[Congressional Record Volume 149, Number 157 (Monday, November 3, 2003)]
[Senate]
[Pages S13791-S13793]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             THE INTERNET TAX NONDISCRIMINATION ACT--S. 150

  Mr. ALLEN. Mr. President, I rise today to ask my colleagues to 
support S. 150, the Internet Tax Nondiscrimination Act.
  As many of my colleagues have heard me say on many occasions, I 
believe it is important that we--and I tried to do it myself--advocate 
policies and ideas that promote freedom and opportunity for all 
Americans. We in the Senate must advance ideas that help create more 
investment, thereby creating more jobs and prosperity rather than more 
burdens from taxation and regulation.
  This measure permanently extends the moratorium banning access taxes 
and taxes that discriminate against the Internet. It is one of my 
priorities. I know the Senator presiding shares that same philosophy 
and has been a great leader in that regard.
  As we all know, the Internet is one of our country's greatest tools 
and symbols of innovation and individual empowerment. I look at the 
invention of the Internet as profoundly transforming and revolutionary 
for the dissemination of ideas and information, as important as was the 
Gutenberg Press.
  Accordingly, I think everyone in the Senate would want to help the 
Internet grow and flourish as a viable tool for education, information, 
and commerce. I stand on the side of freedom of the Internet, trusting 
free people and free entrepreneurs--not on the side of making this 
advancement in technology easier to tax for the tax collectors.
  One of the great things about the Internet is that it is not limited 
by boundaries of State governments, local governments, not even limited 
by the boundary of this country. Clearly, the Internet is intrastate 
commerce. Thus, the Federal Government, Congress, has jurisdiction in 
the taxation and regulation of the Internet.
  My legislation, S. 150, promotes equal access to the Internet for all 
Americans and protects every American from harmful, regressive taxes on 
Internet access services as well as duplicative and predatory taxes on 
Internet transactions. Specifically, as reported out of the Commerce 
Committee, S. 150 has five provisions.
  First, it extends permanently the country's Federal prohibition of 
State and local taxation on Internet access service.
  Second, it makes permanent the ban on all multiple and discriminatory 
taxes relating to electronic commerce. This ensures that several 
jurisdictions cannot tax the same transaction simply because the 
transaction happens to occur over the Internet.
  Third, my legislation repeals the so-called grandfathering provision 
over a 3-year-period.
  Fourth, we make clear the original intent of the Internet Tax Freedom 
Act by updating the definition of Internet access to ensure the 
moratorium applies consistently to all consumers. If we are going to 
exempt Internet access services from taxation permanently, then it 
makes sense to do so in a manner that applies to all methods and

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ways a consumer might have access to the Internet, regardless of how 
they choose to access it, whether by DSL--digital subscriber line 
connections--by wireless connections, by cable modem service, 
satellite, or dial-up service.
  Fifth, and lastly, this legislation ensures that nothing prevents the 
collection or remittance of State and Federal universal service fees.
  The Internet tax moratorium has contributed to extending Internet 
access to over 127 million citizens, approximately 45 percent of our 
country's population. Unfortunately, that moratorium expired Friday 
night. Every day that the moratorium lapses, consumers are susceptible 
to more pestering, burdensome new taxes on Internet access services, as 
well as taxes on e-mail, taxes on instant messages, spam filters, and 
even Web searches.
  For every dollar in taxation--and most kids in elementary school will 
understand these economics--every dollar added in taxation adds to the 
cost of the Internet access. With that, you could expect to see lost 
utilization of the Internet by thousands of American families, 
especially lower income families.
  According to the Pew Internet and American Life Project, 30 percent 
of non-internet users say cost is the major reason they remain off 
line. Additionally, 43 percent of non-internet users agreed with the 
statement, ``Internet access is too expensive.''
  For roughly 55 percent of the American people who are still off line, 
keeping access affordable--and that means keeping access free from 
State, local, and Federal taxation--is vital.
  The guiding principle of this legislation is simple and clear: The 
Internet should remain as accessible as possible to all people in all 
parts of the country forever. That has been the position I have taken 
on this and held since 1997 during my days as Governor of Virginia when 
I was one of only four Governors to share this position.
  I cannot envision any time in our future where it will be desirable 
for any government to tax access to the Internet. I cannot envision any 
instance or event that would precipitate the justification for multiple 
or discriminatory taxes on the Internet by any government, whether 
large or small, local, State, or national.
  Yet if the Senate fails to take action by the end of this week or any 
Senator votes against this legislation, such Member is in effect 
advocating taxing the Internet.
  There are more Americans empowered by the Internet primarily because 
the Federal policy of the United States has consciously allowed 
Internet innovators, entrepreneurs, and consumers to remain free from 
onerous taxation.
  As many know, Congress first enacted this moratorium with the 
Internet Tax Freedom Act in 1998 after dozens of State and local taxing 
commissars began to impose disparate taxes on a consumer's ability to 
access the Internet.
  Since the last extension of the Internet Tax Freedom Act in 2001, 
some States have begun taxing the high-speed component of broadband 
Internet access services by asserting that certain portions of high-
speed broadband Internet access are telecommunication services rather 
than Internet access services. The States doing this are therefore 
circumventing the original intentions of the law.
  Working with our chairman of the Commerce Committee, Senator John 
McCain, as well as Senator Ron Wyden and Senator John Sununu in the 
Commerce Committee, we have updated the definition of Internet access 
to ensure that all Internet access services, regardless of the 
technology used to deliver that service, are covered by the moratorium 
and therefore exempt from State and local taxation.
  I want to also address for my colleagues the misleading statements 
made regarding S. 150. I understand the proponents of higher taxes at 
the State and local level have raised a number of concerns about this 
legislation, indicating that we expanded the moratorium on Internet 
access to include all telecommunication services, making tax free even 
traditional services such as local and long-distance telephone 
communications. Additionally, they have raised the question whether or 
not this bill would prohibit States from imposing property and 
corporate income taxes on telecommunication carriers and Internet 
service providers. The false assertions come maybe from confusion, 
maybe from a misunderstanding, but in some cases they are 
intentionally, outright, and flat wrong statements. I am here to set 
the record straight.
  I want all the Members of this body to understand and be clear on the 
facts about this legislation: S. 150 does not affect traditional voice 
or long-distance telephone services or any other communication service 
that is not directly used to provide Internet access; S. 150 does not 
affect a State's ability to collect income, property, or other 
corporate taxes, such as franchising fees, that are unrelated to 
Internet access.
  The fact is S. 150 does not unnecessarily expand the moratorium on 
Internet access. Rather, the legislation clarifies the original 
intentions of the Internet Tax Freedom Act to include high-speed 
Internet access services. Only because some States and localities 
attempted to circumvent the original law by taxing portions of high-
speed Internet access did the definition of Internet access need to be 
updated.
  The impact of what the States and localities are trying to do in 
taxing broadband has implications that particularly are harmful to 
small communities and rural areas. We have always advocated that we 
have to get broadband to rural areas. Obviously, it costs a great deal 
of money. Our good colleague, Senator Conrad Burns, says out in the 
country there is a lot of dirt to dig between light bulbs.
  If you are going to get broadband to rural areas, there is a great 
investment to get it there because you have a fewer number of customers 
to recoup your investment. In the event a tax is put on to broadband, 
it means obviously fewer people can afford it, thereby making it less 
likely that a company is going to invest the millions and millions of 
dollars it will take to get broadband deployed or high speed deployed 
to rural areas, thereby ruining, hindering, hampering the ability of 
people and small businesses in rural communities to get access to high-
speed Internet services which is vital for them getting information, 
education, as well as conducting business.
  The fact is, S. 150 only makes permanent the tax moratorium on 
Internet access services, which is simply the ability to get access to 
the Internet. Once a consumer has accessed the Internet, the moratorium 
does not affect the services that are purchased, used, or sold over the 
Internet that would otherwise be taxable, even if those services are 
bundled together with Internet access services.
  Proponents of Internet taxes say this bill is an unfunded mandate. 
The fact is, the cost associated with S. 150 only affects those few 
States and localities that were grandfathered under the original Tax 
Freedom Act of 1998. Additionally, my legislation delays the repeal of 
the grandfathering provision for a 3-year period, ensuring that the 
moratorium on Internet access taxes applies equally in all 50 States, 
while giving these few taxing States and localities additional time to 
adjust their budgets accordingly.
  Let's realize this has been now 5 years where these States and 
localities have had time--5 years--to remove these Internet access 
taxes. With my bill, S. 150, they will have, in effect, 8 years to 
repeal these regressive taxes on Internet access.
  I would invite them to look at the record since the enactment of the 
1998 moratorium where several States, plus the District of Columbia, 
have in fact chosen to move away from Internet taxes.
  For example, in 1999, Iowa enacted a law specifically exempting 
Internet access from taxation. In South Carolina, after the enactment 
of the Federal moratorium in 1998, the Governor and tax department 
issued formal announcements indicating the State would abide by the 
national tax moratorium and would cease trying to collect taxes on 
Internet access services. Connecticut's State legislature approved a 
law that accelerated the phaseout of Internet access taxes in July of 
2001. Additionally, in April of 2000, Arizona enacted a law exempting 
Internet access from State and local sales tax. Finally, in 1999, the 
District of Columbia also eliminated taxes on Internet access.

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  Meanwhile, we do have these other States--for example, Kentucky, 
Alabama, and others--that have attempted to tax the transport of high-
speed broadband Internet access.
  In summary, the fact is, by allowing the moratorium to expire, the 
Senate has opened the door for States and localities to begin imposing 
regressive taxes on Internet access services. By taxing Internet 
access, States and localities are actually contributing to the economic 
digital divide. The more expensive we allow the State and local tax 
commissars to make Internet access, the less likely people are to be 
able to buy these advanced services, such as high-speed broadband 
connections. It makes it harder for them to purchase Internet protocol 
software, wireless fidelity, or WiFi devices, or many other multimedia 
applications. These applications are all made less likely to be 
affordable for many millions of Americans.
  In a time when technology and the Internet have grown into improving 
almost every aspect of our daily lives, and where access to the 
Internet is a necessity for Americans, it just seems to me that 
imposing new taxes on access or levying taxes that discriminate against 
the Internet as a form of commerce will just never be sound policy for 
our country.
  As a tool, what is great about the Internet is it breaks down 
economic and educational barriers, leveling the playing field for 
millions of Americans.
  You will also hear some say: Let's just have a short extension. Let's 
have a short extension. We do not need to make it permanent. Well, 
going back to the business model and understanding how businesses have 
to invest, they like to see some certainty. If you have a short 
moratorium, there is less certainty, there is less predictability for 
investment, therefore, fewer job opportunities, and less likelihood 
that broadband or high speed will get out to the smaller towns and 
communities in rural areas.
  More than ever before, with our Nation's economy finally moving 
forward in the right direction, the people of this country need 
security with regard to their financial future. Any additional tax 
burdens on the Internet will mean additional costs many Americans 
cannot afford, forcing the poorest in our society to reduce or even 
forego the use of the Internet as a tool for commerce, education, 
information, exploration, and individual responsibility and 
opportunity.
  In a society--indeed, a world--where the quality of life and an 
individual's opportunity for prosperity are directly related 
proportionately to one's access to and the acquisition of knowledge, we 
as a Senate must choose to close this economic digital divide rather 
than exacerbate it by allowing States and localities to further tax the 
Internet.
  I call on my colleagues to join me in supporting S. 150, the Internet 
Tax Nondiscrimination Act, which permanently extends the Internet 
moratorium on access, multiple, and discriminatory taxes.
  In sum, I ask my colleagues to be leaders, leaders who stand strong 
for individual freedom and stand strong for opportunities for all 
Americans.

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