[Congressional Record Volume 144, Number 85 (Thursday, June 25, 1998)]
[Extensions of Remarks]
[Pages E1230-E1231]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

                                 ______
                                 

                               speech of

                          HON. CHRISTOPHER COX

                             of california

                    in the house of representatives

                         Monday, June 22, 1998

  Mr. COX of California. Mr. Speaker, even prior to recent changes 
which enabled the Internet Tax Freedom Act to be endorsed by the 
National Associated of Governors, National Conference of State 
Legislatures, and other state and local government groups, the bill had 
already been endorsed by a number of prominent individual Governors, 
State lawmakers, State Treasurers and tax collectors.
  I'd particularly like to single out for thanks the support of 
California Gov. Pete Wilson, New York Gov. George Pataki, Massachusetts 
Gov. Paul Cellucci, Virginia Gov. Jim Gilmore, former Massachusetts 
Gov. Bill Weld, former Virginia Gov. George Allen, California Board of 
Equalization Chairman Dean Andal, former Federation of Tax 
Administrators president Ernie Dronenburg, Ohio Treasurer Ken 
Blackwell, Utah Senate Democrat Leader Scott Howell, and Maryland House 
Republican Leader Martha Klima. (Attachment # 1).
  The Internet Tax Freedom Act is strongly supported by President 
Clinton, who endorsed the legislation in February 1998 in a speech to 
high-tech executives. The legislation is also supported by the U.S. 
Treasury Department, which endorsed the legislation in May 1997 in 
testimony before Congress. I'd like to insert into the Record the 
following letter of support form the Deputy Secretary of the Treasury, 
the Honorable Lawrence H. Summers. (Attachment # 2).
  In addition to significant support from prominent stated officials 
and President Clinton, the Internet Tax Freedom Act has also garnered 
support from a broad and diverse coalition of individuals and 
organizations, consumer and taxpayer advocates, and service and trade 
associations representing businesses involved in the Internet 
community. I'd like to ask that several letters of support from these 
individuals and organizations be placed in the Record. (Attachment # 
3).

 STATEMENTS OF PROMINENT STATE LAWMAKERS AND OFFICIALS WHO SUPPORT THE 
                        INTERNET TAX FREEDOM ACT

       VA Gov. Jim Gilmore: ``Virginia's Internet community is a 
     thriving forum for commercial innovation and 
     entrepreneurship. Now is not the time to tax the infant but 
     promising marketplace of electronic commerce. Virginia must 
     foster the economic growth of the Internet rather than thwart 
     it with a state-by-state patchwork of burdensome tax 
     policies.''
       CA Gov. Pete Wilson: ``The Internet is a newly emerging 
     business tool that holds great promise for commercial uses, 
     and your bill will ensure that the Internet industry will 
     have a chance to develop without the market distortions 
     caused by a haphazard tax structure. Without that protection, 
     countless potential businesses will never have the 
     opportunity to succeed.''
       Former Federation of Tax Administrators President Ernie 
     Dronenburg: ``I am confident that the Internet Tax Freedom 
     Act's federally-imposed hiatus will create a unified and 
     concerted effort ultimately leading to a fair solution for 
     states and localities, the Internet industry and their 
     customers. The dramatic growth in the Internet industry 
     requires that action on this legislation should occur sooner 
     rather that later.''
       CA Tax Board Chairman Dean Andal: ``Instead of applying 
     traditional legal concepts to the taxation of electronic 
     commerce, state tax bureaucrats are becoming legal 
     contortionists in an attempt to tax Internet sales. The 
     resulting confusion among prospective Internet merchants and 
     service providers could substantially impede the development 
     of Internet commerce. Congress must act, as it should have 
     long ago, to clearly identify the boundaries of state 
     taxation of interstate commerce.''
       NY Gov. George Pataki: ``New York's efforts alone are not 
     enough. There must be a national effort to protect the 
     Internet from a myriad of new taxes and reporting 
     requirements that would hurt the development of the whole 
     industry and the jobs that go with it. Ordinarily such taxes 
     would be within the jurisdiction of the states. Since the 
     Internet does not respect traditional geographic borders, 
     Congressional action that would have a beneficial effect on 
     the development of on-line commerce in both New York State 
     and the nation is justified and desirable.''
       Former VA Gov. George Allen: ``The moratorium on Internet 
     taxation called for by this legislation has the potential to 
     boost the long-term growth and utilization of this technology 
     tool in Virginia and across the nation. As a strong supporter 
     of the Constitution's rich federalist tradition and a firm 
     believer in common-sense Jeffersonian conservative 
     principles, I recognize the apparent tension created by this 
     legislation between the important principles of lower taxes 
     and State sovereignty. I firmly believe, however, that the 
     proper balance exists in this bill between these two 
     seemingly distinct ideals.''
       Former MA Gov. Bill Weld: ``The real threat to 
     Massachusetts' future economic health is the taxing power of 
     hundreds of jurisdictions who are thinking only of maximizing 
     their tax revenue and not considering the creative energy and 
     potential of the Internet. The Congress has a constitutional 
     obligation to assess the various threats to the nation's 
     interstate commerce.''
       MD House of Delegates Republican leader Martha Klima: 
     ``States' rights are enormously protested by many of us in 
     the state legislatures, but I hope that in this instance, you 
     help protect us from ourselves and require a satisfactory 
     moratorium prohibiting state and local governments from 
     various forms of taxation.''
       UT Senate Democrat leader Scott Howell: ``A national 
     moratorium is consistent with efforts in several states to 
     discourage precipitous Internet taxation by local 
     governments. We also believe that the consultative approach 
     is a sensible way to provide breathing room to form a 
     federal-state and international consensus on Internet 
     policies. We understand that eventually there may be 
     sufficient commerce taking place on the Internet to be 
     considered as a source of tax revenues for states, but that 
     level of activity still lies several years in the future. In 
     the meantime, we think it is necessary for federal, state, 
     local, and even international policy makers to develop 
     broadly-agreed-to comprehensive policy.''


     
                                  ____
                                              The Deputy Secretary


                                              of the Treasury,

                                        Washington, June 23, 1998.
     Hon. Newt Gingrich,
     Speaker of the House, U.S. House of Representatives, 
         Washington, DC.
       Dear Mr. Speaker: As the House prepares to consider H.R. 
     4105, the Internet Tax Freedom Act, I welcome the opportunity 
     to share the Administration's views on this important 
     legislation.
       The Administration strongly supports a temporary and 
     appropriate moratorium on taxation of the Internet and 
     electronic commerce. The dramatic growth of the Internet and 
     electronic commerce is creating jobs and economic growth, 
     expanding customer choice, and making U.S. firms more 
     competitive in global markets. We would not want duplicative, 
     discriminatory or inappropriate taxation by 30,000 different 
     state and local tax jurisdictions to stunt the development of 
     what President Clinton has called ``the most promising new 
     economic opportunity in decades.'' Thus, any taxation of the 
     Internet and electronic commerce must be clear, consistent, 
     neutral, and non-discriminatory.
       At the same time, we must not allow the Internet to become 
     a tax haven that drains the sales tax and other revenues that 
     our states and cities need to educate our children and keep 
     our streets safe. In conjunction with this moratorium, we 
     need to establish a commission that will explore the longer-
     term tax issues raised by electronic commerce, and develop a 
     policy framework that is fair to states and localities while 
     allowing the Internet to earn its fair place in the ever-
     changing business world.
       The Administration strongly urges the House to act now to 
     pass this legislation as we work to accomplish these two 
     goals. The Administration will have suggestions for improving 
     the bill, but we believe that any outstanding issues can be 
     resolved in a House-Senate conference.
       The Office of Management and Budget has advised that there 
     is no objection from the standpoint of the Administration's 
     program to the presentation of this report.
           Sincerely,

                                          Lawrence H. Summers.


     
                                  ____
                                          Chamber of Commerce,

                                                    June 23, 1998.
     Hon. Christopher Cox,
     U.S. House of Representatives, Washington, DC.
       Dear Representative Cox: On behalf of the U.S. Chamber of 
     Commerce, the world's largest business federation, 
     representing more than three million businesses and 
     organizations of every size, sector, and region, we urge you 
     to support the Internet Tax Freedom Act when it comes before 
     the House floor.
       The U.S. Chamber views the successful development of 
     electronic commerce as essential to the future health of 
     American business. Today's patchwork of state and local taxes 
     on the Internet interferes with the free flow of electronic 
     commerce and, if current trends continue, will reduce the 
     potential of the Internet as a new frontier for commerce. The 
     Internet Tax Freedom Act's moratorium on state and local 
     taxes on the Internet or interactive computer services, will 
     ease the burden on electronic commerce.
       Passage of the Internet Tax Freedom Act would compliment 
     well the Senate companion bill, S. 442, which has a six-year 
     moratorium on all existing and future taxes on electronic 
     commerce. Making the Internet more accessible for small 
     business owners is a major concern for the U.S. Chamber and 
     we may consider using this vote in our annual How They Voted 
     vote ratings.
       The U.S. Chamber commends the House on its efforts 
     concerning this issue, and pledges

[[Page E1231]]

     to continue working with both Houses of Congress to enact 
     this landmark legislation. Successful passage of the Internet 
     Tax Freedom Act will be critical for the future of electronic 
     commerce and for the future of private enterprise.
           Sincerely,

                                              R. Bruce Josten.


     
                                  ____
                   Citizens Against Government Waste

                               Pork Chops


        Talking points on waste issues before the 105th Congress

 The Internet Tax Moratorium Act (H.R. 3529) ``Establishing a National 
                  Policy Against Taxing Information''

       On June 17, the House Judiciary Committee approved the 
     Internet Tax Freedom Act (H.R. 3529), a bill that imposes a 
     three-year moratorium on new taxes targeted at Internet 
     users. Rep. Chris Cox R-Calif.), a sponsor of the 
     legislation, praised the committee action, stating: ``We are 
     one step closer to establishing a national policy against 
     taxing information.''
       Electronic commerce is a rapidly growing industry. One-
     third of all Internet users bought products online within the 
     last year. Commerce on the Internet is expected to grow to 
     $327 billion by 2002 if undue regulation is not imposed, 
     according to Forrester Research Inc., a Massachusetts 
     consulting firm.
       More and more businesses are offering their services over 
     the Net--more than 25 percent of all small businesses have 
     already established an Internet presence, according to one 
     survey. Online stores, such as Amazon.com and Dell Computer, 
     are finding out that they can build real businesses selling 
     products online. Total Web-related revenues generated $24 
     billion in 1997, nearly double the amount from the previous 
     year.
       Total Web-related revenues are projected to reach $1 
     trillion by 2000, according to one industry analysis. Others, 
     including the accounting form of Arthur Andersen, have put 
     this figure between $150 and $600 billion. In 1996, the U.S. 
     Treasury Department projected more conservative online 
     revenues of $70 billion by 2000.
       A KPMG Peat Marwick survey found that more than half of 
     participating financial executives responded that ambiguous 
     state and local tax laws are already inhibiting their 
     involvement in electronic commerce. An alarming 20 percent of 
     executives were so confused by the tax situation that they 
     did not know if their companies were even subject to sales 
     and transaction taxes for the sale of products over the 
     Internet.
       The Internet Tax Freedom Act provides for tax-free Internet 
     access and prohibits state and local governments from 
     imposing taxes on Internet access charges. Taxes on Internet 
     access, online services, and ``bit taxes'' are expressly 
     banned for three years.
       The Internet Tax Freedom Act prevents multiple or 
     discriminatory taxes on the Internet and protects consumers 
     and vendors who buy and sell over the information 
     Superhighway.


     
                                  ____
                          The Internet Tax Fairness Coalition,

                                                    June 23, 1998.
       Dear Member of Congress: Today, H.R. 4105, the Internet Tax 
     Freedom Act, will be brought to the floor of the House. We 
     urge your support of this important legislation.
       As you know, the Internet Tax Freedom Act (ITFA) would 
     place a temporary moratorium on taxation of Internet access 
     and discriminatory taxation of electronic commerce. This 
     ``time-out'' will enable consumers, businesses, and local 
     governments to establish fair and non-discriminatory rules-
     of-the-road for the taxation of Internet commerce--rules that 
     will allow e-commerce to flourish both at home and abroad. 
     The members of our coalition feel this bill is essential if 
     America is to realize the full potential of the Internet and 
     electronic commerce. The alternative, which we have begun to 
     glimpse in the past two years, is a rush by numerous state 
     and local authorities to tax this exciting new medium, 
     leaving consumers confused or disadvantaged, and online 
     businesses facing a host of overlapping and discriminatory 
     tax demands.
       The Internet is changing the way Americans interact, shop, 
     do business and learn. By enacting the ITFA, Congress would 
     ensure millions of citizens that their use of the Internet 
     will not be stifled by overreaching or unfair taxation.
       The ITFA was reported out of both the Commerce and 
     Judiciary Committees without dissent, and enjoys strong, 
     bipartisan support. We hope you will lend it your support, as 
     well, when H.R. 4105 is considered today on the House floor.
       The Internet Tax Fairness Coalition (www.stopnettax.org) is 
     a coalition of leading Internet and high-tech companies and 
     trade associations that supports the fair and equitable tax 
     treatment of the Internet and online services. The Coalition 
     believes Congressional action is necessary to implement a 
     moratorium to address Internet-related tax issues.
           Sincerely,
                              The Internet Tax Fairness Coalition.


                                MEMBERS

       America Online, Inc., American Electronics Association, 
     American Hotel & Motel Association, American Society of 
     Association Executives, Americans for Tax Reform, Association 
     of Online Professionals, Business Software Alliance, 
     California Internet Industry Alliance, Charles Schwab & Co., 
     Inc., Citizens for a Sound Economy, CommerceNet, Commercial 
     Internet Exchange, Computer Software Industry Association, 
     Computer Technology Industry Association, DCI, Frontiers for 
     Freedom, Hewlett Packard, IBM, Information Industry 
     Association, Information Technology Association of America, 
     Interactive Services Association, International Mass Retail 
     Association, Microsoft Corporation, National Association of 
     Realtors, National Retail Federation, NCR Corporation, 
     Securities Industry Association, Silicon Valley Software 
     Industry Coalition, Software Forum, Software Publishers 
     Association, Ticketmaster, US Chamber of Commerce, US 
     Internet Council, US West.


     
                                  ____
                                                    June 23, 1998.
     Hon. Christopher Cox,
     The U.S. Capitol, Washington, DC.
       Dear Representative Cox: Congratulations on your efforts to 
     prevent unfair taxation of the Internet.
       The Internet and the development of electronic commerce 
     present difficult policy questions in areas as diverse as 
     tax, privacy, liability and telecommunications regulation. 
     However, we believe it is best to adhere to time-tested 
     principles like consumer choice, deregulation and 
     competition. We believe that tax policy should not 
     discriminate against electronic commerce.
       We have long believed that lower taxes and a smaller 
     government are keys to a successful and healthy economy. 
     American consumers and retailers are benefiting as a part of 
     the marketplace becomes electronic: the Internet provides 
     more consumer choice and is a growing market for consumers 
     from around the world.
       The laws that you create must be neutral and consistent. 
     Stated another way, government ought not choose one 
     technology over another or one type of transaction over 
     another, and consumers should know what to expect of our 
     laws.
       Again, we commend your efforts to ensure a neutral and 
     consistent tax policy that will not hamper development of 
     electronic commerce.
           Sincerely,
         Grover G. Norquist, President, Americans for Tax Reform. 
           James L. Gattuso, Vice President, The Competitive 
           Enterprise Institute. Paul Beckner, President, Citizens 
           for a Sound Economy. Thomas Duesterberg, The Hudson 
           Institute.

           

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