[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
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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
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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.
____________________