for government, which is necessary, but how
    we tax has an impact on what people do. And when it comes to
    telecommunications, the taxes are really not well aligned with
    what our purpose is for the Internet. In fact, wireless
    services are taxed nationwide at an average of rate of 16.3
    percent, whereas other goods average 7.42 percent. In New York,
    it is nearly 23 percent, nearly 21 percent in Illinois, 21.5 in
    Florida, 23.5 in Nebraska. These are jurisdictions where cell
    phone access to the Internet is taxed like a sin tax. Really
    you would think that we were trying to discourage people from
    accessing the Internet using a mobile platform which is far
    from the truth. It is at odds with the national policy to
    expand our broadband network.
        And as Mr. Cohen has mentioned, there is this aspect. These
    discriminatory taxes especially discriminate against low-income
    individuals because low-income individuals access the Internet
    through their mobile platform considerably more frequently than
    do more affluent individuals, and the reasons are obvious.
    Getting a DSL line or a cable line, an expensive laptop or
    desktop computer is a lot of cash. A cell phone can access the
    Internet in a very affordable way, and that is why communities
    of color, low-income communities increasingly utilize this
    platform for access to the Internet. That is a good thing not
    only for those communities, but it is good for our country and
    we should not discourage it.
        As the Chairman has noticed, this is a moratorium on taxes.
    I served on the board of supervisors for 14 years in Santa
    Clara County. I well understand the need that local governments
    have for revenue, but this does not decrease revenue. It just
    prohibits discriminatory taxes in the future. If you do a 1
    percent tax on everything, it would not exclude this, but you
    can't tax cell phone access like a sin tax if this measure
    passes.
        It is regressive. It is unfortunate, and it is something
    that we need to do something about on a bipartisan basis.
    Ordinarily I support local governments and State governments in
    setting their own taxing policies, but when the outcome is so
    at odds with the Nation's policy to expand broadband access, I
    think we have to act, and I am glad that we are doing so with
    such support across the Congress and on a bipartisan basis.
    Again, thanks to Mr. Franks and to you, Mr. Chairman.
        And I would yield back my time with thanks for the
    opportunity to appear.
        [The prepared statement of Ms. Lofgren follows:]

                                   __________

        Mr. Coble. I thank you, Ms. Lofgren.
        The gentleman from Arizona who is a Member of this
    Subcommittee, Mr. Franks, do you want to be heard?
        Mr. Franks. Well, thank you, Mr. Chairman. I will be very
    brief.
        Thank you, Ms. Lofgren.
        Mr. Chairman, I want to thank you for scheduling this
    hearing today on H.R. 1002, the ``Wireless Tax Fairness Act of
    2011.'' Congresswoman Lofgren and I reintroduced H.R. 1002 last
    Thursday with the broad bipartisan support of 144 original
    cosponsors.
        Access to wireless networks represents a key component of
    millions of Americans' livelihoods, providing the efficient
    communication capabilities, whether a phone or broadband or
    Internet or otherwise, necessary to run a successful business.
        The exorbitant taxes on wireless customers are not only
    unfair, they are counter-intuitive, yet adding another costly
    impediment to the success of so many American businesses which
    are already struggling in the midst of a prolonged recession
    and already a hefty tax burden.
        These taxes also single out low-income and senior Americans
    who frequently rely on wireless service as their sole means of
    telephone and Internet access.
        H.R. 1002, the ``Wireless Tax Fairness Act,'' provides a
    balanced approach, in my judgment, that protects the revenue
    needs of States and localities while allowing for a 5-year
    hiatus to develop a rational tax regime that maintains the
    affordability of wireless services.
        As Chairman of the Subcommittee on the Constitution, I am
    sensitive, Mr. Chairman, to the constitutional implications of
    any legislation that comes before us and the limits on the
    Federal Government's power. However, the mobile nature of
    wireless services and the ability to use such services all
    across the country clearly grants Congress the power to, quote,
    regulate commerce among the States.
        Additionally, the Fourteenth Amendment provides that no
    State shall deny to any person within its jurisdiction the
    equal protection of the laws. Under section 5 of the Fourteenth
    Amendment, Congress shall have the power to enforce by
    appropriate legislation the provisions of this Article.
        So, Mr. Chairman, I believe that H.R. 1002, the ``Wireless
    Tax Fairness Act,'' is a constitutionally sound, pro-consumer
    bill, pro-business bill, and I strongly encourage this
    Subcommittee and the full Committee to mark up this bill as
    expeditiously as possible so that it can be considered by the
    full House.
        And I thank Ms. Lofgren and I thank you, Mr. Chairman, for
    holding this hearing.
        Mr. Coble. I thank the gentleman.
        Ms. Lofgren, you may be excused.
        While the witnesses find their way to the table, I will
    give some background on them.
        Mr. Scott Mackey is a partner at KSE Partners LLP. Mr.
    Mackey is an expert in tax policy and wireless communications.
    He is former chief economist at the National Conference of
    State Legislatures. For 10 years, Mr. Mackey focused his
    studies on taxation of electronic commerce and
    telecommunications tax reform. He has testified before panels
    all over the country and has been quoted extensively on CNN,
    the New York Times, the Wall Street Journal, and USA Today.
        Mr. Mackey is a former legislative assistant to Senator
    James Jeffords. He received his bachelor's degree in economics
    from Middlebury College and his M.B.A. from the University of
    Colorado.
        Ms. Bernita Sims sits as a city council member from High
    Point, North Carolina. And I must say to my colleagues I am in
    a bind. I had a very good visit with my friends from the
    furniture capital of the world last night, and I told Ms. Sims
    we are on different sides of this issue. She said, well, I am
    going to bring you around tomorrow.
        But Councilwoman Bernita Sims, it is good to have you and
    other members of the High Point City Council with us today.
        Ms. Sims has been a member of the High Point City Council
    since December 2003 where she is the current chair of the
    Public Service Committee, a member of the Planning Committee,
    and liaison to the local Alcohol and Beverage Commission. She
    was elected mayor pro tem in December of 2005 by her fellow
    council members and served a 1-year term.
        She serves on the National League of Cities Committee on
    Finance, Administration, and Intergovernmental Relations. She
    is also the chairman of the Finance and Legislative Action
    Committee for the North Carolina League of Municipalities. Last
    year she received the High Point Chamber of Commerce Minority
    Business Associate of the Year Award.
        Bernita, good to have you with us. Scott, good to have you
    with us.
        Our last witness today is Mr. Harry Alford who is the
    President and CEO of the National Black Chamber of Commerce.
    Mr. Alford is a major advocate for advancing African American
    businesses in the United States and around the world. Because
    of his extensive involvement in international business, Mr.
    Alford was recently named Cultural Ambassador by the United
    States Department of State. Mr. Alford also sits on the board
    of directors for the National Newspaper Publishers Association
    and writes weekly business columns for their members. He is an
    active member of the board of directors of the Chamber of
    Commerce and a consultant to several corporations and
    publications.
        It is good to have each of you with us.
        The ground rules, folks. We try to comply with the 5-minute
    rule. We apply that rule to ourselves and to you all as well.
    And when you see the panel before you, when that light turns
    amber, that is your warning that the ice upon which you are
    skating is becoming thin, and you will give a minute, of
    course, to pare down. But when the red light appears, that is
    your signal that your 5 minutes have elapsed.
        So, Mr. Mackey, why don't you kick us off?

                TESTIMONY OF SCOTT R. MACKEY, PARTNER,
                            KSE PARTNERS LLP

        Mr. Mackey. Thank you very much, Mr. Chairman, Mr. Cohen,
    Members of the Subcommittee.
        I am here to report on a study that I have just recently
    completed that is attached to my testimony. I have been doing
    this for about the last 7 years.
        And basically the findings of my study, as has already been
    discussed, is that the average wireless consumer pays over 16
    percent of their bill in wireless taxes and fees versus just a
    little over 7 percent in the State sales tax. So there is a big
    disparity, as folks have already mentioned so far, between what
    wireless consumers pay and what you pay for things you buy over
    the counter at the store.
        Unfortunately, this disparity is growing. As I have done
    the study over time, I have found that while the disparity has
    always existed, the disparity is getting worse. And in fact,
    between 2007 and 2010 when this study covers, wireless taxes
    and fees grew three times faster than the sales taxes. So there
    is a problem and the disparity is getting worse.
        And I think one of the reasons that it is important for the
    time out that is being contemplated in this bill is that if we
    are ever going to get our hands around this problem and get the
    States and localities and the stakeholders to work this out, we
    have got to stop the problem from getting worse because the
    worse it gets, the harder it is to solve.
        The opening statements have really covered a lot of the key
    issues, so I will be very brief in terms of why policymakers
    should care about this issue.
        The first one, obviously, as was alluded to by many of the
    speakers, is the disproportionate impact of these taxes, the
    regressive nature of these taxes, and the disproportionate
    impact on low-income people and on minority communities.
    Clearly, the facts are not in dispute. Low-income people are
    increasingly relying more on wireless as their sole
    communications link and these taxes apply much more heavy
    burdens, as a share of income, than on wealthier individuals.
    Particularly one of the disturbing trends of going to very high
    per-line charges, for instance, in the City of Baltimore where
    they just raised the tax to $4 per line per month--so if you
    have a family share plan with three or four lines, you are
    paying $4 per month on each one of those lines even though, in
    some instances, the actual cost of adding a line is only $5. So
    in the case of Baltimore, the tax burden on those individual
    additional lines is over 100 percent.
        The second reason I think that this bill is very important
    is for the reason stated by Representative Lofgren at the
    outset of her remarks. We have government policies seemingly
    working at cross purposes here where through the stimulus
    programs and through other efforts, States are trying to
    encourage the deployment of better and faster wireless networks
    and the roll-out of those. So on the one hand, we are trying to
    promote, incentivize, and encourage it, and on the other hand,
    in some instances in some States, we are taxing at such high
    rates that it discourages the use. So you have got government
    policies working at cross purposes. And this bill would help to
    stop the problem from getting worse and give us time to try to
    sort all this out.
        And finally, as was alluded by the Chairman, the impact on
    business costs. Businesses, including our own small business
    where we have outfitted half of our employees with multiple
    mobile devices, are increasingly relying on this technology to
    increase productivity, profitability, and ultimately this will
    lead to creation of jobs. But these taxes do impact businesses
    significantly. It is not just consumers that are paying them.
    And so by causing a time out on these taxes, it is going to
    prevent the burden from getting worse on the small businesses
    that are using wireless technology.
        So this bill, in conclusion, does not fully address the
    problem, but it does cause a pause and a time out, so hopefully
    collectively we can address the problem. And if we don't do
    this, I fear that the disparity and the dependence on these
    revenues by local governments is going to get worse. It is
    going to increase, and therefore it is going to make it that
    much harder to solve this problem down the road.
        So I appreciate the opportunity to testify before you
    today. I look forward to any questions you might have. And
    again, I thank you for the opportunity.
        [The prepared statement of Mr. Mackey follows:]

                                   __________

        Mr. Coble. And Mr. Mackey, you beat the red light. You were
    a speed merchant. Thank you, sir.
        Ms. Sims, we would be glad to hear from you.

               TESTIMONY OF BERNITA SIMS, COUNCILWOMAN,
               CITY COUNCIL OF HIGH POINT, NORTH CAROLINA

        Ms. Sims. Chairman Coble and distinguished Members of the
    House Subcommittee on Courts, Commercial and Administrative
    Law, my name is Bernita Sims. I am a council member from the
    City of High Point, North Carolina. In addition, I serve on the
    Finance, Administration and Intergovernmental Relations
    Committee of the National League of Cities.
        I appreciate the opportunity to appear before you today on
    behalf of the National League of Cities, the United States
    Conference of Mayors, the National Association of Counties, the
    Government Finance Officers Association, and the National
    Association of Telecommunications Officers and Advisors.
        Let us be clear. This bill is not about expanding broadband
    technology or providing tax parity for an overtaxed industry.
    Rather, this bill is about special treatment and favoritism for
    wireless phone companies that continue to experience explosive
    growth and profits. The current tax treatment of wireless
    services by Federal, State, and local authorities has not
    hindered product innovation, service growth, or industry
    profitability. In fact, the wireless communications industry is
    a strong and successful industry with vibrant subscribership
    levels and revenues.
        If there is one thing all of our organizations share, it is
    our longstanding opposition to efforts by Congress to preempt
    State and local taxing authority. How to levy taxes fairly, how
    to ensure there is no discrimination among companies that
    provide different forms of the same service, and how to protect
    local government revenues are all appropriate debates. But
    these debates belong at the State and local levels. And this is
    why our associations unite in opposing this bill.
        Local governments exercise their taxing authority to the
    extent provided by State law. As a result, local taxing
    authority and practices differ from State to State. And
    oftentimes, taxing policy differs from county to county and
    city to city within the State. But this is good because this
    means that every local government taxing authority tailors is
    tax policy by taking into account the sources of revenue
    available and the needs and wants of its residents. More
    importantly, the local officials making these decisions are
    accountable by the ballot box to those paying the taxes that
    support the services they use. Our citizens do not need to be
    protected by the long arm of the Federal Government. They
    already have the power to change locally imposed taxes.
        In today's difficult economic times where State aid to
    local governments has decreased dramatically, local taxing
    autonomy is crucial in helping to ensure that the needs of
    local citizens, our mutual constituents, are met. The ability
    to make taxing and other fiscal policy decisions at the local
    level without Federal interference enables High Point to
    provide the quality services my constituents expect.
        Some argue the proposed 5-year ban set forth in this bill
    wouldn't hurt State and local governments because they can
    still continue to collect the taxes they currently impose. But
    this misses the point. What this legislation does is preempt
    State and local taxing authority and represents a Federal
    intrusion into historically protected State and local tax
    classifications. Enactment of this bill would lead other
    industries to seek preferential tax treatment at the expense of
    State and local budgets and taxpayers. This slippery slope
    necessarily leads to an erosion of our system of federalism and
    a direct threat to the fiscal health of State and local
    governments.
        It is important to remember that State and local
    governments, unlike the Federal Government, must balance their
    budgets. In this tough financial climate, this isn't an easy
    task and the impact of decisions made by local elected
    officials are felt immediately by constituents. Hard and
    oftentimes unpopular choices, like those made by High Point,
    must be made. Even my counterparts at the county level are
    leaving no stone unturned to rein in spending, as demonstrated
    in a recent survey by the National Association of Counties.
    Essential services may be cut. Public employees may be laid
    off. Infrastructure repairs and construction may be put on
    hold. And, yes, taxes may occasionally have to be raised. But
    what is important to emphasize is that when balancing the
    budget, all options must be on the table. What this bill does
    is takes away one of these options, to tax the wireless
    industry, at the expense of other taxpayers and businesses. To
    have the Federal Government, which has difficulties balancing
    its own budget, seek to tie the hands of State and local
    lawmakers through the misguided enactment of legislation such
    as this is simply wrong.
        Americans are benefitting from being able to access the
    mobile industry or make a phone call at any time and anywhere.
    Whether wireless technology is being used by other industries
    such as health care, education, transportation, or energy,
    these results affirm our industry is revolutionizing and
    improving the way we live and work.
        Furthermore, State and local taxes on wireless services are
    not an obstacle to wireless broadband deployment.
        The economics of the industry will not be changed by
    preemption of State or local taxes. Wireless carriers will
    quite rationally still invest their resources in the most
    potentially lucrative areas and will still set their prices at
    the highest aggregate rates they believe the market will bear.
        Finally, let me say this. Our associations support the need
    for State and local governments to stand on their own and use
    all tools and resources available to them to balance their
    budgets, while continuing to provide essential services. Not
    always, but in some cases, taxation of the wireless industry,
    even at higher rates than other industries, might be one of
    those tools. It is incumbent for all Members of Congress to
    support their hometown leaders.
        I urge you to oppose this bill.
        Thank you.
        [The prepared statement of Ms. Sims follows:]

                                   __________

        Thank you, Bernita Sims. I appreciate your testimony.
        Mr. Alford, we would be glad to hear from you.

     TESTIMONY OF HARRY ALFORD, PRESIDENT AND CEO, NATIONAL BLACK
                          CHAMBER OF COMMERCE

        Mr. Alford. Chairman Coble, Ranking Member Cohen,
    distinguished Members of the Subcommittee, thank you for
    allowing the National Black Chamber of Commerce to provide
    testimony concerning the Wireless Tax Fairness Act of 2011.
        When the National Black Chamber of Commerce was
    incorporated in 1993, the U.S. Census Bureau was reporting
    300,000 Black-owned businesses with annual revenues of $30
    billion. As of 2007, it now reports 1.9 million Black-owned
    businesses with annual revenues of $137 billion. We are the
    fastest growing segment of the American economy. The future
    seems to be bright as African Americans have nearly $1 trillion
    in disposable income, according to Selig School of Business,
    and our businesses have yet to capture that majority of the
    market.
        Still, our economic status is fragile. Unemployment in
    Black communities soars over the national average and it is
    currently at 16 percent. The recession is taking its toll. The
    saying ``when most people catch a cold, Blacks will catch
    pneumonia'' still applies. We can look at what the subprime
    mortgage debacle did to our communities. African Americans
    literally lost over 35 percent of their net worth from this
    malicious scandal. Our life spans make our Social Security
    contributions more or less a transfer of income. Sometimes our
    economic future seems to be very tenuous.
        Yes, we have a smaller pie to cut from when it comes to the
    cost of living. This is why we support the Wireless Tax
    Fairness Act of 2011 because new discriminatory taxes and fees
    on wireless services are regressive and significantly increase
    consumers' and businesses' costs of services. State and local
    tax increases fall disproportionately on African Americans,
    minority small businesses, and the elderly.
        As the economic status of the African Americans is at the
    bottom rung of the American economy, they will suffer the most
    from these discriminatory taxes. Our Black-owned businesses
    will suffer from a consumer base that is weakening and that
    will greatly lessen the opportunity to create more jobs. Hence,
    the staggering 16 percent unemployment level may even increase.
    That chance of making education affordable will also lessen.
    Unfair taxation is a problem for our communities.
        We should concentrate on further deployment of broadband as
    it is a greater factor in doing business and provide security.
    Cell phones are no longer a luxury item. They are a necessity
    to our daily living. Minority-owned businesses and small
    businesses that are leading the U.S. out of the recession are
    dependent on access to wireless products and services. It
    enhances communication, information, education, and creates
    many opportunities for employment and wealth building. Current
    tax levels on mobile devices resemble luxury taxes such as
    liquor, cigarettes, and jewelry.
        Local communities should consider ways to increase
    employment via entrepreneurship. This will increase the payroll
    tax base and that will offset budget challenges.
        Finally, the Wireless Tax Fairness Act of 2011 will help
    stabilize taxes as stakeholders work to determine what is best
    for consumers, businesses, the economy, and the further
    deployment of wireless services in rural and urban areas.
        Your consideration of supporting this legislation is indeed
    appreciated. I look forward to it passing through Congress and
    being signed by our President. Thank you very much.
        [The prepared statement of Mr. Alford follows:]

                                   __________

        Mr. Coble. Thank you, Mr. Alford.
        We will now examine the witnesses.
        Ms. Sims, let me ask you this question. How does the City
    of High Point currently tax wireless subscription?
        Ms. Sims. We currently do not tax wireless subscription. It
    is done at the State level. It comes back to the city in the
    form of taxes and user fees from the State.
        Mr. Coble. Now, it has been said by some, Ms. Sims, that a
    high wireless tax is regressive and therefore burdens low- and
    middle-income subscribers with a higher effective tax rate as
    opposed to higher-income subscribers. What do you say to that?
        Ms. Sims. Well, Congressman Coble, I say that whenever it
    comes down to an issue where we are talking about taxes, quite
    naturally the conversation shifts to how it impacts individuals
    in the community who least have the ability to pay. But I must
    say that in my community, I have not seen one individual--I
    don't know of anybody who doesn't own a cell phone, and none of
    them have ever complained about the taxes that are associated
    with the use of that phone. They complain about the rate that
    they are charged for the use of the phone, but nothing
    regarding taxes.
        I don't necessarily subscribe to the notion that it imposes
    an unfair tax burden on those individuals who are least able to
    pay. I don't subscribe to that.
        Mr. Coble. I thank you for that.
        Mr. Mackey, State and local governments seem to agree that
    wireless tax reform is needed. So why have they made such
    little progress in reducing wireless taxes on their own accord?
        Mr. Mackey. That is a great question. As I listened to one
    of the other witnesses say that we ought to be sorting this out
    at the State and local level, some of us have been working on
    this issue for 10 or 12 years. We tried--and I work a lot on
    State tax policy with legislatures--through the Governors
    Association, the National Conference of State Legislatures to
    raise the issue. They have encouraged reforms. But at the end
    of the day in that whole 10-year period, there has only really
    been one significant tax reform and that was in the State of
    Virginia which was successfully able to broaden the base, lower
    the rates down to the sales tax rate. Actually, I am just about
    to publish another study that shows that local governments in
    Virginia are better off under the reform than they were under
    the old high-rate tax system.
        So in terms of why that hasn't happened, I think the reason
    is it is a very difficult conversation to have particularly in
    the States where because wireless used to be a monopoly and so
    there were all these monopoly local taxes that were imposed,
    they are reliant on those taxes and it is a very difficult
    conversation to have to try to figure out a path toward getting
    off the reliance of those wireless revenues. So the reason it
    hasn't happened is because there hasn't been the political will
    at the State level to force those conversations.
        One more quick point is that I think the conversations are
    going to have to happen because we are at the point now where
    consumers who are pretty savvy are starting to realize that
    they have different options for purchasing communication
    services and other entertainment services, and we are starting
    to see migration toward Netflix and other forms. So there is
    going to be a conversation that is going to have to happen at
    the State and local level because the current system where you
    load certain services with high taxes and other services don't
    have any at all, it is just going to collapse. And those
    revenue losses are going to occur anyway. And we think this
    legislation will help us begin those conversations and stop the
    problem from getting worse.
        Mr. Coble. Let me try to get one more question in before my
    5 minutes expire.
        Mr. Alford, the National Black Caucus of State Legislators
    and the National Hispanic Caucus of State Legislators have
    supported this legislation in the past because presumably of
    the effect of high wireless taxes on their constituent
    communities. Can you elaborate, sir, on how these communities
    are particularly affected by high wireless taxes?
        Mr. Alford. Yes, sir. There is a growing dependence and a
    growing necessity on the use of wireless and mobile devices. I
    think there is a misperception by some that we are taxing
    wireless phone companies. We are not taxing the companies. We
    are taxing families and individuals. They are the ones who are
    paying the bill. And I think the wireless phone companies are
    American heroes in leading the way for us to be globally
    competitive.
        So it is pretty simple. If you have got $5 and you have to
    give up $2 and the guy next to you has $10 and he has to give
    up $2, I think the guy with the $10 is less angry or less
    hurt--it is simple math--than the guy who has $5.
        Mr. Coble. Thank you, sir.
        Mr. Cohen, I beat the red light. I want you to take notice
    of it. I yield to you.
        Mr. Cohen. Thank you, Mr. Chairman.
        Mr. Mackey, in a previous life, what organization did you
    represent?
        Mr. Mackey. The National Conference of State Legislatures.
        Mr. Cohen. And how many years were you with the National
    Conference of State Legislatures?
        Mr. Mackey. Almost 10.
        Mr. Cohen. And what was your position there?
        Mr. Mackey. When I left, I was the chief economist and
    staffed the telecommunications tax task force which I believe
    you served on.
        Mr. Cohen. And based on those 10 years of experience with
    State legislatures, how would you rate overall State
    legislatures taxing authority compared to the Federal
    Government? Is it more progressive or more regressive?
        Mr. Mackey. I think it is more regressive due to the higher
    reliance on consumption and property taxes, whereas the Feds
    tend to rely more on income-based taxes. So it is more
    regressive.
        Mr. Cohen. Do you remember a Senator from Tennessee named
    Leonard Donovan?
        Mr. Mackey. Yes.
        Mr. Cohen. He said--and I don't think he coined this. I
    know he didn't. But somebody said don't tax me, don't tax thee,
    tax that many behind that tree. Is that not more or less the
    mantra of most State legislators? Some State legislators.
        Mr. Mackey. I would say some, yes.
        Mr. Cohen. And is the wireless tax something that would
    fall into that category? People don't really think about it. It
    is just a doodad here and a dabble there. Like Everett Dirksen
    said, eventually it adds up to real money.
        Mr. Mackey. I think that is right. I mean, one of the
    issues is that unlike many goods and services that are sold,
    either historically or by grants of authority, legislatures
    have allowed local governments, municipalities primarily, more
    tax options on this service. And so what you see are multiple
    taxes from multiple governments appearing on the same bill. And
    so I do think, in a given State, the one municipality might not
    see the totality of all the taxes. They only see their piece.
    And because of that, what ends up happening is the aggregation
    of all these taxes ends up putting a significant burden on the
    consumer.
        Mr. Cohen. In your recent special report, you indicate
    State and local and Federal taxes and fees combine to an
    average of over 16 percent nationally for wireless subscribers.
    How much of that percentage is based on national taxes and
    fees?
        Mr. Mackey. 5 percent of that is the Federal, the Universal
    Service Fund.
        Mr. Cohen. And what impact will H.R. 1002 have on those
    taxes and fees?
        Mr. Mackey. It would not affect the Federal Universal
    Service Fund.
        Mr. Cohen. Right, and that is 5 percent. And the 11 percent
    is what is put on there.
        Thank you, sir.
        Is it Councilman or Commissioner Sims?
        Ms. Sims. Councilwoman.
        Mr. Cohen. Councilmember Sims. I appreciate your service in
    local government and representing your group.
        But let me ask you this. H.R. 1002 simply imposes a 5-year
    moratorium on new discriminatory taxes on wireless services.
    State and local government will still be able to tax wireless
    service and providers as long as they are not discriminatorily
    applied, you know, a general tax, not specifically picking out
    just one service.
        Why should Congress not impose such a simple moratorium
    when it is not banning all taxes on wireless services, simply
    discriminatory taxes?
        Ms. Sims. Well, based on the fundamental principle of how
    we operate as local municipalities, we don't think that you all
    should be in the business of banning it at all, and that is the
    core principle of where we are coming from, that we should be
    allowed at the State and local level to impose those taxes and
    make those decisions on our own. So the moratorium, regardless
    of whether it is only for 5 years--we don't think it should be
    there at all, that we should still be given the authority to
    work and to do what we have to do to balance our budgets.
        Of course, we all know from an economic perspective we are
    all challenged. Everybody is trying to figure out how to make
    this thing work, and the more that we start to get into the
    issues around technology services--and that is what this all
    falls into is the whole technology realm--to say that it is
    sacrosanct and you can't do what you need to do at the local
    level to generate revenues we think is just wrong.
        Mr. Cohen. Mr. Mackey, is taxing of wireless services kind
    of a new kid in town and starting to be a source of funding for
    State and locals? Wireless has only been around--what? How many
    years?
        Mr. Mackey. 15 or so.
        Mr. Cohen. And they started taxing it when?
        Mr. Mackey. A lot of the taxes that apply to local land
    line service were applied to wireless in the late 1990's in the
    beginning of the year 2000. Back then it was viewed as sort of
    a luxury tax and it is only the rich that could afford it. So
    let's apply these taxes. But obviously, things have changed
    since then.
        Mr. Cohen. And they are starting to be discriminatory taxes
    applied since?
        Mr. Mackey. Pretty much since. And then what we have seen
    is just sort of a gradual adding of new taxes, increasing of
    existing discriminatory taxes over the years as we moved
    forward.
        Mr. Cohen. Thank you, sir.
        I am going to beat the red light, be in the yellow light,
    and be better than my Chairman. And I yield back the balance of
    my time.
        Mr. Coble. I will say to the distinguished gentleman from
    Michigan, Mr. Cohen and I have beaten the red light, John. So I
    don't want to put a lot of pressure on you, but I recognize the
    gentleman from Michigan.
        Mr. Conyers. Thank you, Chairman Coble.
        I am trying to decide. I have opposed this bill in the
    past, and I really think I still do but I am going to look at
    it more carefully. I have not had that opportunity.
        Ms. Sims, could you take a moment and build up my
    opposition to the bill? I mean, what is our best case against
    this measure that is before us today?
        Ms. Sims. I believe, Mr. Conyers, that basically we go back
    to States rights, and I know that sometimes that issue,
    depending on what side of the coin you are on, is a good thing,
    and sometimes it is a bad thing. But I believe that
    fundamentally this whole issue around the ability for us to tax
    goes back to States rights.
        And I think that we look at this and I have heard in this
    conversation where individuals have said, you know, there is
    more of a reliance on cell phone services in our neighborhoods
    and this is the only source of communication that lots of
    people have and that it is going to unfairly impact these
    individuals. And I say to that I don't believe that that is so.
    I think that we tend to pull poor people out in an argument
    because that grabs at the heart strings, but I know for a fact
    that individuals who probably should not even have cell phones
    in their budgets do. And no one has ever gone to any place to
    purchase a phone and said how much are the taxes on this phone.
    That has never been the source of the conversation. When they
    purchase phones, they look at how many minutes I am going to
    get, what the package is going to give me, does it have
    Internet access, and what is all of this going to cost me.
        So I look at this and say, to be fair to States, we still
    should have the right to be able to impose this tax, and I
    don't think that at any level Congress needs to get into that
    fray. I think that it should be left with States and local
    municipalities to determine what their needs are and to be able
    to use this as a revenue-generating resource in their
    communities.
        Mr. Conyers. Isn't the tax in this bill regressive?
        Ms. Sims. Is it regressive? I don't believe so, no. Again,
    that is part of the argument, and I don't believe that that is
    so.
        Mr. Conyers. Well, do you not normally oppose regressive
    taxes?
        Ms. Sims. I sometimes oppose taxes. It just depends on what
    that tax is. I don't oppose necessarily--when we look at this,
    it is not so much about the tax itself as it is our ability to
    do it. Now, we may decide at our local level that this is not
    something we want to do, but that decision needs to be made
    locally. It does not need to be made at this level. And that is
    the entire argument that we have at this point. This is not
    going to unnecessarily impact these companies, and I don't
    believe, depending on a municipality's or locality's decision
    to impose the tax, that is a decision that they need to make. I
    don't believe it needs to be made at this level.
        Mr. Conyers. Mr. Chairman, can the time that I have
    remaining be added to the next Committee hearing when we have
    some more time? [Laughter.]
        Because I have never ended my time with this much remaining
    before.
        Mr. Coble. This is a case of first impression for me, John.
    [Laughter.]
        I don't know how to handle that.
        Thank you, Mr. Chairman. I appreciate that.
        The Chair now recognizes the distinguished gentleman from
    Georgia, Mr. Johnson.
        Mr. Johnson. Thank you, Mr. Chairman. I will gladly accept
    Chairman Conyers' offer of yielding his remaining time.
        Mr. Coble. I figured you might.
        Mr. Johnson. And you had about 10 seconds left on yours
    also. I would like to have that.
        Mr. Mackey, your credibility has been bolstered I think
    when you were asked about your former employment which was with
    the National Conference of State Legislatures?
        Mr. Mackey. Yes.
        Mr. Johnson. And you said you had been there for about 10
    years? But now you are partner with KSE Partners where,
    according to your statement, over the past 11 years I have
    worked with major wireless telecommunications providers to
    reduce or eliminate excessive discriminatory taxes on wireless
    services at the State and local level. You look too young to
    have worked for 11 years and before that 10 years with the
    State legislatures.
        Mr. Mackey. Thank you.
        Mr. Johnson. I mean, what was your position with the State
    legislatures?
        Mr. Mackey. I started with them in 1990 and finished in
    2000, and I was the chief economist.
        Mr. Johnson. So, yes, you had a job and then you left that
    job. Now you are with a lobbying group and you lobby for the
    wireless cell phone industry. Correct?
        Mr. Mackey. Correct.
        Mr. Johnson. I just wanted to clear the table of any
    unfairness that may have existed.
        But, listen, now Mr. Alford, you heard Mr. Franks who is
    the cosponsor of this bill talk about the fact that Congress
    has the ability to regulate commerce between the States. You
    heard that. Correct?
        Mr. Alford. Yes, sir.
        Mr. Johnson. And you agree with that.
        Mr. Alford. This is interstate commerce, if not
    international commerce.
        Mr. Johnson. So you agree with the notion that it is
    constitutional to have a health care reform bill that requires
    people to purchase insurance. Correct?
        Mr. Alford. I don't tie those two together.
        Mr. Johnson. Do you understand the issue that exists
    between the two, one central issue and that is the Federal
    Government's ability to regulate commerce? You say that it can
    in this context, and I will accept that. Can it also do so in
    the health care context?
        Mr. Alford. If I see that it can, I would agree with----
        Mr. Johnson. Well, have you agreed with it or have you
    disagreed with it?
        Mr. Alford. I don't accept the concept. We are talking
    about mobile devices, and now you are talking about health care
    which is a totally different animal.
        Mr. Johnson. I am just talking philosophically because Ms.
    Sims makes a great point about Federal intrusion into the
    affairs of State and local governments.
        Now, State and local governments--local government in
    particular needs every funding source that it can get to
    provide the people who lack resources and who live in
    communities racked with crime. They need that money to support
    their police departments. Don't they?
        Mr. Alford. They need less crime and that is done through--
    --
        Mr. Johnson. Well, I mean, how are you going to do that
    without having a strong police department?
        Mr. Alford. It is pretty simple, sir. It is just good
    management skills.
        Mr. Johnson. Good management skills will keep people from
    committing crimes.
        Mr. Alford. You don't tax people to death to lower crime.
        Mr. Johnson. But what about people who need to call an
    ambulance and perhaps the local government has a surcharge on
    cell phone use to supplement the 911 set-up so that people can
    call and ambulances can come in? Do you think that is a
    legitimate use of funds by government?
        Mr. Alford. Absolutely.
        Mr. Johnson. Well, why shouldn't the local governments have
    the ability to utilize that revenue stream to perform that
    particular obligation to its citizens?
        Mr. Alford. I have no problem with 911 being assessed on
    mobile devices, as it is.
        Mr. Johnson. But you would support and you would also, Mr.
    Mackey, a 5-year moratorium on raising revenues in that way.
        Mr. Alford. Yes, sir.
        Mr. Mackey. I would just point out that the legislation
    does permit 911 fees that are used for 911 purposes to be
    outside of the moratorium.
        Mr. Johnson. So you think that it is okay for the Federal
    Government to micro-manage the affairs of State and local
    governments to that degree.
        Mr. Mackey. I was just pointing out that 911 fees would be
    permitted even if the bill passed because they are excluded
    from the moratorium if they are used----
        Mr. Johnson. But what about police and fire? What about if
    the money goes for police and fire? Would they be grandfathered
    in, if you will, under this legislation?
        Mr. Mackey. Only the 911 fee purpose.
        Mr. Johnson. Only the 911 fee.
        And do you think that this bill, Ms. Sims, would become--
    though it is a 5-year moratorium, do you think it would pretty
    much become a permanent ban on the raising of cell phone taxes
    by State and local governments?
        Ms. Sims. I think it has the potential to do so, yes.
        Mr. Johnson. All right. I have no further questions, Mr.
    Chairman. Thank you.
        Mr. Coble. I thank the gentleman.
        The Chair will now recognize the distinguished gentleman
    from North Carolina, Mr. Watt, for 5 minutes.
        Mr. Watt. Thank you, Mr. Chairman. I confess the primary
    reason I came back was to welcome my constituent, Ms. Bernita
    Sims, to our Committee.
        Mr. Coble. If the gentleman would yield, I owe you an
    apology because I claimed sole possession of Bernita and I
    apologize for that.
        Mr. Watt. You stole her from me. You stole my constituent.
    [Laughter.]
        I will have you know that she is the Chairman of the 12th
    Congressional District of North Carolina.
        Mr. Coble. And I reiterate my apologies, Mr. Watt.
    [Laughter.]
        Mr. Watt. So you all can see we steal constituents too
    around here.
        I don't want to get into the global philosophical debate
    about taxation or non-taxation or what is covered under the
    Commerce Clause or not covered under the Commerce Clause.
        As I have expressed to my colleague, Ms. Lofgren, who is
    the primary proponent of this bill, below the philosophical
    level, there are some real serious problems with the
    legislation: some of the definitions of what a discriminatory
    tax is; the fact that it covers something called ``mobile
    service property'' which means all property used by a mobile
    service provider in connection with the business of providing
    mobile services ``whether real, personal, tangible, or
    intangible (including goodwill licenses, customers lists, and
    other similar intangible property associated with such
    business).''
        It is hard to have that global philosophical discussion
    about the Commerce Clause when you are down talking about taxes
    on real property, tangible property, which has generally been
    the provenance of local communities. And for us to be saying to
    local communities that they can't exercise their discretion in
    this area anymore is troublesome to me, not just because Ms.
    Sims is my constituent and some of her city council people are
    sitting in the audience with her. And I just left, when I went
    out, to go up and meet with the city council people from
    western Salem. But that is troublesome.
        It is troublesome to me that a new discriminatory tax is
    defined based on ``measured by the charges, receipts, or
    revenues from or value of'' various different things. So you
    have got a static formula here in this bill that kind of
    freezes us at current levels and disregards any kind of
    activity going forward into the future. And I think that is
    troublesome.
        Those are not global issues about whether this is covered
    by the Commerce Clause or whether--you know, some of my
    colleagues, as Mr. Johnson has pointed out, try to have it both
    ways. When it is convenient for them to say something is under
    the Commerce Clause, as it is here, then they say it is under
    the Commerce Clause. When it is not convenient for them to say
    it is under the Commerce Clause, such as they don't want any
    intrusion into health care reform by the Federal Government,
    then it is not under the Commerce Clause. You know, I don't
    know whether it is or is not under their philosophy.
        It is hard for me to evaluate these things on this kind of
    global perspective. I have to look at the wording in the bill
    that is before us, and this bill has a lot of work to be done
    on it before I can support it. Ms. Lofgren knows that. I have
    had this conversation with her last year. I wish I had been
    here for her testimony. I understood she testified earlier.
        But I don't really have any questions. I mean, we have had
    this discussion--what is this? About the third or fourth or
    fifth year in a row? We have had a bill of this kind trying to
    do this. And before that, then there was no taxes on the
    Internet and no taxes on rental cars and no taxes on something
    else. At some point, you have to draw the line and let local
    governments have some authority to tax something, otherwise the
    claim that the Big Brother Federal Government is a big, big,
    big brother becomes a self-fulfilling prophecy because you have
    left nothing for State and local governments to tax and gobbled
    it all up under the jurisdiction of the Commerce Clause. And
    there has to be some kind of limit to that even in the tort
    reform area, even in the taxation area.
        So we are struggling here to figure out what that
    limitation is. I think I heard everybody's testimony except
    part of Mr. Mackey's. I never really heard anybody deal with
    the exact content of the bill. It was all kind of a
    philosophical discussion about this, and I don't think we can
    really evaluate a piece of legislation on a philosophical
    level. You have got to get down into the nitty-gritty guts of
    the language, and that is where my troubles are very heavy.
        Mr. Johnson. Will the gentleman yield?
        Mr. Watt. I don't think I have any more time to yield to
    the gentleman. My red light----
        Mr. Coble. The time has expired, and I am told there is
    going to be a scheduled floor vote imminently.
        Let me say this before I recognize the gentleman from
    Illinois. Thank you, Mr. Watt.
        Mr. Quigley, did you want to be heard?
        Mr. Quigley. No. Thank you, Mr. Chairman.
        Mr. Coble. Thank you for coming.
        I thank you all for coming.
        Let me say this. I came here enthusiastically supportive. I
    am still supportive, but Bernita, maybe you may have brought me
    around a little bit. But I appreciate very much the testimony
    of all three witnesses. As Mr. Watt said, there clearly are two
    sides to this.
        And in closing, I want to thank the High Point City Council
    members and the distinguished city manager for you all being
    here and other local elected officials, if there are others in
    the audience, for the service that you all do each day.
        I have two statements I want to present, without objection,
    into the record. One is for the bill. One is against it. One is
    from the Speaker of the Minnesota House of Representatives.
        [The information referred to follows:]

                                   __________

        Mr. Coble. The second is a statement from the Federation of
    Tax Administrators. I would like to introduce these into
    evidence, without objection.
        [The information referred to follows:]

                                   __________
        Mr. Coble. Let me thank all of you for being here and
    particularly our witnesses.
        Without objection, all Members will have 5 legislative days
    to submit to the Chair additional written questions for the
    witnesses, which we will forward and ask the witnesses to
    respond as promptly as they can so that their answers may also
    be made a part of the record.
        Without objection, all Members will have 5 legislative days
    to submit any additional materials for inclusion into the
    record.
        With that, again I thank the witnesses and those others in
    attendance, and this hearing is adjourned.
        [Whereupon, at 2:37 p.m., the Subcommittee was adjourned.]

                                A P P E N D I X

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                   Material Submitted for the Hearing Record