[Congressional Record Volume 144, Number 139 (Wednesday, October 7, 1998)]
[Senate]
[Pages S11682-S11688]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        INTERNET TAX FREEDOM ACT

  The Senate continued with consideration of the bill.
  The PRESIDING OFFICER. The Senator from Nebraska.


                           Amendment No. 3783

  Mr. KERREY. Mr. President, what is the order of business?
  The PRESIDING OFFICER. The pending business is the McCain amendment 
No. 3783 to amendment No. 3719.
  Mr. KERREY. Mr. President, I rise to speak against the McCain second-
degree amendment which would extend the moratorium on States taxing 
Internet transactions from 3 years to 4. The Finance Committee had 
knocked it back to 2 years. We thought that was a reasonable length of 
time, given that we allowed 15 months to restructure the IRS; 18 months 
in getting the Medicare Commission to do its work. We believed that 2 
years was a reasonable period of time. I was willing to go along with 
an extension of that from 2 years to 3. To go to 4 years is just much 
too long a time.
  This is an issue where the Federal Government is intervening, saying 
the States can't raise taxes in a certain way. This is, in my judgment, 
without precedent.
  I am willing to support this piece of legislation. I am willing to 
provide this moratorium so we can reach an understanding of how we will 
tax these transactions. But to allow 4 years--when we allow 
approximately 15 months in getting a commission to restructure the IRS, 
and 18 months in getting Medicare, Mr. President--is an unreasonable 
length of time.
  I hope my colleagues will vote against the McCain amendment. We have 
been contacted by our Governors who are actually asking us to go along 
with the Finance Committee, which was 2 years. As I said, I'm willing 
to support a compromise to 3 years, but 4 years, given the amount of 
time we have allowed for some things that are more complicated than 
this, it is unreasonable and too lengthy a period of time.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. BUMPERS. Mr. President, I agree mostly with what the Senator from 
Nebraska said. I prefer a 2-year moratorium.
  As the Senator from Nebraska stated, earlier this year, we passed a 
bill to reform the Internal Revenue Service. That legislation arose 
from the IRS Commission, which had a mere 15 statutory months to take a 
top to bottom look at, and make recommendations on, how to restructure 
the IRS. The entire commission process plus the legislating process 
resulted in a bill the President signed in just a shade over two years.
  The point I am trying to make is this: Fair taxation of the Internet 
is not more complicated than restructuring the IRS. The bill to which 
the two amendments presently pending are offered, is a bill that 
provides a 2-year moratorium. Two years is enough. To allow any more 
time would do nothing but prove that the U.S. Senate is knuckling under 
to the Internet industry.
  I see my good friend from Florida on the floor. He and I were both 
Governors. The Governors signed off on 2 years and now here is a letter 
saying they hope we will compromise on 3 years. ``Do not adopt,'' they 
say, ``the 4 year moratorium. Accept the compromise of 3 years.''
  I can tell you, Senator, if I were still Governor of my State, I 
would be squealing like a pig under a gate. Here a significant 
percentage of the State's entire tax base is being eroded, literally 
destroyed, by remote sellers, and the Internet industry and the 
Governors say let's compromise at 3 years. We are willing not to tax 
the Internet for a 3-year period. Think about that. In 3 years' time 
the estimates are that sales over the Internet will be $300 billion. We 
know that catalog sales right now are in excess of $100 billion.
  The States are saying they are willing to forgo their right to tax 
the Internet for 3 years. If there were no catalog sales, if there were 
no Internet, $400 billion worth of goods would be sold by Main Street 
merchants in America on which they would pay a 4, 5, 6, or 7 percent 
sales tax to support their community schools, their fire departments, 
their police departments, their landfills, paving their streets and 
everything else that cities have to do.
  Yes, if I were still Governor, trying to raise teachers' salaries, 
trying to making better schools, trying to increase the size of the 
police department and reduce crime in my community, if I were charged 
with the responsibility as mayor or Governor and had the responsibility 
of our children, our environment, all of those things, I would never 
sit still. I would never sit still for allowing these people to escape 
taxation. It has been a mystery to me for 7 years, as I have fought to 
try to give the States the right--not the mandate, but the right--to 
make remote sellers collect sales taxes. There are only 7,500 of them. 
The bill I offered would only affect 675 of them. We exempted everybody 
that did less than $3 million in business a year. I have been soundly 
defeated each time I have tried to correct this problem. And as I leave 
the U.S. Senate after 24 years, it is a mystery to me. Why do people 
vote to allow the tax bases in their States to be eroded when their 
Governors and their mayors and local officials are scrounging for money 
to improve schools and everything else?

  My State has a sales and use tax on all mail-order sales coming into 
my State. Do you know how much we collect on it? Zero. Do you know why? 
Because the tax is on the purchaser. I promise you there is not 1 in 
10,000 people in the State of Arkansas that even know that the tax 
exists. Of course, they don't pay it. Literally millions of dollars of 
goods come into my State every year on which not one cent of tax is 
collected, even though it is owed. But it is owed by the person who 
bought the merchandise, and he or she doesn't even know the tax exists.
  When we try to say to the States--Senator Graham, Senator Dorgan and 
myself--that we are going to help you, we want to honor what you are 
trying to do, they have all championed my bill. They haven't been very 
effective, but the Governors and mayors have all championed my 
legislation every year I have offered it. But the U.S. Senators sit up 
here, with all their arrogance, and say to their legislatures, 
Governors and mayors: We don't care what you want, we will decide what 
you get. For 7 years, so far, and much longer than that, we have said 
you get nothing. We are not going to let you tax mail-order sales. So 
quit talking about it. You might as well quit talking about it. I think 
30 or 35 votes is my high-water mark in trying to address what I 
consider a terrible problem.
  The Presiding Officer heard me talk a while ago about how the first 
thing I did when I came here was to try to stop the manufacturing of 
CFCs that are destroying our ozone. We all know the ozone is being 
systematically destroyed, but back then we had to study it. It was just 
a theory. As I said, the best way to kill something in the U.S. Senate 
is to say let's study it. If you want to never hear of something again, 
get an amendment adopted that says, no, you can't do that anymore, you 
have to study it.
  That is what we are doing here. We are saying to the mayors and 
Governors and legislatures of our respective States--45 of the 50 
States already have a tax, but it is on the consumer and nobody knows 
it, and they are desperate. The reason I mention that again is because 
I will be sitting down in Arkansas, or someplace, a few years from now 
and this thing will crescendo and will reach a level where the Senate 
won't have any choice but to deal with it and to give the States that 
right, because if they don't their schools are going to start 
crumbling, their police departments are going to go to pot, as are 
their fire departments.
  Did you see in the paper this morning where Amazon.com's stock is 
selling for over $100 a share, and they haven't made a nickel profit 
yet? It is estimated they are selling two-thirds of all the books sold 
over the Internet, and their sales are growing exponentially. I have a 
lot of friends that never buy a book from a local bookstore anymore. 
They buy it over the Internet. Not only do they get a little discount, 
they pay no sales tax on it. So this morning's paper says Amazon.com 
has become so terrific and so powerful that a publishing house is 
buying Barnes & Noble's on-line system. They have a third and 
Amazon.com has two-thirds. The publishing house knows that they are

[[Page S11683]]

going to be put out of business if they don't get with the program, 
because Amazon.com is going to be selling all the books in the country. 
So they are buying Barnes & Noble's on-line book service.
  That is good for the consumers, but it is terrible for State and 
local government. Yesterday afternoon, I offered an amendment to say at 
least make the Internet state that the merchandise you buy may be 
subject to local taxation. You think about that. Senator Dorgan voted 
with me, Senator Graham voted with me, and we got 27 votes. They don't 
even want the people to know that there is a sales tax on which the 
purchaser is liable.
  Then, this morning, we finally won a little battle. There was an 
amendment here that I could not believe that said you can't study this 
issue. Think of that. Normally you use studies to kill things. This 
morning, we get an amendment saying you can't even study it. I am 
telling you, I don't know what the Internet and these mail-order 
catalog houses have on the Senate, but it must be something. Larry 
Flynt ought to be offering a million dollars to find out the answer to 
that one. So here we are standing around debating an issue, the merits 
of which are not even in question. Everybody knows that we ought not to 
be giving a free ride to the to people who are selling merchandise by 
the hundreds of billions of dollars over the Internet and eroding the 
tax base of almost every State in the Nation. I am for computers; I am 
for technology, but I am not for allowing them to destroy the tax base 
of the states.
  Mr. DORGAN. Will the Senator yield for a question?
  Mr. BUMPERS. Yes, I am happy to.
  Mr. DORGAN. Mr. President, I have listened to the Senator from 
Arkansas, and I am reminded again why we are going to miss him when he 
is gone. He fights hard for the things he feels strongly about, and 
this has been one of them for many years.
  This vote coming up, probably in 20 minutes, is a very simple vote. 
This issue started with the notion that people said, gee, we must do 
something here to provide a shield so that nobody would impose punitive 
taxes on the Internet and retard the growth of the Internet. Lord, have 
you ever seen anything grow like the Internet and Internet commerce? 
That is mushrooming so fast you can't get your arms around it. And they 
are saying we have to be sure that we protect them.
  Well, in the matter of protecting them, they have created a 
moratorium on the ability of State and local governments to impose 
taxes. The vote that we are going to have in a moment is regarding how 
long that moratorium is going to last. The committee on which I serve 
reported a bill out that said let's have a moratorium for 6 years. I 
didn't vote for that. The House of Representatives said let's have a 
moratorium for 3 years. The Senate Finance Committee said let's have a 
moratorium for 2 years. The underlying bill will now say 3 years. The 
amendment we are going to vote on says no, that is not enough; we need 
a 4-year moratorium. The Senator from Arkansas will be fishing in 
Arkansas, and at the end of 4 years we will have folks--I guarantee 
it--who will stand here on the floor of the Senate, and they will say, 
``We have got to have an extender. We have to extend this moratorium.'' 
How long? Another 4 years. How about permanently? Make it a permanent 
extender. That is exactly what is going to happen.

  We ought to decide as a Senate 3 years--no more. And at the end of 3 
years we are done. If we can't figure it out by the end of 3 years, 
there is something wrong with us.
  I ask the Senator from Arkansas. Does he agree that this ought not be 
a circumstance where we create a tax system that says, ``Oh, by the 
way. We will favor folks doing this over a computer,'' which means we 
will penalize the folks that hire the folks on Main Street who rent the 
building, put the inventory in, open their door early in the morning, 
and hold themselves open for business. And we say to them that we will 
penalize them because the other folks don't have to comply with the tax 
laws when they come in and compete with them.
  That is what this fight is about. The amendment here is going to be 4 
years or 3 years. There will be a lot of folks who come to the well of 
the Senate and say, ``What is the issue?'' The issue is that for every, 
I assume, 4 years, or for every 3 years. But what does good sense tell 
us ought to be the case here? Three years maximum, and then no more. 
Then let's have a tax system that is fair to everybody regardless of 
how they are selling--off the Internet, catalogs, or Main Street. Let's 
be fair with respect to this tax system of ours.
  Let me conclude by saying I worked on this issue when I was in the 
House of Representatives on the Ways and Means Committee for 10 years. 
I know what the problem is. You start talking about this issue, and the 
first thing you know you have a million friends--not friends. You get a 
million postcards, because everybody who buys from a catalog seller is 
told to send a postcard to this person, or that person, and they are 
told that person is trying to increase your tax. Of course, that is not 
true. Nobody is talking about any additional taxes. There is no 
increase in tax. This is a different issue--the moratorium. So you get 
a million cards out there, or 10 million cards that affects all of the 
interests that are voting.
  Mr. President, again, let me say to the Senator from Arkansas that 
his dedication to this issue is important, and he will leave a long and 
lasting impact on the Senate. I think the most immediate impact and the 
most immediate presentation now is a good vote so we can at least turn 
back the 10 years. I think that would be a good public service.
  Mr. BUMPERS. Mr. President, the distinguished Senator from North 
Dakota, my good friend, has been a steadfast ally with me in this 
battle for many, many years, because the State of North Dakota took 
this case to the Supreme Court. And the Supreme Court said we are 
reversing ourselves in previous decisions. If the Congress wants to 
give the right to the States to collect this tax, they can now do it. 
But Congress has to do it. Congress has steadfastly refused to do what 
the Supreme Court told them they had the authority to do.
  I will be sitting down in Arkansas fishing 3 years from now, and I 
assume that is probably the number of years we are going to adopt in a 
few minutes. I am not going to vote for it. I am not going to vote for 
4 years. I am not going to vote for the bill either. It has a 2-year 
moratorium. As far as I am concerned, that is enough.
  But having said that, I will be down there fishing. I will be 
watching C-SPAN. I will smile to myself when somebody gets up as though 
it is the most original idea that was ever created, and says, ``Mr. 
President, I send an amendment to the desk that would create a 
commission to study taxation of the Internet. We have had 3 years to 
study it, but we are really not quite finished and we don't know what 
havoc this is going to create. We need to get the National Academy of 
Sciences, the Council of Economic Advisers, or the GAO. We need 
somebody to study this a while longer.'' They will buy it again. I can 
tell you that 3 years from now the makeup of this place will not change 
that much. They will buy it again, and we will extend it again. But 
just like the ozone layer, the time will come when everybody knows that 
you can't do it anymore, because the States and the cities can't afford 
to let this go any longer. They are barely making ends meet the way it 
is. That is the way it goes. If you do not learn anything in 24 years 
here, you will learn the way the game is played.
  Mr. President, I am pleased to be able to take a firm stand on an 
issue that I felt strongly about for so many years. As I say, I don't 
intend to vote for a second-degree amendment which would take it to 4 
years. I don't intend to vote for the second-degree amendment that will 
take us to 3 years. The bill, as it came out of committee and came to 
this floor provided for a 2-year study. That is too long. They don't 
need 2 years. I am going to vote for the bill because 2 years is much 
too long anyway.
  I don't believe there ought to be a tax exemption for anybody who is 
competing with Main Street merchants.
  Let me add one further thing. The Senator from North Dakota piqued my 
memory on this. Outside of being the entire Charleston South Franklin 
County Bar Association, I was also a Main Street merchant. I can tell 
you

[[Page S11684]]

even then, 40 years ago, my biggest competitor was the catalog. I 
detested it. I was a Main Street merchant having to organize the 
Christmas parade, be president of the Chamber of Commerce, and trying 
to attract industry into town so we could create a few jobs. I paid 
sales tax on every dime I sold, all of which went for the schools of 
our State and our city, which went to the police department, which went 
to the fire department, which went to help us pave our streets, take 
care of our landfill, dispose of our garbage.
  Those are the things that Main Street merchants do in this country. 
We are saying to them and the National Federation of Independent 
Businesses--NFIB. I don't want to get started on them. As far as I am 
concerned, they represent big business, and not small business. But I 
think they are for this bill. It is the most damaging thing to Main 
Street merchants I can imagine. I know. I used to be one.
  I yield the floor.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the time 
until 5:30 be equally divided for debate on the pending McCain-Wyden 
amendment, and at the conclusion of the debate the Senate proceed to 
vote on or in relationship to the amendment.
  I further ask that no second-degree amendments be in order prior to 
the vote.
  Mr. GRAHAM. Mr. President, is there currently a limitation on debate 
on this amendment?
  The PRESIDING OFFICER. There is not.
  Mr. GRAHAM. I object to the unanimous consent.
  The PRESIDING OFFICER. Objection is heard.
  The Senator from Arizona controls the floor.
  Mr. McCAIN. Mr. President, I ask the Senator from Florida what he 
wants.
  Mr. GRAHAM. I want just--Mr. President, I would also settle----
  The PRESIDING OFFICER. The Chair did not hear the Senator from 
Florida.
  Mr. McCAIN. I ask unanimous consent to engage in a colloquy with the 
Senator from Florida.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. What time agreement will the Senator from Florida agree 
to?
  Mr. GRAHAM. I would like to complete my remarks, and then we will 
consider what will be an appropriate time limitation.
  Mr. McCAIN. Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida is recognized.
  Mr. GRAHAM. Thank you, Mr. President.
  Mr. President, I go back to the same point that I have made on two or 
three occasions in the debate of this legislation. That is to remind us 
what we are doing. We are doing quite an exceptional thing. We are 
telling to 50 States and multiple local jurisdictions that their legal 
authority to establish what is the appropriate fiscal policy for their 
citizens is going to be preempted. We are telling them for this purpose 
that they will be precluded from exercising a judgment that they might 
otherwise feel is in the interest of their residents and citizens.
  We are doing this in order to provide a pause, a time-out, a brief 
period in which to sort out the application of public policy, 
particularly as it relates to tax policy, and the new technology of the 
Internet.
  I think that we ought to accept the fact that the presumption should 
be that that preemption of our brethren at the State and local level 
should be respectfully as brief as possible. We should not easily or 
excessively indulge in this kind of behavior, particularly when the 
consequences of this behavior are so obvious and perverse.
  I have used the analogy, and I will use it again, of what we are 
doing to that Main Street merchant, as if to say that Main Street had a 
north side and a south side. On the north side, all the people who come 
to buy their hardware, their clothes, their shoes would be responsible 
for paying the legislated State and local sales tax, and they would be 
responsible for collecting it and then remitting it back to the 
appropriate tax collection authorities. That is not adding a new tax; 
that is the administration of a tax which the democratic processes in 
Little Rock or Tallahassee or Salem or any other State capital have 
prescribed as a means of funding the essential responsibilities of 
local and State government. We are saying that on the north side that 
collection has to take place. But on the south side, which is a virtual 
south side because it doesn't really exist other than in cyberspace, 
because it is reached through the Internet, there is not such a 
responsibility to collect on exactly the same hardware, shoes and 
clothing that we now ask the north side merchant to collect.
  That is a fundamentally unfair proposition. We would be shocked and 
appalled if someone were to suggest that as a de novo proposition. But 
that is what we are doing with this Internet Tax Freedom Act.
  The second consequence that we are accepting as a result of this 
legislation is that we are about to drive a major hole into the ability 
of local governments and States to finance their most basic 
responsibility--police who secure our neighborhoods, fire officials who 
protect us in times of emergency, and most specifically our schools. I 
will talk in a moment about what has happened to education during this 
105th Congress, but I suggest that of all the things we have done or we 
have not done, the most important education bill that we are going to 
consider in 1998 is the one that is before us today.
  Now, the question that I ask, and I hope that we receive a response, 
is why 4 years? I was reticent to object to the unanimous consent to 
call for a vote at 5:30, but I felt that we ought to allow enough time 
for the proponents of the 4 years to make the strongest case they could 
to overcome what I think should be the very strong presumption against 
making this moratorium excessive, against lengthening by an unnecessary 
day, week, month or year the time in which we will allow this 
unfairness in the marketplace and this threat to the ability of State 
and local governments to carry out their fundamental functions to 
remain in existence.
  Let's talk about what had been some appropriate times for major 
tasks. Well, we find in Genesis, chapter 1 and chapter 2, that God 
created Heaven and Earth in 7 days: ``In the beginning, God created the 
Heaven and the Earth, and the Earth was without form and void and 
darkness was upon the face of the deep, and the spirit of God moved 
upon the face of the waters.'' And 6 days later Earth, the oceans, the 
mountains, the valleys, the streams, all of the fishes, the animals, 
and finally man and woman themselves had been created by God--in 7 
days, according to Genesis, chapter 1 and 2. And yet it is going to 
take us 48 months to figure out what the appropriate tax policy should 
be for bits and bytes and all of the terminology of the Internet.
  We have some more recent examples that have already been cited. 
Senator Kerrey said the commission which was responsible for looking at 
the Internal Revenue Service, clearly one of the most complex agencies 
administering one of the most complex set of laws that man has ever 
known, was able to conduct its work in 15 months--3 months less than 
its original charter, and its work was so good that it formed the basis 
of the Congress this year enacting the most significant reform of the 
Internal Revenue Service since it was created. So the fact that they 
had an 18-month charter to accomplish this very complicated task did 
not degrade the quality of the ultimate recommendations and the 
receptivity of Congress to those recommendations.
  We have currently at work a commission studying Medicare. That 
commission, which was created by this Congress in 1997, was given 18 
months to do its work. Medicare is one of the largest and most complex 
programs that this Congress has ever created. It serves to finance the 
health care of over 35 million Americans. It is a significant part of a 
health care industry which represents approximately one-seventh of our 
gross domestic product. We decided that 18 months was the appropriate 
time to study the complex Medicare system, and yet it is going to take 
us 4 years, according to this amendment, to decide what should be the 
appropriate way for the State of North Carolina to levy taxes on 
Internet activities that affect the citizens of the State of North 
Carolina.
  The almost absurdity of this 4-year period leads one to suspect--and 
we are not by nature a suspicious, certainly

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not a cynical people, but to suspect--that there are motivations here 
other than allowing a sufficient amount of time, the amount of time 
that we normally anticipate would be required to get a undergraduate 
degree from one of our great colleges or universities, why it would 
take 4 years in order to study this issue.
  Let me suggest what I think some of the motivations might be. One is 
that it is going to provide an extended period of freedom from taxation 
during which there will be new technological applications of the 
Internet which will have the effect of further widening the gap between 
Main Street and cyberspace and further exposing local and State 
government to an erosion of their tax base.
  I spoke yesterday about the new technology of Internet telephony, 
using the Internet as the means of making long distance telephone calls 
rather than the traditional line system that we use today. The effect 
of that is going to be that that Internet telephony will now escape 
both Federal as well as State taxation for the period of this 
moratorium.
  I read a statement yesterday by a research group which estimated that 
by early in the next century potentially 10 percent or more of long 
distance telephone calls would be made through Internet telephony.
  A second reason for the 4 years might be to develop a political 
coalition. There are going to be a lot of folks who are going to find 
it is awfully nice and convenient to not collect this tax. It is 
awfully nice to have your sales explode, as it was stated that 
Amazon.com's book sales are exploding. They surely ought to explode. 
They have a 6- or 7-percent market advantage over that independent 
bookseller in Fayetteville, AR. They ought to beat the pants off the 
bookseller. And now we have the situation where the publishers, not 
going through any intermediary, are going to be selling directly on 
line. That is great for the American consumer. They are going to have 
access to a lot of literature and other books at a very attractive 
price, but the price that society is going to pay is imbalance in the 
commercial marketplace and a degradation of our police, fire and 
educational services.
  We, also, as a consequence of this, are going to frustrate local 
choice. I said this morning that the morning newspaper was filled with 
articles which are relevant to this debate. This is one that might be 
of particular interest to our good friend from Arkansas, Senator 
Bumpers, in which there is, apparently in Arkansas today, an effort 
being made--and, by the polls, a pretty effective effort--to repeal the 
property tax in Arkansas and to substitute for the property tax a 
significant increase in the sales tax. It appears on page A-3 of the 
Washington Post of October 7 under the headline, ``Grass-roots Group 
Takes Aim At Arkansas Property Tax.''
  I don't know whether this is a good idea or bad idea, for Arkansas to 
be suggesting this. Apparently the Governor and a lot of other folks 
think it is a bad idea. But I think we might agree, whether the idea is 
good or bad, that it ought to be an Arkansas idea, as to how Arkansas 
wants to organize its State and local taxation. We are about to say in 
this bill that we are going to make it more difficult for States to 
have that range of choice. As we erode the base upon which the sales 
tax is applied, the opportunity for States to do what Arkansas is 
considering, substituting sales for property tax, is going to be much 
more difficult because there will be less to substitute with.
  So we are embarked along a path which is not just a temporary one but 
has the potential of driving a permanent wedge between the Federal 
Government and States as we rather casually preempt their traditional 
political choices of how to organize their tax base.
  But those consequences, I think, pale in terms of the final one to 
which I have already alluded. That is that this is the most important 
education bill of 1998.
  Mr. President, 1998 started with a lot of enthusiasm for education. 
The President in his State of the Union talked about reducing class 
size, particularly in the primary grades, so that children would not 
have to go to excessively overcrowded classrooms. That was an issue 
that struck home directly to me.
  My third daughter, Suzanne Gibson, was a wonderful kindergarten 
teacher. The last year she taught kindergarten at a new elementary 
school in Miami, Dade County, FL, there were 38 students in her class--
38 students in a kindergarten class. My daughter is a wonderful 
teacher. She now is the mother of triplets, so she is getting to apply 
what she learned with those 38 students in her class, but I defy anyone 
to educate thirty-eight 5-year-olds. You may provide custodial services 
but you do not educate thirty-eight 5-year-olds.
  So we started this year in Washington with a hope and some 
expectation that the Federal Government might reach out in a hand of 
friendship and partnership to States and school districts and millions 
of young boys and girls, and help them with their educational needs. We 
did not pass the bill that would have allocated an additional 100,000 
teachers with Federal assistance in order to reduce class size at the 
primary grades. Although we had a good experience with a similar action 
with community police, where we are helping to finance 100,000 
community police in a very positive contribution to enhance law 
enforcement, we did not do that as it relates to primary education.
  Then the President had another proposal for the Congress to assist in 
helping school districts be able to build enough schools and maintain 
the old schools so that we could have the classrooms that would be 
required to significantly reduce class size, particularly in the 
primary grades. We did not pass that bill either.
  So, now on the 7th of October, with some 2, 3, or 4 days left in this 
session, we are coming to the most important education bill we are 
going to pass. What is it going to do? Is it going to help States and 
local school districts carry out their most important responsibility? 
No. What it is going to do is to undercut their existing revenue and 
make it even more difficult to even keep class sizes down to the 38-to-
1 level in the kindergarten of Miami, Dade County, FL.
  So, I believe there is absolutely no justification for making this 
moratorium a day longer than is required to carry out what is a fairly 
straightforward task. This certainly is no reason to argue it is going 
to take 4 years, but I look forward to the argumentation that maybe 
will persuade me as to why 4 years are required for this task when God 
created Heaven and Earth in 7 days and we reformed the IRS in 15 
months.
  Mr. President, I want to vote for this bill because I believe that 
there is a persuasive argument that a brief moratorium, with the time 
used by an intelligent group of people who represent all the interests 
involved, and against a charter which allows them to look at all the 
relevant improvements, could play a useful purpose. But I could not 
support a 4-year moratorium, with all the pernicious effects it would 
have, without any contribution to a greater understanding of the issues 
involved in Internet taxation.
  So, I urge defeat of this amendment. I urge adoption of the position 
taken, thoughtfully, by the Senate Finance Committee, which was for a 
2-year study. If that is the provision, I will support this 
legislation. Otherwise, I fear for the consequences.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCain. Mr. President, I ask unanimous consent that there be 
remaining 10 minutes equally divided between the Senator from Florida 
and the Senator from Oregon, and that following that there be a vote on 
the McCain amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Oregon.
  Mr. WYDEN. Mr. President, the McCain-Wyden amendment is, of course, a 
compromise. The bill that came out of the Senate Commerce Committee was 
a 6-year bill. The bill that came out of the Finance Committee was a 2-
year bill. So there was an effort to bring the parties together around 
4 years. But that is not what is really important. What is really 
important is the timetable that is going to be essential to do this job 
right.
  Mr. President, 18 months after the date of enactment, the commission 
is going to make its recommendations--May of 2000. The moratorium under 
the

[[Page S11686]]

finance bill ends in October of 2000. That means that there is less 
than 6 months to act on the recommendation before the timeout would 
end. Some States, a number, have legislatures that are not meeting in 
the year 2000. I am sure my friend and colleague, Senator Graham, would 
be interested in knowing that Arkansas, Maine, Minnesota, Montana, 
Nevada, North Carolina, Oregon, Texas, North Dakota, and Vermont all 
have legislatures that do not meet every year. So we are going to have 
a situation, it seems to me, where there will be essentially no time in 
order for a legislature to thoughtfully look at these issues.
  The Senator from Florida says that Chairman McCain and I are ramming 
this bill through the U.S. Senate. We have worked on it, now, for 18 
months. We have made more than 30 separate changes in an effort to try 
to address the concerns of the Senator from Florida. There has been 
discussion about how this would create a tax haven on the Internet. Let 
us be very clear about what happens during the moratorium. If a person 
walks into a store and purchases a sweater in a jurisdiction where 
there is a 5 percent sales tax, if they order that sweater over the 
Internet, they pay exactly the same tax, exactly the same fee--
technological neutrality.
  The Senator from Florida says that the apocalypse is at hand because 
there is going to be a huge reduction in revenue at the State level. 
When we began this bill with legislation that was much more 
encompassing than the one we are considering now, the Congressional 
Budget Office could not even initially score it. It then came back with 
a projection of less than $30 million.
  Nothing is being preempted here. The States and localities are 
allowed to treat the Internet just as they would treat anything else.
  At the end of the day, the kinds of people who will benefit from this 
are the senior citizens in Florida, for example, the home-based 
businesses in Oregon, people who are trying to use the Internet as a 
way to advance the chance to build a small business and particularly 
see the Internet as a great equalizer.
  They are not going to be in a position, those home-based businesses, 
to compete with the corporate giants. But if we create across this 
country a crazy quilt of State and local taxes where each jurisdiction 
goes off and does its own thing, it is going to be very difficult for 
those entrepreneurs, senior citizens, handicapped and disabled people 
to go out and hire the accountants and lawyers that would be necessary 
to carry out the vision of the Senator from Florida of the Internet. 
What we need to do is come up with some sensible policies, and it is 
going to take some time.
  If somebody from Florida, for example, orders Harry and David's fruit 
in Medford, OR, using America Online in Virginia, pays for it with a 
bank card in California, and ships it to their cousin in New York, we 
are talking about a completely different kind of commerce than we have 
seen in the past. Let us take the time to do it right. Without the 
amendment that the Senator from Arizona and I are offering--
  Mr. GRAHAM addressed the Chair.
  Mr. WYDEN. I believe I have the floor.
  The PRESIDING OFFICER (Mr. Abraham). The Senator has the floor and 
has approximately 35 seconds remaining.
  Mr. WYDEN. Thank you, Mr. President.
  Without the amendment that the Senator from Arizona and I are 
offering, all of those legislatures that I mentioned specifically, 
which we talked about initially more than an hour ago, are going to 
have to act immediately in order to carry out the spirit of this 
commission. I can't believe that is what the Senate wants, and I am 
very hopeful that the Senators will join groups like the National 
Retail Federation, the Information Industry Association, the Home 
Business Association, and scores of other small business groups 
supporting the amendment.
  The PRESIDING OFFICER. The Senator's time has expired.
  The Senator from Florida.
  Mr. GRAHAM. Will the Senator yield for a question?
  Mr. WYDEN. I will be happy to.
  Mr. GRAHAM. Mr. President, I ask unanimous consent for 2 minutes for 
the purpose of a colloquy.
  The PRESIDING OFFICER. The Senator from Florida has 5 minutes 
allotted to him. Does he wish to have the additional 2 minutes 
allocated to the Senator from Oregon to be used for questions?
  Mr. GRAHAM. I do.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered. The Senator from Oregon has 2 
minutes for the purpose of a question.
  Mr. GRAHAM. Mr. President, I say to the Senator from Oregon, in the 
effort to describe the equality of treatment, he used the example that 
if a person went into a local bookstore and bought a book, they would 
pay and the bookstore seller would be responsible for collecting and 
remitting the appropriate State and local sales tax.
  Mr. WYDEN. If the Senator will yield for an answer, if that is 
current policy in that State. I know that the Senator from Florida is 
very anxious to resolve mail-order and catalog sales tax questions. The 
bill does not resolve that.
  Mr. GRAHAM. The answer to that question is yes, the merchant would be 
responsible for collecting and remitting the sales tax.
  If the same sale were made on Amazon.com, would Amazon.com be 
responsible for collecting and remitting the sales tax?
  Mr. WYDEN. Certainly that would be the case if it was done instate 
where you had a current policy with respect to sales tax. But if it 
applies to other States, if other States have a particular tax policy, 
if they do business involving the Internet, we apply exactly the same 
rule.
  Mr. GRAHAM. If a person in Florida has a sales and use tax, could it 
require Amazon.com to collect from a Florida resident, who ordered a 
book in Seattle, the Florida sales tax?
  Mr. WYDEN. I am not up on Florida's policy, but we do not do anything 
different with respect to the Internet than we do in any other area. 
The hearing record in the Commerce Committee--I will be glad to share 
it because I cited many of those examples--and the Finance Committee 
makes it very clear that the Internet gets no preference, the Internet 
suffers no discrimination, and that is the point of the bill.
  Mr. GRAHAM. The answer is no, that the discrimination is the fact, 
that currently the local Main Street merchant is required to collect 
the tax, but the distant remote Internet seller is not, and we are 
about to make that a 4-year institutionalized--
  Mr. WYDEN. Will the Senator yield?
  The PRESIDING OFFICER. The 2 minutes have expired.
  Mr. WYDEN. I ask unanimous consent that the Senator have 1 additional 
minute. I want to engage him in a question.
  The PRESIDING OFFICER. The Senator from Florida has 5 minutes.
  Mr. GRAHAM. I yield another minute for the question.
  Mr. WYDEN. I say to my friend from Florida, what you described is 
your desire--and I know it is sincere--to overturn the Quill decision. 
What we are saying in this bill is that we are trying to deal with a 
different set of economic issues, and if we don't deal with these 
questions of Internet policy now, I and the Senator from Arizona submit 
that we will be dealing, just as we are now with the mail-order 
questions, with these issues with respect to the Internet. Let us try 
to get out in front of these issues facing the digital economy rather 
than duplicating the mistakes we made with respect to mail-order and 
catalog sales.
  I thank the Senator for the time.
  Mr. GRAHAM. In answer to the question, the Quill opinion gave to the 
Congress the responsibility to authorize the States to require the 
distant seller to collect and remit the tax. Thus far, as Senator 
Bumpers' long, valiant, but thus far unsuccessful attempts illustrate, 
Congress has been unwilling to do so. I suggest that indicates what is 
the likely political result of this new issue of how we are going to 
tax the Internet.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Florida has an additional 3 minutes 20 seconds if he wishes to use that 
at this time. Is the Senator prepared to yield back his time?
  The Senator from Florida has 2 minutes remaining. Does he wish to 
yield back his time?

[[Page S11687]]

  Mr. GRAHAM. Mr. President, I have no extended remarks. I still don't 
think we have heard the answer to the question of why does it take 4 
years to do this study. The fact is that when this report is available, 
whatever time, the principal recipient of that report will not be the 
individual 50 State legislatures, it is going to be us, because in 
order to implement the recommendations that would allow States to hold 
the distant seller responsible for collection, we know it is going to 
require action by the U.S. Congress.
  We are in session just about all the time. So whatever date we set 
for this report to be submitted, we will likely be here, or close to 
being here, to receive it and to commence the process to deal with it.
  I still have not heard any rationale as to why we should continue 
beyond the minimal time necessary for the inequity of the Main Street 
merchant and the vulnerability of State and local governments' capacity 
to finance their police, fire, and schools that an extended moratorium 
implies.
  Thank you.
  The PRESIDING OFFICER. The Senator from Florida still has 1 minute 30 
seconds.
  Mr. GRAHAM. I yield back the remainder of my time.
  The PRESIDING OFFICER. The remainder of time has been yielded back or 
used on both sides.
  Mr. McCAIN. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the McCain 
amendment No. 3783. The yeas and nays have been ordered. The clerk will 
call the roll.
  The assistant legislative clerk called the roll.
  Mr. NICKLES. I announce that the Senator from Pennsylvania (Mr. 
Specter) is necessarily absent.
  Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) and the 
Senator from South Carolina (Mr. Hollings) are necessarily absent.
  The PRESIDING OFFICER (Mr. Faircloth). Are there any other Senators 
in the Chamber desiring to vote?
  The result was announced--yeas 45, nays 52, as follows:

                      [Rollcall Vote No. 305 Leg.]

                                YEAS--45

     Abraham
     Akaka
     Allard
     Ashcroft
     Baucus
     Bennett
     Boxer
     Burns
     Campbell
     Coats
     Cochran
     Coverdell
     Craig
     D'Amato
     DeWine
     Dodd
     Domenici
     Faircloth
     Grams
     Gregg
     Hagel
     Hatch
     Inouye
     Kerry
     Kyl
     Lautenberg
     Leahy
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Murkowski
     Murray
     Nickles
     Robb
     Santorum
     Shelby
     Smith (NH)
     Smith (OR)
     Stevens
     Torricelli
     Warner
     Wyden

                                NAYS--52

     Biden
     Bingaman
     Bond
     Breaux
     Brownback
     Bryan
     Bumpers
     Byrd
     Chafee
     Cleland
     Collins
     Conrad
     Daschle
     Dorgan
     Durbin
     Enzi
     Feingold
     Feinstein
     Ford
     Frist
     Gorton
     Graham
     Gramm
     Grassley
     Harkin
     Helms
     Hutchinson
     Hutchison
     Inhofe
     Jeffords
     Johnson
     Kempthorne
     Kennedy
     Kerrey
     Kohl
     Landrieu
     Levin
     Mikulski
     Moseley-Braun
     Moynihan
     Reed
     Reid
     Roberts
     Rockefeller
     Roth
     Sarbanes
     Sessions
     Snowe
     Thomas
     Thompson
     Thurmond
     Wellstone

                             NOT VOTING--3

     Glenn
     Hollings
     Specter
  The amendment (No. 3783) was rejected.
  Mr. FORD. Mr. President, I move to reconsider the vote.
  Mr. DORGAN. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona is recognized.


                    Amendment No. 3678, As Modified

  Mr. McCAIN. Mr. President, I ask unanimous consent that amendment No. 
3678, the Abraham amendment, be modified, and I send the modification 
to the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
amendment will be so modified.
  The amendment (No. 3678), as modified, is as follows:

       At the end of the bill add the following new title:

     SEC. ____01. SHORT TITLE.

       This title may be cited as the ``Government Paperwork 
     Elimination Act''.

     SEC. ____02. AUTHORITY OF OMB TO PROVIDE FOR ACQUISITION AND 
                   USE OF ALTERNATIVE INFORMATION TECHNOLOGIES BY 
                   EXECUTIVE AGENCIES.

       Section 3504(a)(1)(B)(vi) of title 44, United States Code, 
     is amended to read as follows:
       ``(vi) the acquisition and use of information technology, 
     including alternative information technologies that provide 
     for electronic submission, maintenance, or disclosure of 
     information as a substitute for paper and for the use and 
     acceptance of electronic signatures.''.

     SEC. ____03. PROCEDURES FOR USE AND ACCEPTANCE OF ELECTRONIC 
                   SIGNATURES BY EXECUTIVE AGENCIES.

       (a) In General.--In order to fulfill the responsibility to 
     administer the functions assigned under chapter 35 of title 
     44, United States Code, the provisions of the Clinger-Cohen 
     Act of 1996 (divisions D and E of Public Law 104-106) and the 
     amendments made by that Act, and the provisions of this 
     title, the Director of the Office of Management and Budget 
     shall, in consultation with the National Telecommunications 
     and Information Administration and not later than 18 months 
     after the date of enactment of this Act, develop procedures 
     for the use and acceptance of electronic signatures by 
     Executive agencies.
       (b) Requirements for Procedures.--(1) The procedures 
     developed under subsection (a)--
       (A) shall be compatible with standards and technology for 
     electronic signatures that are generally used in commerce and 
     industry and by State governments;
       (B) may not inappropriately favor one industry or 
     technology;
       (C) shall ensure that electronic signatures are as reliable 
     as is appropriate for the purpose in question and keep intact 
     the information submitted;
       (D) shall provide for the electronic acknowledgment of 
     electronic forms that are successfully submitted; and
       (E) shall, to the extent feasible and appropriate, require 
     an Executive agency that anticipates receipt by electronic 
     means of 50,000 or more submittals of a particular form to 
     take all steps necessary to ensure that multiple methods of 
     electronic signatures are available for the submittal of such 
     form.
       (2) The Director shall ensure the compatibility of the 
     procedures under paragraph (1)(A) in consultation with 
     appropriate private bodies and State government entities that 
     set standards for the use and acceptance of electronic 
     signatures.

     SEC. ____04. DEADLINE FOR IMPLEMENTATION BY EXECUTIVE 
                   AGENCIES OF PROCEDURES FOR USE AND ACCEPTANCE 
                   OF ELECTRONIC SIGNATURES.

       In order to fulfill the responsibility to administer the 
     functions assigned under chapter 35 of title 44, United 
     States Code, the provisions of the Clinger-Cohen Act of 1996 
     (divisions D and E of Public Law 104-106) and the amendments 
     made by that Act, and the provisions of this title, the 
     Director of the Office of Management and Budget shall ensure 
     that, commencing not later than five years after the date of 
     enactment of this Act, Executive agencies provide--
       (1) for the option of the electronic maintenance, 
     submission, or disclosure of information, when practicable as 
     a substitute for paper; and
       (2) for the use and acceptance of electronic signatures, 
     when practicable.

     SEC. ____05. ELECTRONIC STORAGE AND FILING OF EMPLOYMENT 
                   FORMS.

       In order to fulfill the responsibility to administer the 
     functions assigned under chapter 35 of title 44, United 
     States Code, the provisions of the Clinger-Cohen Act of 1996 
     (divisions D and E of Public Law 104-106) and the amendments 
     made by that Act, and the provisions of this title, the 
     Director of the Office of Management and Budget shall, not 
     later than 18 months after the date of enactment of this Act, 
     develop procedures to permit private employers to store and 
     file electronically with Executive agencies forms containing 
     information pertaining to the employees of such employers.

     SEC. ____06. STUDY ON USE OF ELECTRONIC SIGNATURES.

       (a) Ongoing Study Required.--In order to fulfill the 
     responsibility to administer the functions assigned under 
     chapter 35 of title 44, United States Code, the provisions of 
     the Clinger-Cohen Act of 1996 (divisions D and E of Public 
     Law 104-106) and the amendments made by that Act, and the 
     provisions of this title, the Director of the Office of 
     Management and Budget shall, in cooperation with the National 
     Telecommunications and Information Administration, conduct an 
     ongoing study of the use of electronic signatures under this 
     title on--
       (1) paperwork reduction and electronic commerce;
       (2) individual privacy; and
       (3) the security and authenticity of transactions.
       (b) Reports.--The Director shall submit to Congress on a 
     periodic basis a report describing the results of the study 
     carried out under subsection (a).

[[Page S11688]]

     SEC. ____07. ENFORCEABILITY AND LEGAL EFFECT OF ELECTRONIC 
                   RECORDS.

       Electronic records submitted or maintained in accordance 
     with procedures developed under this title, or electronic 
     signatures or other forms of electronic authentication used 
     in accordance with such procedures, shall not be denied legal 
     effect, validity, or enforceability because such records are 
     in electronic form.

     SEC. ____08. DISCLOSURE OF INFORMATION.

       Except as provided by law, information collected in the 
     provision of electronic signature services for communications 
     with an executive agency, as provided by this title, shall 
     only be used or disclosed by persons who obtain, collect, or 
     maintain such information as a business or government 
     practice, for the purpose of facilitating such 
     communications, or with the prior affirmative consent of the 
     person about whom the information pertains.

     SEC. ____09. APPLICATION WITH INTERNAL REVENUE LAWS.

       No provision of this title shall apply to the Department of 
     the Treasury or the Internal Revenue Service to the extent 
     that such provision--
       (1) involves the administration of the internal revenue 
     laws; or
       (2) conflicts with any provision of the Internal Revenue 
     Service Restructuring and Reform Act of 1998 or the Internal 
     Revenue Code of 1986.

     SEC. ____10. DEFINITIONS.

       For purposes of this title:
       (1) Electronic signature.--The term ``electronic 
     signature'' means a method of signing an electronic message 
     that--
       (A) identifies and authenticates a particular person as the 
     source of the electronic message; and
       (B) indicates such person's approval of the information 
     contained in the electronic message.
       (2) Executive agency.--The term ``Executive agency'' has 
     the meaning given that term in section 105 of title 5, United 
     States Code.


                    Amendment No. 3721, As Modified

  Mr. McCAIN. Mr. President, I send to the desk a modification to 
amendment No. 3721.
  The PRESIDING OFFICER. The amendment will be so modified.
  The amendment (No. 3721), as modified, is as follows:

       On page 17, beginning with line 18, strike through line 21 
     on page 19 and insert the following:
       (a) Establishment of Commission.--There is established a 
     commission to be known as the Advisory Commission on 
     Electronic Commerce (in this title referred to as the 
     ``Commission''). The Commission shall--
       (1) be composed of 19 members appointed in accordance with 
     subsection (b), including the chairperson who shall be 
     selected by the members of the Commission from among 
     themselves; and
       (2) conduct its business in accordance with the provisions 
     of this title.
       (b) Membership.--
       (1) In general.--The Commissioners shall serve for the life 
     of the Commission. The membership of the Commission shall be 
     as follows:
       (A) 3 representatives from the Federal Government, 
     comprised of the Secretary of Commerce, the Secretary of the 
     Treasury, and the United States Trade Representative (or 
     their respective delegates).
       (B) 8 representatives from State and local governments (one 
     such representative shall be from a State or local government 
     that does not impose a sales tax and one representative shall 
     be from a state that does not impose an income tax).
       (C) 8 representatives of the electronic commerce industry 
     (including small business), telecommunications carriers, 
     local retail businesses, and consumer groups, comprised of--
       (i) 5 individuals appointed by the Majority Leader of the 
     Senate;
       (ii) 3 individuals appointed by the Minority Leader of the 
     Senate;
       (iii) 5 individuals appointed by the Speaker of the House 
     of Representatives; and
       (iv) 3 individuals appointed by the Minority Leader of the 
     House of Representatives.

                          ____________________