[Congressional Record Volume 144, Number 139 (Wednesday, October 7, 1998)]
[Senate]
[Pages S11688-S11691]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNET TAX FREEDOM ACT
The Senate continued with the consideration of the bill.
Amendment No. 3719, as modified, as amended
Mr. McCAIN. Mr. President, I ask unanimous consent that there be 15
minutes, with 10 minutes on this side, controlled by the Senator from
Alaska, and 5 minutes controlled by the Senator from North Dakota, that
no second-degree amendments be in order, and immediately following
that, there be a vote on the Murkowski tabling motion.
The PRESIDING OFFICER. The question will first come on the first-
degree amendment.
Mr. McCAIN. Mr. President, I believe Senator Murkowski will be
seeking to table the underlying amendment.
Mr. MURKOWSKI addressed the Chair.
The PRESIDING OFFICER. The Senator from Alaska is recognized.
Mr. McCAIN. Mr. President, I repeat the request.
The PRESIDING OFFICER. Is there objection?
Mr. GRAMM. Mr. President, I didn't hear the request. Can I hear it
again?
Mr. McCAIN. It is that there be 15 minutes on a Murkowski tabling
motion, with 10 minutes under the control of the Senator from Alaska, 5
minutes under the control of the Senator from North Dakota, with no
intervening second-degree amendments, immediately followed by a vote.
Mr. GRAMM. No objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MURKOWSKI addressed the Chair.
The PRESIDING OFFICER. The Senator from Alaska is recognized.
Mr. MURKOWSKI. Mr. President I rise in opposition to the amendment
being offered to grandfather existing taxes on Internet services.
This amendment undermines the fundamental integrity of the underlying
bill because all state and local taxing jurisdictions would not be
under the exact same moratorium. It rewards those states and
municipalities that raced to set up discriminatory taxes on Internet
services and places them in a better position to raise revenue than
those states that have chosen not to act.
More importantly, it sets the precedent that some states, but not all
states, can levy taxes that harm interstate commerce. This amendment
makes the Internet Tax Moratorium a piece-meal moratorium, not a real
moratorium.
I ask my colleagues to consider why we are considering this Internet
tax moratorium. As all of us recognize, the Internet is a massive
global network that spans not only every state in the Union, but
international borders. As the Commerce committee found, Internet access
services are inherently a matter of interstate and foreign commerce
within the jurisdiction of the United States Congress. In fact, it has
been estimated that if the Congress does not make a policy decision
regarding taxation of Internet services, more than 30,000 separate
taxing jurisdictions within the United States could establish their own
taxes on Internet transactions.
Because of the chaos that would ensue, we have decided to place a
halt on Internet taxes and allow a commission to study this issue and
make recommendations to the Congress. Yet the amendment that the
Senator from Oregon proposes would reward those jurisdictions that have
already decided to tax Internet services. Why should we grandfather
those jurisdictions?
If it is appropriate for states and localities to impose taxes on
Internet services than all states should be permitted to adopt such
taxes. Alaska should be given that opportunity just as much as North
Dakota and South Dakota. But under the Internet Tax Moratorium
legislation, my state does not have that option but the Dakotas can
continue their taxes because they adopted those taxes prior to this
moratorium.
And if it is not appropriate for states and localities to impose
taxes on Internet services, than not states nor localities should be
permitted to adopt these taxes.
I believe this amendment is not only discriminatory but undermines
the fundamental idea underlying this bill. As I noted earlier, the
Internet is inherently about Interstate Commerce and we in Congress are
about to make a decision that no local taxes should be imposed on
Internet services until Congress receives the Commission's
recommendations. I believe we should make this moratorium uniform, not
piece-meal as the Senator from Oregon proposes.
Otherwise, we are encouraging every state in the union to rush to the
state legislature every time a new technology comes along and adopt a
taxing scheme on the new technology, secure
[[Page S11689]]
in the knowledge that should Congress decide to impose a moratorium on
such a new tax, that state's taxes will be grandfathered.
Moreover, there is no rational basis to grandfather these state and
local taxes on what everyone agrees is interstate commerce. We have
asked a Commission of experts to make recommendations regarding
Internet taxes. Although I cannot pre-judge what the Commission will
recommend, it is probable that the Commission will make three
recommendations. It will make a decision that state and local taxation
of Internet services are appropriate or inappropriate. It may decide
that some taxes, such as taxes on ``pipeline'' services like Erols or
value-added online services like America Online are appropriate but
that taxes on interstate product sales on the Internet are
inappropriate.
What is certain is that the Commission will not recommend that the
only Internet taxes that are appropriate are those that are levied by
the states that are proposed to be grandfathered. That would make no
sense and would probably be unconstitutional. For that reason alone, we
should not permit this grandfather.
Mr. President, one of the most important reasons I believe we should
not grandfather any of the Internet taxes is because a decision we make
on grandfathering will send a signal to our trading partners that if
they adopt taxes on Internet commerce today, those taxes will likely be
grandfathered if and when an international agreement on taxation of
Internet commerce is reached in the future.
Why shouldn't Brazil or Germany or Canada establish taxes today on
Internet commerce and then claim that since these taxes were adopted
prior to an international agreement, they should be grandfathered just
like the United States grandfathered similar taxes?
Mr. President, there is ample precedent for such a scenario. Many of
the tariff and non-tariff barriers that the United States has
confronted in the past 50 years have covered practices that were
insulated by the original GATT grandfathering rules that were adopted
more than 50 years ago. In fact, there have been a number of instances
where our foreign trading partners have used the GATT grandfather
clause to defend measures that would otherwise violate our GATT rights.
A number of those involved foreign tax regimes.
For example, the European Union relied on the GATT grandfather clause
to defend their system of territorial taxation and income shifting
rules that clearly constituted an illegal export subsidy. Similarly,
Brazil used the grandfather clause to defend internal taxes of general
application (i.e., sales taxes) that discriminated against goods
imported from other GATT members. And Canada relied on the grandfather
clause to defend its interprovincial restrictions on the sale of beer
and other malt beverages, which included discriminatory charges on
imports of competing products from the United States.
Mr. President, the Internet as a means of communication and commerce
is in its infancy. Commerce on the Internet is projected to grow by
several thousand percent in the next five years. And who stands to
benefit the most from that growth? Companies based in the United States
will be the largest beneficiaries. I think there can be no doubt about
that.
We in the United States invented the Internet. We have been the first
country to begin to exploit its benefits. We are leading the world in
Internet commerce and the world is watching everything we do and trying
to figure out how to prevent American domination of this new medium.
One way to slow American domination of the Internet is for foreign
countries to begin to establish taxing regimes on products and
information generated from the United States. It is not hard to imagine
our foreign trading partners developing taxing schemes designed to
protect their domestic manufacturers from competition from more
efficient American competitors selling in their country via the
Internet. Nor is it difficult to imagine that some of the more
repressive regimes in the world might want to come up with punitive
access taxes that functionally prevent their citizens from reading
American on-line newspapers and magazines. In the name of ``cultural
sovereignty,'' I can imagine that some countries will adopt special
taxing regimes to restrict access to Internet web pages that are in
English.
Mr. President, the precedent we set by grandfathering Internet taxes
currently in place will be closely watched by our trading partners.
They will follow our model because the United States has established
all of the standards and protocols for the Internet.
We should send a message to our trading partners that we will not
grandfather any taxes on Internet commerce. Unless we do that, I fear
that when our negotiators sit down and attempt to negotiate away
discriminatory foreign taxes on Internet services, our foreign trading
partners will use the grandfather model in this bill as a reason their
taxing regime should be maintained in place. That is surely not the
precedent we want to set.
Finally, Mr. President, if we table this amendment we will ultimately
not be voting on whether the moratorium should be three years or four
years. The Senate has already spoken on this issue and if the
grandfathering amendment is tabled, the Chairman of the Committee will
certainly offer another amendment that we can accept that will extend
the moratorium for four years.
I move to table the amendment on grandfathering state Internet taxes.
Mr. MACK. Mr. President, I oppose this amendment which would allow
some states to tax the Internet but not others. The moratorium on
Internet taxation must be uniform, applying equally to all states and
all local taxing jurisdictions without exception.
Congress is taking an extraordinary, though not unprecedented, step
in preempting a taxing power of the states. The people of the United
States, through the Constitution, charge Congress with the
responsibility of ensuring that states do not interfere with interstate
commerce. This power is rarely exercised in the context of taxation,
and is a power that we take very seriously.
Use of this extraordinary power is required to prevent the heavy
hands of government from stifling the economic growth potential of
Internet commerce. We have now just a glimpse of the future of
commerce, and a complete revolution in the way people transact business
is within sight. We are on the threshold of exciting times, in which
information about products will move quicker and farther than ever
imagined, in which the elderly, the handicapped, and people living in
remote rural areas can participate in world markets without ever
leaving their homes. A moratorium is necessary to prevent the taxing
authorities of 50 states, over 6,000 localities, and the federal
government from taking near-sighted actions that jeopardize this future
of commerce.
A threat to interstate commerce so severe as to require a national
moratorium cannot be tolerated in any state. If Congress were to
grandfather those states that have already imposed Internet taxes, we
would be setting a terrible precedent. This ``Early Bird Special''
exception gives states the incentive to rush to impose new taxes on new
technologies. This is not the kind of race we want to encourage.
And if Congress can impose a moratorium on some states but not
others, will future Congresses attempt to disadvantage individual
states in this manner? The defenders of a grandfather clause cast their
argument as one of states' rights. But establishing the principle that
a moratorium must apply equally to all states protect states from
unwarranted infringements upon their power, by preventing the federal
government from isolating a minority of states for adverse treatment.
And I should also point out that states do not have the right to
interfere with interstate commerce--the power to regulate interstate
commerce was delegated to the national government, not retained by the
states.
The United States should set a strong example and preempt all
Internet taxes until a rational, national approach to Internet taxation
is developed. If we fail to do so, we undermine attempts to persuade
our trading partners that barriers to global electronic commerce should
be removed. We have the opportunity to lead the world in the area of
Internet commerce, and we should make our cause the cause of freedom.
[[Page S11690]]
Mr. President, I urge my colleagues to reject this amendment.
Mr. DORGAN addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from North
Dakota.
Mr. DORGAN. Mr. President, I rise in opposition to the efforts by the
Senator from Alaska. My understanding is that he is seeking to table
the underlying first-degree amendment, the McCain amendment. The McCain
amendment includes the grandfather provision which preserves the
existing Internet access taxes. In my judgment, this makes the
moratorium a forward-looking moratorium, and will not preempt existing
taxes.
It also deals with State and local taxing authorities by including a
State and local tax savings provision, which makes it clear that no
other State or local tax will be affected. In other words, it protects
against the unintended consequences that may well occur unless we have
that savings clause.
I really think that it is important that we not support the motion
offered by the Senator from Alaska.
The third provision I want to mention in the first-degree amendment
that he is attempting to table is a provision ensuring that this
moratorium will not affect any pending or existing liabilities.
Currently there are companies that may have failed to pay some taxes
that would have a current liability under current valid existing laws,
and we would not want this moratorium to have the unintended
consequence of interrupting those liabilities either.
As I understand it, we have a first-degree amendment, and now a
motion to table that. I hope that the motion to table will not prevail.
I will vote against it. I will be, by that vote, supporting the
underlying first-degree McCain amendment.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Arizona is recognized.
Mr. McCAIN. Mr. President, I suggest the absence of a quorum.
the PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCAIN. Has all time expired?
The PRESIDING OFFICER. It has not expired.
Mr. MURKOWSKI. Mr. President, I yield all time back that's remaining
on our side. It would be my intention when all time is yielded to ask
for the yeas and nays. Excuse me, Mr. President. It would be my
intention to move to table the pending amendment when all time is
expired.
The PRESIDING OFFICER. Does the Senator from North Dakota yield back
his time?
Mr. DORGAN. Mr. President, I make a point of order that a quorum is
not present.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
Mr. DORGAN. I object.
The PRESIDING OFFICER. Objection is heard.
The legislative clerk continued with the call of the roll.
Mr. McCAIN. For the convenience of Senators who have plans this
evening and were told that we would have a vote, I would ask unanimous
consent that further proceedings under the quorum call be rescinded.
The PRESIDING OFFICER. Is there objection?
Mr. DORGAN. I object.
The PRESIDING OFFICER. There is objection.
The legislative clerk continued with the call of the roll.
Mr. McCAIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. McCAIN. Mr. President, I ask to be recognized.
The PRESIDING OFFICER. The Senator from Arizona.
Mr. McCAIN. Mr. President, we obviously have a problem. The Senator
from Florida is insisting on a point of order that will basically gut
this legislation. I want to go ahead and vote on the Murkowski
amendment. If the Senator from Florida wants to destroy this bill,
which is supported by literally everyone except him, he is free to do
that.
Mr. President, how much time remains?
The PRESIDING OFFICER. All time has expired.
Mr. GRAHAM addressed the Chair.
Mr. McCAIN. All time has expired?
Mr. GRAHAM. Point of personal privilege.
The PRESIDING OFFICER. The Senator from Florida.
Mr. GRAHAM. Mr. President, I am sorry, my good friend from Arizona
has on several previous occasions made statements that have become, I
think, excessively personal and not factually correct.
I am prepared to vote on this bill right now, and I will vote for the
bill in its current form. What the issue is, is offering an amendment
that I question as to its germanity to this bill and that I might raise
a point of order on that germanity. I don't consider that to be an
inappropriate or even a particularly hostile act. That is a matter of
the rules of the Senate. It either is or is not germane in this
postcloture environment.
I do not accept the characterization that I am, in some malicious
way, standing in the way of the bill. I am perfectly prepared to vote
at this time.
The PRESIDING OFFICER. All time has expired.
Mr. MURKOWSKI. I move to table the amendment and ask for the yeas and
nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
lay on the table amendment No. 3719, as modified, as amended. The yeas
and nays have been ordered. The clerk will call the roll.
The bill 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 result was announced--yeas 28, nays 69, as follows:
[Rollcall Vote No. 306 Leg.]
YEAS--28
Ashcroft
Campbell
Cochran
Collins
Coverdell
D'Amato
Faircloth
Gramm
Grams
Grassley
Gregg
Hagel
Helms
Hutchinson
Hutchison
Jeffords
Lott
Mack
McConnell
Murkowski
Nickles
Roth
Santorum
Shelby
Smith (NH)
Stevens
Thomas
Torricelli
NAYS--69
Abraham
Akaka
Allard
Baucus
Bennett
Biden
Bingaman
Bond
Boxer
Breaux
Brownback
Bryan
Bumpers
Burns
Byrd
Chafee
Cleland
Coats
Conrad
Craig
Daschle
DeWine
Dodd
Domenici
Dorgan
Durbin
Enzi
Feingold
Feinstein
Ford
Frist
Gorton
Graham
Harkin
Hatch
Inhofe
Inouye
Johnson
Kempthorne
Kennedy
Kerrey
Kerry
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lugar
McCain
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Reid
Robb
Roberts
Rockefeller
Sarbanes
Sessions
Smith (OR)
Snowe
Thompson
Thurmond
Warner
Wellstone
Wyden
NOT VOTING--3
Glenn
Hollings
Specter
The motion to lay on the table the amendment (No. 3719), as modified,
as amended, was rejected.
Mr. McCAIN addressed the Chair.
The PRESIDING OFFICER (Mr. Brownback). The Senator from Arizona.
Mr. McCAIN. Mr. President, first of all, let me say for my colleagues
where we are on this bill.
We believe that we had an agreement that there would be this vote on
the Murkowski amendment to table, and then we would proceed to adopt a
previously agreed to amendment that had been agreed to by the Senator
from North Dakota who has been managing the bill and others that have
been involved in the legislation. Apparently, that was not agreed to by
the Senator
[[Page S11691]]
from Florida who intends to at least at this time challenge on the
issue of germaneness the amendment that the Senator from North Dakota,
the Senator from Oregon, I, the Senator from Wyoming, and others had
agreed to, which has to do with the definition of what are
discriminatory taxes.
This, obviously, germane point of order would carry, or there is a
likelihood that it would. That would reduce the effectiveness or the
impact of this bill to the point where it would be nearly meaningless.
The Senator from Florida has told me that he will work overnight with
us and with others to try to craft some agreement or relook at the
entire issue. I hope that he will do so.
After the vote at 11 tomorrow on VA-HUD, I will then propose
amendment No. 3711. At that time, if the Senator from Florida still
wishes to, obviously he can challenge the amendment on point of order
concerning whether the amendment is germane or not.
Mr. President, I think everybody realizes how important this
legislation is. I would very much hate to see it derailed at this point
in time.
But the amendment, 3711, is vital to this legislation. Some may ask
why we didn't propose it earlier. That is because it was part of a
package of negotiation that we were in with the Senator from North
Dakota, and others.
I respect the right of the Senator from Florida to object on
germaneness grounds. That is his right as a Senator. I do not challenge
that.
Mr. WYDEN. Will the Senator yield?
Mr. McCAIN. I ask unanimous consent to yield to the Senator from
Oregon without losing my right to the floor.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WYDEN. I will be very brief, I say to the chairman and
colleagues. The hour is late.
All we seek to do is to have technological neutrality. We are not
going to tax catalogs. We also don't want to tax web sites. That is all
this is about--preventing that kind of discriminatory tax.
I thank the chairman for yielding.
Mr. McCAIN. Mr. President, these things happen as we consider
legislation. There are very strongly held views on this issue,
especially by the Senator from Florida who, as a former Governor,
understands the impact of these issues on his State. I understand that
and appreciate that. But I want to be clear that my interpretation and
that of the Senator from Oregon and the proponents of this legislation
are that if we do not allow the amendment 3711, then the legislation
itself would be rendered largely meaningless.
____________________