[Congressional Record Volume 150, Number 54 (Monday, April 26, 2004)]
[Senate]
[Pages S4345-S4367]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
INTERNET TAX NONDISCRIMINATION ACT--MOTION TO PROCEED
The PRESIDING OFFICER. The Senate will resume consideration of the
motion to proceed to S. 150, which the clerk will report.
The legislative clerk read as follows:
Motion to proceed to Calendar No. 353, S. 150, a bill to
make permanent taxes on Internet access and multiple and
discriminatory taxes on electronic commerce imposed by the
Internet Tax Freedom Act, and for other purposes.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Madam President, I would like to address my remarks
for the next few minutes on the discussion that we have been having for
the last 6 months in this body on the question of how to deal with the
phenomenon of high-speed Internet access. It is the fastest growing new
technology in America, according to a New York Times article last week.
We have some differences of opinion about how to proceed in terms of
the taxation and regulation of this phenomenon, not only what it should
be but whether the Federal Government, the State government, or local
government should do it.
The leader has asked all of us who have different opinions to work
together. We have tried that. We have worked hard. Senator McCain,
chairman of the Commerce Committee, has been especially involved. I am
grateful to him for that. Senator Allen and Senator Wyden, who have
principled positions on this discussion, have worked hard to try to
compromise on the issues, as have I and my colleagues, but we simply
have a difference of opinion.
Now, today, we begin debating a motion to proceed and to move down a
track in the Senate that, I believe, is the wrong track. I welcome this
opportunity and I thank the leader for giving us a chance to have a
full debate, which we will be having this week. I am confident that by
the time we are finished the Senators who have had a chance to spend
more time on this, and that the citizens of the country who have had a
chance to understand more clearly what we are talking about, and the
State and local officials who will see exactly what we are doing which
might affect the future of State and local governments in America will
suddenly say there is a little more to this than meets the eye and that
we will come to a good conclusion.
I believe it was President Harry Truman who had on his desk a sign
that said, ``The buck stops here.'' What we are about to do today and
later this week with the consideration of S. 150 is to begin a series
of votes about passing the buck. I looked on the Truman Presidential
library Web site to see why Harry Truman, who was noted for plain
speaking, liked the phrase ``The buck stops here.'' Here is what the
Truman Web site says:
The saying ``the buck stops here'' derives from the slang
expression ``pass the buck'' which means passing the
responsibility on to someone else. The latter expression is
said to have originated with the game of poker, in which a
marker or a counter, frequently in frontier days a knife with
a buckhorn handle, was used to indicate the person whose turn
it was to deal. If the player wishes to deal, he could pass
the responsibility by passing the buck, as the counter
came to be called, on to the next player.
That would be my text today, if I were preaching a sermon, because we
are about to vote about passing the buck. By passing the buck, if we
were to do this, we would create permanent confusion about how to
regulate and tax the fastest growing new technology in America--high-
speed Internet access. We would create a permanent tax loophole for the
high-speed Internet access industry and the telecommunications
industry, and the high-speed Internet access industry, so far as I can
tell, must already be the most heavily subsidized in America by
Federal, State, and local laws. We would be voting for higher taxes,
not lower taxes, because if you order taxes to be lowered on
telecommunications or high-speed Internet access, you are raising taxes
on local property taxes or local sales taxes on food or local
corporation taxes on manufacturing companies that might be struggling
to keep from moving their jobs overseas.
It is a big trick to say this is a bill that lowers taxes. It does
create a tax loophole for one industry. But what cost does that mean?
That just means everybody else pays higher taxes.
Aren't a lot of people going to be surprised if this should be
enacted and suddenly they find their mayor and their Governor raising
local property taxes, raising local sales taxes on food and imposing a
car tax again? That is what happens. You lower this tax and you raise
that tax.
Then the worst thing to me as a former Governor--and there are many
in this body who have been Governors, who have been State tax
commissioners, who have been mayors, who have been State treasurers,
who have been local officials--the worst thing to me is we are breaking
our promise about doing no harm to State and local governments,
particularly on my side of the aisle, the Republican side of the aisle.
We were elected promising to do no harm to State and local
governments. I will be talking a lot about that this week because I
believe in that. I heard it. It wasn't just from me.
In 1994, the Republican revolution began to occur. In 1995 and 1996,
we had Presidential elections. When the Republican Party gained control
of Congress in 1995, the first thing it did in this body was pass S. 1.
The Presiding Officer very well knows the distinguished Senator who
was the majority leader at that time. His name was Senator Bob Dole of
Kansas. He carried around in his pocket the tenth amendment. He said S.
1 means no more unfunded mandates.
If we vote to put into motion S. 150 and the companion measure that
passed the House, we will be imposing a massive unfunded mandate on
State and local governments. We will be breaking our promise.
It is rare that the Senate has had an opportunity to do so much harm
with one vote. It is very difficult to find a situation where you can
cast one vote and create permanent confusion about the fastest growing
technology and a permanent tax loophole for the most subsidized
technology I can find. With that one vote, you could also impose higher
taxes, local property taxes, car taxes, taxes on food, and sales taxes,
and break your promise to State and local governments to do no harm.
There is a better way to go about this. I believe that I and my
colleagues have suggested that. Senator Carper and I and a group of
nine other Senators of both parties have said: Wait a minute. Let us do
this a different way. There is a way we can vote to ban new taxes on
Internet access for 2 years. We can provide the Senate time to consider
what to do about this phenomenon of high-speed Internet access growth,
and we can keep our promise to State and local governments.
Rarely has there been a chance to do so much good with one vote, and
that would be to pass the Alexander-Carper compromise, or take the
original moratorium of 1998 and enact it for 2 more years. That would
be a vote for no taxes, it would be a vote for no unfunded mandates,
and it would be a vote for time to study it. That would be the wise and
prudent course. That will be the argument we will be making today.
Today, we begin a series of procedural motions--that is the way the
Senate works--designed to give us a full opportunity to consider and
discuss these issues.
[[Page S4346]]
Senators Allen and Wyden have offered S. 150 which will be coming up
this afternoon. I am under no illusions about the fact we will be
getting to it even though I think it is moving us in the wrong
direction and along the wrong track. Senator Carper and I, and nine
others, have offered the compromise I just suggested. I believe that
would be the best way to go--a 2-year extension of the current ban on
State and local taxing of international access. We did it in 1998.
Congress did it in 2000. Congress can do it again in 2004.
By voting to extend the original moratorium on taxation for 2 more
years, Members of Congress will be casting a vote against taxing
Internet access--casting a vote for allowing time to consider what the
best long-term solution is and casting a vote for doing no harm to
State and local governments. I believe, if the House were to agree with
us, we could get the legislative action we desire in this session.
I am prepared to move ahead, as I have been all year, and I have
suggested for 2 years ways we could move ahead. I am for banning
taxation for the next 2 years. I am willing to support that. I am for
no unfunded mandates and I am for time to study. Prospects for
legislative action might have been different this year, if the House of
Representatives had sent to the Senate a different piece of legislation
to begin with instead of sending legislation to extend the current
moratorium.
Moratorium means a temporary timeout. That was the idea in 1998.
Everybody said we have this new thing, the Internet. In 1998, when the
moratorium was passed, I would wager that almost no one in the Congress
had ever heard of high-speed Internet access. The only kind of Internet
access we were using was AOL which hooks up to your dial telephone. But
we said--and I agreed with this and I supported this--that we don't
really understand what this is. This is new. Let us just put in a
temporary timeout. Then we will decide what to do. The assumption, in
my mind at least, was that as the Internet industry grew and became
mature, it would pay the same taxes as everyone else. We don't say the
Senator from North Carolina and the Senator from Tennessee will pay
taxes which the Senator from Wyoming will not pay. We have to have an
awfully good reason for that. We believe in the fair and equitable
distribution of taxes.
We are talking about whether the Internet industry should pay the
same sales taxes and the same kind of business taxes that everybody
else is paying or whether we should lower their taxes permanently and
create a great big loophole for them, subsidize them some more, and
then have higher taxes for everybody else.
The House didn't send us another temporary timeout which would have
been the third on State and local taxation of Internet access. The
House sent over a permanent ban. But it was more than that. Instead of
banning State and local taxation of Internet access--which would mean
my relationship to the Internet service provider, the same as my
relationship to a telephone company or a cable company or a satellite
TV company--they broadened the definition of Internet access.
Whether intentionally or unintentionally, this train got on the wrong
track, running completely out of control. Maybe it was because this is
a very complex subject, we have a lot going on here, and not many
people were paying close attention, but it got out of control.
Basically, what started out as a modest benefit to consumers, a
temporary timeout while we could see what was happening, the House
turned it into a permanent big tax loophole for the Internet access
industry, the telecommunications industry. Then, on top of that, they
turn around and send the bill to State and local governments. We do not
do that much. We debate taxes all the time. We reduce taxes. Sometimes
they go up, but we do it ourselves. I did not know you could do this.
I ran for the Senate the same year as the Presiding Officer the
Senator from North Carolina. If I knew the Senate could do this, I
might have run for the Senate promising to make a Federal law
abolishing local property taxes as my way of encouraging home
ownership, or I might have run for the Senate promising to pass a
Federal law to abolish State car taxes as a way of encouraging
transportation to work, or I might have run for the Senate promising to
pass a Federal law abolishing State taxes on food because there are a
lot of hungry people. But that would have been a trick on the voters.
The voters would have caught up with me and said, Wait a minute, Lamar,
who are you trying to fool? You cut our sales taxes, and now we will
have an income tax in Tennessee. Because if sales taxes go down, this
must go up.
I suppose one could say we will close a few schools, raise tuition,
and cut the cost of Government. But it means lower taxes for one group
of taxpayers and it means higher taxes for another. That is what we
have over here.
Sometimes it has been said these figures that have been used are not
accurate, so I have some detailed information for the Congressional
Record. For example, the bill sent to the Senate from the House of
Representatives in the name of a simple, permanent ban on the little
connection we make to the Internet access would do this: One, it would
put at risk $10 billion collected annually in telephone transaction
taxes in the State and local governments. State and local governments
collect more than $10 billion annually in taxes on telephones. If we
tell them they cannot do that, what do they do? Senator Feinstein has
said, and I am sure she will say later this week, she has 125 cities
and counties in California that say this might interrupt 5 to 10
percent of their local budgets. We cut one tax and they raise the
property tax. That is not what we are supposed to do. We promised not
to do that in 1995.
There are 62 Senators serving here today who in 1995 voted to pass
the Unfunded Mandates Act which said no money, no mandate. If we break
our promise, throw us out. I want to keep the promise.
The first problem with the House bill is $10 billion in telephone
taxes. The second problem is $7 billion annually in business taxes
currently collected. I have a source from each one of these. The first
is the Congressional Budget Office. The source for the $7 billion is in
the Multistate Tax Commission memoranda and a letter from the
Congressional Budget Office. The third unfunded mandate in the House
bill, half a billion annually in business taxes currently collected on
the Internet backbone. We will hear more about that this week. The
backbone is the infrastructure of the Internet. The same kind of
business taxes on the backbone is like business taxes on any other
business. Nobody likes to pay taxes, but are we going to exempt them
and make everybody else pay? Four, cost to State and local governments
was $80 to $120 million. On grandfathered States--that means 11 States
were permitted after the 1998 temporary timeout moratorium; there are
about 16 States already taxing dial-up Internet service so they are
permitted to keep doing that--that is $80 to $120 million out the
window, and another $40 to $75 million in 27 States where they are
taxing the part of the Internet access provided by the telephone
companies, DSL.
Finally, the language of H.R. 49, the bill that came over from the
House, would hurt universal service fund fees and September 11 service
fees. That is very important in Alaska, rural North Carolina, and
Tennessee. If there is less money in the fund, there is less money for
September 11 and universal service.
This bill came to the Senate like a freight train. Nobody voted
against it. It passed by consent order. What did it do? It came over
wearing a dress that said, ``I am Ms. Internet Access Tax Ban.'' But it
actually was $10 billion in telephone taxes, $7 billion more in
business taxes, half a billion in business taxes, sales taxes of a
couple hundred million a year, universal service fund fees, September
11 fees, all of that which is the responsibility of State and local
governments. We say, here, you cannot collect. That is an unfunded
Federal mandate of the worst sort.
Now after some discussion, the bill has gotten a little better.
Senator Allard, to his great credit, has worked hard. There may be no
better-humored Member of the Senate.
He and I joined in a debate at the Heritage Foundation on a minority
of principle. We had a good debate and discussed the issues. He
improved the bill some. There are fewer unfunded mandates.
I will be asking unanimous consent at the end of my speech to have
printed
[[Page S4347]]
in the Congressional Record the unfunded Federal mandates in his bill,
S. 150. Still, as far as I know, his bill threatens $3 to $10 billion
in telephone taxes currently collected. He and I have said to each
other we do not intend to do that. However, that was several weeks ago
and we have been working hard to write language we agreed on that
expressed our mutual intention. We have failed so far.
No. 2, his legislation continues to say to State and local
governments, you cannot collect half a billion a year in business taxes
that are currently collected on the Internet backbone.
No. 3, his legislation would phase out the sales taxes State and
local governments are currently collecting on Internet access. So S.
150 continues down the wrong track. It continues to provide a big
subsidy to the fastest growing technology already heavily subsidized.
How much does it cost the Federal taxpayer? Not a penny. Not a penny.
We will send the bill to Governors and mayors and local governments and
let them raise property taxes, let them raise sales taxes on food, let
them worry with all the other unfunded mandates and add this right on
top of it. That is what we are doing. We are passing the buck.
I ask unanimous consent at the end of my remarks I be allowed to have
printed in the Record the unfunded Federal mandates on H.R. 49 first,
and unfunded Federal mandates on S. 150 next.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1)
Mr. ALEXANDER. Madam President, there is no doubt this is an unfunded
Federal mandate. We can talk about that more this week. Some of my
colleagues on my side have come up and said that does not sound like an
unfunded mandate. I thought an unfunded mandate was when we told you
you had to do something and pay for it. But if I tell you you have to
stop doing something, that you cannot collect that tax, that is a cost
I have imposed on you. If I and the Congress say to Governor Alexander,
in Tennessee, ``Stop collecting property taxes, stop collecting sales
taxes,'' then I have to go think of some other tax--lower taxes here;
higher taxes there. Nothing makes local officials madder than some
Member of the U.S. Senate or Congress to come up here and have some big
idea and pass a law, and take credit for it--lower taxes on the
Internet--and then send the bill home to them and then that same Member
of Congress or Senator is usually down to the district the next weekend
making a big speech about local control. Nothing gets the blood up in a
Senator or Governor or mayor or county commissioner more than that, and
that is exactly what we are doing.
If the Congress wants to create a big, additional tax break for high-
speed Internet access, then Congress should pay for it and not send the
bill to State and local governments. I think we, as Members of
Congress, ought to do as Paul Harvey says, and tell the rest of the
story: If we lower your taxes on Internet access, we are going to raise
your property taxes or your car taxes. Sure as the world, it is going
to be our responsibility. We can call this the Raising the Local
Property Tax Act of 2004 or the Car Tag Act of 2004 or the Sales Tax on
Food Act of 2004 or the Raise the Corporate Tax on Manufacturing and
Send the Jobs to China Act of 2004. That is what we will be doing.
One of the other issues I hope we talk about this week is whether
there needs to be an additional Government subsidy for high-speed
Internet access on top of the billions already provided by Federal,
State, and local governments.
According to the Congressional Research Service, there is already at
least $4 billion in Federal tax subsidies to encourage the use of high-
speed Internet access. I have a report from the Alliance for Public
Technology. I will not inflict its length on the Congressional Record
today, but it is filled with State and local programs to encourage the
growth of high-speed Internet access--dozens and dozens of State and
local subsidies, in addition to the Federal subsidy to encourage the
spread of high-speed Internet access.
Why is there a need for more subsidy at all when the New York Times
reported, last week, that high-speed Internet access is the fastest
growing new technology in America? It is growing at an astonishing
rate. According to a Congressional Budget Office report in February,
the United States has the highest number of broadband subscribers--
``broadband'' is another name for high-speed Internet access--at 19.8
million. It is probably a lot higher today.
An April 19 story from the Associated Press tells us that a new study
by the Pew Internet and American Life Project has found that almost
one-quarter of all Americans--more than 48 million people--have high-
speed Internet access at home. This is two out of every five Web users
who have it at home. The same study showed that more than half of
Americans have it at work. CBO told us, last December, that 88 percent
of all ZIP codes have at least one high-speed subscriber, and 29
percent have access to more than five.
In September of 2002, the U.S. Department of Commerce told us
consumers are adopting broadband technologies at a faster pace than CD
players, cell phones, color TVs, and VCRs during the same period in
their development. CBO, the Congressional Budget Office, reported, in
December of last year, that cellular phones took 6 years from their
introduction to reach 7.5 million subscribers; high-speed Internet
access reached 7.5 million subscribers in half that time.
Then, why do we need additional taxpayer subsidy? Why do we need to
say to these folks: You pay less taxes and the rest of us will pay
more? You can barley pick up a newspaper today without reading about
some new initiative from the private sector offering high-speed
Internet access.
According to CBO, from 1996 to 2001, the four largest telephone
companies increased their investment in broadband technologies by 64
percent. Cable companies increased their investment by 68 percent in
the same period.
Now, sometimes this discussion makes my head hurt because high-speed
Internet access is a subject that is unfamiliar to most of us, and you
almost have to warm up in order to be able to talk about it and
understand the complexities of what is going on. But, in effect, it is
very simple: It is just faster access to the Internet. It can be
provided in lots of different ways. Your cable company will sell it to
you. Your telephone company will sell it to you. There is a nice young
woman who comes on your direct satellite television and she will sell
you high-speed Internet access.
There is another way we might get it. There may be more. Things are
changing. But your electric company may sell it to you over electric
wires. There is a lot of talk about how we need to create more and more
subsidy so we can reach more and more Americans, that we will have
people left out. Well, thanks to the expansion of the rural
electrification system in America during World War II, almost every
American has an electric wire somewhere near them. Electric companies
have begun to offer high-speed Internet access service.
Madam President, I have an article from the Washington Times of April
5, 2004. I ask unanimous consent that this article be printed in the
Record, in the proper sequence, following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 2.)
Mr. ALEXANDER. According to this article--and we will be talking
about this more this week--according to the Federal Communications
Office of Engineering and Technology, having another major player--the
power companies--has helped to bridge the digital divide. The power
companies have the infrastructure to make broadband available
nationally.
There are a lot of utilities out there that really, really
want to do this, [says the head of another firm].
It is being offered today in Manassas, VA. The city of
Manassas offers high-speed Internet access through their
electric company for $26.95 a month.
Customers typically pay $30 to $40 a month for DSL service
and $40 to $50 a month for Internet access over cable.
If we are really talking about taxes on Internet access, we are only
talking about $1 to $3 a month, for most Americans, that they would
save if we Senators and our fellow Members of Congress go home and say:
Look at us. We just banned State and local taxation of
[[Page S4348]]
Internet access. Well, that will save you $1 to $3 a month. That is not
what they are doing, though. They are exempting a whole industry from
taxation that most industries pay. But for those who worry about
whether high-speed Internet access is going to be available to every
single American, it will be available from your electric company soon.
Now, there is another phenomenon we should talk about in terms of
whether we need to have a subsidy. All this growth is happening, just
as it should. We have a promarket economy. Traditionally, we do not
pick economic winners and losers. That is what they do in Japan. They
do it a lot more than we do. Our economy is stronger and better than
theirs because the Government does not do as good a job, we believe, at
picking winners and losers as the free market does. That is, at least,
what a great many of us over here on the Republican side traditionally
say, that we do not like industrial policy. We do not like picking and
choosing winners and losers.
So we asked the Congressional Budget Office, Congress did, last year,
about this. CBO reported to us, Congress:
[T]he broadband market is booming. . . . [N]othing in the
performance of the residential broadband market suggests that
federal subsidies for it will produce any economic gains.
Yet here we are, getting ready to spend a whole week sending billions
of dollars more in subsidies to the high-speed Internet access market.
Why are we doing this? To even encourage broader use of it? Well, I am
not sure it will have that effect.
This is an example from the Atlanta Constitution Journal of September
of a couple years ago. It is a little old, but it is good information.
In LaGrange, GA, they give away high-speed Internet access for free.
So we can ban taxation. We can keep Gwinnett County from imposing a
dollar tax on your high-speed Internet access in Georgia, but we won't
be able to do that because they give it away for free. And what has
happened? Despite the fact they give it away for free, only half the
city has subscribed a year later. A lot of people didn't want it. This
story tells why.
I ask unanimous consent this article from the Atlanta Constitution be
printed in the Record following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 3.)
Mr. ALEXANDER. It is an interesting article. It is like a lot of
other things. Just because we in Washington think everybody in America
ought to have high-speed Internet access tomorrow doesn't mean they
will take it, even if we give it to them. So then why should we give
the telecommunications industry another big subsidy to offer high-speed
Internet access to people who are already getting it free and won't
take it?
Finally, just in case Congress should, in its wisdom, decide to grant
an additional subsidy to high-speed Internet access, the first thing we
should do is make sure Congress pays for it and doesn't send the bill
to State and local governments. The House bill and the Allen-Wyden
bill, S. 150, which this motion to proceed is about, expressly violate
the Budget Act which was amended in 1995 by the Republican majority,
enthusiastically. And President Clinton signed it. Sixty-two Senators
now serving in this body voted for it, and 300 Republicans stood on the
Capitol steps in late September, early October, right before the
election that produced the Contract with America and the first
Republican Congress in a long time, and this is what we said: Our
party, no money, no mandate. If we break our promise, throw us out.
This is about the Congress keeping its promise. I have a great many
speeches that say in words more effectively than I how important
avoiding an unfunded Federal mandate is. Most of them were made by
Members of this body. There will be an opportunity to hear those
speeches again this week because they were good in 1995, and they are
good in 2004.
There is one way to provide a further subsidy to encourage the use of
high-speed Internet access, if we think it is necessary, that would
make a lot more sense than the various proposals that have been offered
so far. That, interestingly, is the Texas plan. It was the plan
authored by our President, George W. Bush, when he was Governor of
Texas. It is very simple. It is aimed at consumers, not big companies.
In 1999, Governor Bush signed a law exempting the Texas State sales tax
on Internet access up to the $25 the consumer paid each month. In other
words, there is no State tax in Texas on the first $25 you pay for
Internet access.
We just heard that in Manassas, VA, it doesn't cost you more than $25
to get Internet access from your power company. So you don't pay any
tax on Internet access in Texas. The Governor suggested to the Congress
some time ago that if Congress were bound and determined to give
another big subsidy to the telecommunications and high-speed Internet
access industry, do it this way. Use Governor Bush's idea; use the
Texas plan. Then I would say we ought to figure out what it cost State
and local governments and reimburse them for it.
It is ironic that last year we stood here and cried about the
condition of State and local governments and sent a $20 billion welfare
check to the States. This year we are taking credit for lowering taxes
on Internet access $1 a month and sending the bill to State and local
governments. I suggest if we really want to consider a Federal law that
affects State and local taxation of Internet access over the long term,
we ought to look at President Bush's idea when he was Governor of
Texas. Then I would argue it is up to us to decide what tax we are
going to raise to pay the bill, or are we going to increase the deficit
or are we going to cut services, because that is precisely what the
mayors are going to have to do. That is what the Governors are going to
have to do, and the county commissioners are going to have to do.
If everybody would go home 1 week and ask, How would you like one
more unfunded mandate to deal with along with all the others, I think
they would get an earful. At least I do when I go home.
I look forward to this week. I hope this is the beginning of a
constructive debate. I hope the end result is that we reject the
proposal we are moving to proceed on this afternoon. Those are
proposals that would create permanent confusion in this complex area of
trying to deal with the growth of high-speed Internet access that would
create an unwarranted additional tax loophole for one of the most
heavily subsidized industries in America, the high-speed Internet
access industry; that would create higher taxes because when you order
taxes lowered on some people, they are going up on others; and that
would break a promise this Congress made to State and local governments
9 years ago that we would do no harm, that we would not pass any more
unfunded Federal mandates.
What we should be doing is what we are doing in other parts of the
Congress and in the courts and in the Federal Communications
Commission. The chairman of the Commerce Committee, Senator McCain, has
already held a hearing about high-speed Internet access, its
regulation, and its taxation, and tried to sort out what to do about it
since it was not envisioned by the Telecommunications Act of 1996. The
Senator from Alaska, Mr. Stevens, has said several times that he thinks
we need to revisit the Telecommunications Act and do this in a
comprehensive way.
The Chairman of the Federal Communications Commission, Michael
Powell, has talked about the importance of digital migration, high-
speed Internet access. We will be able to carry to our homes movies, e-
mail, all sorts of services. It is wonderful. But when it does that, it
may have the effect of wiping out 5, 10, 15 percent of the State and
local tax base. We should think about that before we do that.
Among all of the principles we need to discuss, one of those is
federalism, the improper relationship of strong State and local
governments to the Federal Government. We should not slam through like
a freight train a permanent tax loophole for this industry without
carefully considering the long-term consequences to State and local
governments and the parks and the schools and the universities and the
health care and other services they are expected to provide.
A vote for the legislation that came from the House and for S. 150 or
anything like it is a vote for permanent
[[Page S4349]]
confusion, a vote for unwarranted tax loopholes, a vote for higher
taxes, and a vote to break a promise.
A vote for the Alexander-Carper compromise is a vote to ban taxes for
another 2 years, to extend the moratorium, extend the temporary
timeout. It is a vote against taxes. It is a vote against unfunded
mandates because it does no more harm to State and local governments.
And it is a vote for a reasonable period of time, up to a couple of
years, for us to thoughtfully consider what to do.
Madam President, I am new to this body, but I have watched it for a
long time. I had my first opportunity to work in it when the Senator
from North Carolina and I both came to Washington a few years ago. I
have great respect for the wisdom here and for the rules of this body.
They offer us a chance to deliberate a little longer than our friends
in the House are able to, and sometimes that is important to do. I
believe it is on this issue.
I am ready to move, ready to come to a conclusion. There are at least
a couple of ideas out there that will get a legislative result this
week if we would like to do it. But I am not ready to vote for
permanent confusion, another big tax loophole, higher taxes, and I am
not ready to break our promise to State and local governments about
unfunded mandates.
I ask unanimous consent to have printed in sequence following my
remarks the following articles:
One is a November 4, 2003, editorial from the Washington Post. The
Senator from Ohio, Senator Voinovich, brought this to our attention at
that time, saying this Congress should step back from the brink
temporarily, extend the moratorium, and sort this all out in a way that
doesn't intrude on State prerogatives.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 4.)
Mr. ALEXANDER. Madam President, I ask unanimous consent to have
printed in the Record an editorial from the Dallas Morning News.
``Congress must get this right,'' it says in its last sentence, ``and a
2-year moratorium with all new Internet access fees will give Congress
enough time to sort through the issue.''
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 5.)
Mr. ALEXANDER. Madam President, I ask unanimous consent to have
printed in the Record a letter from Commissioner Loren Chumley from the
Department of Revenue from the State of Tennessee. She points out
Tennessee is now not taxing, not imposing a sales tax on Internet
access because our State law doesn't permit it. In fact, the direction
of things has been that States have repealed their taxes on Internet
access. States do things like that. But this points out in very clear
terms how important it is for our State, which doesn't have an income
tax--how important it is for us here not to try to tell them what taxes
to collect and what services to provide. Again, I ask unanimous consent
that that be printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 6.)
Mr. ALEXANDER. Finally, there are two articles which are a little
long, but they are important. I know Senators and staff members will
bring their attention to this subject, and we know we will be debating
it for the next several days, and that truly we will be considering it
for the next couple of years as the Commerce Committee wades through
all of the issues surrounding digital migration and, hopefully, come to
a comprehensive approach toward how we approach taxation and
regulation--I hope minimal taxation and regulation, but appropriate
taxation and regulation of high-speed Internet access, and how we
divide that among the various governments. These are the best two
articles I have found that help explain the history behind the Internet
access tax moratorium bill and the issue before us.
The first is by the Center on Budget and Policy Priorities, dated
March 15, 2004, entitled `` The Alexander-Carper Internet Access Tax
Moratorium Bill, S. 2084: a True Compromise That Substantially Broadens
the Original Moratorium.''
I point out that the leader asked us who are opposed to this to
compromise, and we have. The Alexander-Carper legislation is broader
than the original moratorium, and it levels the playing field so all
providers of high-speed Internet access are treated the same--at least
so far as the Congress is concerned--on the last mile between the user
of high-speed Internet access and the provider.
I ask unanimous consent that the article's summary be printed in the
Record in sequence following my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 7.)
Mr. ALEXANDER. Finally, I want to offer another recent article by
Harley Duncan and Matt Tomalis, from the Multistate Tax Commission,
entitled ``The Forgotten First Sentence.''
The definition of Internet access is what is causing a lot of the
problem here. We hear a lot about that from the Senator from Ohio and
those on both sides of the issue. The problem is, the way the bill is
written, it doesn't focus only on the consumer and provider of Internet
access, it goes way back up the line and bans the State and local
government from collecting taxes on the whole industry, and a whole
variety of services that are now part of the State and local tax.
Nobody wants to pay taxes on anything, but if we ban those taxes, we
raise these taxes. This article helped us to clearly understand how the
definition of Internet access is the problem here.
I see the Senator from Ohio, a former chairman of the National
Governors Association before he was a Senator. He can speak with
authority about what happened in 1994 and 1995 because he was a
national leader in the movement to persuade Congress to stop unfunded
Federal mandates and to pass the Unfunded Mandate Reform Act, which
amended our Budget Act. He is a principled man and I am delighted to be
working with him on this issue and on others.
Again, I thank the leader for setting in motion the series of
procedural steps that will give us a chance to fully debate this issue
this week. I thank Senator Allen and Senator Wyden for their courtesies
and patience as we worked on an issue we disagree about. I look forward
to a full discussion and, I hope, a temporary 2-year timeout to give us
a chance to think about that which bans taxes for 2 more years, but
keeps our promise and does no harm to State and local governments.
I yield the floor.
Exhibit 1
Unfunded Federal Mandates Created by H.R. 49
1. $10 billion annually in telephone transactions taxes
currently collected--under H.R. 49, the telecommunications
industry could be exempted from the collection of state and
local taxes on gross receipts taxes, sales an use taxes, and
other telecommunications transactions taxes. As the
telecommunications industry offers more and more of its
services over the Internet, more and more of the industry's
revenues could be tax exempt. Cost to state and local
governments: $10 billion annually. Source: Letter from
Congressional Budget Office, February 13, 2004.
2. $7 billion annually in business taxes currently
collected--The taxes preempted in H.R. 49 go beyond taxes on
access by customers to the Internet to include income,
property, and other business taxes levied on
telecommunications companies. Cost to state and local
governments: $7 billion annually. Source: Multistate Tax
Commission Memorandum, September 24, 2003; Letter from
Congressional Budget Office, February 13, 2004.
3. $500 million annually in business taxes currently
collected on the Internet ``backbone''--Under H.R. 49, states
could not continue to tax some business transactions such as
business-to-business transactions between Internet service
providers and telephone companies. Cost to state and local
governments: $500 million annually. Source: Federation of Tax
Administrators' Memorandum, November 10, 2003.
4. Sales taxes on Internet access currently collected--
Under H.R. 49, states that are now collecting taxes on
Internet access could not continue to do so immediately upon
the bill being signed into law. Cost to state and local
governments ``grandfathered'' by the original 1998 Act: $80-
120 million per year. Cost to state and local governments (27
states) imposing taxes on charges for the portion of DSL
Internet access services that they do not consider to be
``Internet access'': $40-75 million per year. Source: Letter
from Congressional Budget Office, November 5, 2003.
5. Universal Service Fund fees and 911 service fees--The
language of H.R. 49 would prohibit the federal government
and/or states from imposing or collecting fees on
telecommunications offered over the Internet. As telephone
service migrates to the Internet, universal service funding
and funding
[[Page S4350]]
for the provision of 911 and E911 service will be reduced as
traditional telephone sales revenue drops. Cost to state and
local governments: $3-4 billion. Source: Congressional
Research Service; Letter from Congressional Budget Office,
February 13, 2004.
Unfunded Federal Mandates on States (S. 150)
1. $3-$10 billion annually in telephone taxes currently
collected--Under the moratorium, states may not be able to
continue to tax telephone calls if they are made over the
Internet. Cost to state and local governments: within five
years losses in telecommunications revenues could rise to $3
billion per year; ultimately, state and local revenue loss
could be $10 billion per year. Source: Letter from
Congressional Budget Office, February 13, 2004.
2. $500 million annually in business taxes currently
collected on the Internet ``backbone''--Under S. 150, states
could not continue to tax some business transactions such as
business-to-business transactions between Internet service
providers and telephone companies. Cost to state and local
governments: $500 million annually. Source: Federation of Tax
Administrator's Memorandum, November 10, 2003.
3. Sales taxes on Internet access currently collected--
Under S. 150, states could not continue to collect sales
taxes on Internet access after the three-year grandfather
period. Cost to state and local governments ``grandfathered''
by the original 1998 Act; $80-120 million per year. Cost to
state and local governments imposing taxes on charges for the
portion of DSL Internet access services that they do not
consider to be ``Internet access'': $40 to $75 million per
year. Source: Letter from Congressional Budget Office,
November 5, 2003.
Exhibit 2
[From the Washington Times, Apr. 5, 2004]
Electric Companies Begin Offering Broadband Service
(By William Glanz)
Sean Porter's high-speed Internet connection doesn't come
through a cable-television cord, a telephone line or from a
satellite.
An electrical outlet powers the broadband connection at the
Manassas architect's firm.
``The greatest advantage is that we only need to have an
outlet to use it,'' Mr. Porter said.
Manassas is the second city in the nation, where broadband
service over power lines became commercially available. City
officials there began marketing the service in February.
Today, only about 300 U.S. consumers pay for high-speed
Internet access over power lines, but this new method of
delivering Web content could jolt the market for Internet
service.
Allentown, Pa., and Cincinnati are the only other U.S.
cities where residents are paying for the new high-speed
Internet service, but electric companies from North Carolina
to Hawaii are testing the service or plan to begin a pilot
project. Federal regulators hope broadband access over power
lines becomes widely available, especially in rural areas.
In Manassas, 60 homeowners and a handful of businesses have
Internet access through power lines. Another 1,200 homeowners
have asked to be hooked up. That's nearly 10 percent of the
city's 12,500 homes.
By the end of the year, broadband over power lines could be
available to all Manassas residents. It would be the first
U.S. city where the new technology is available to all
residents.
Internet access from power lines began to get attention
last year, when the Federal Communications Commission (FCC)
promoted it as a way to offer high-speed Internet services
for people in rural areas. The FCC also saw broadband access
from power lines as an alternative to high-speed access from
phone, cable and satellite companies that could lower
consumer prices.
Since the power grid is ubiquitous, broadband over power
lines could be available to nearly every U.S. home.
``Having another major player--the power companies--has to
help bridge the digital divide. The power companies have the
infrastructure to make broadband available nationally,'' said
Ed Thomas, chief of the FCC's Office of Engineering and
Technology.
The FCC in February proposed rules to govern broadband over
power lines. The rules aren't final, but a handful of cities,
utilities and technology companies are pushing forward.
Current Communications Group in Germantown, Md., is working
with Ohio utility Cinergy Corp. to market broadband service
over power lines in Cincinnati.
Current Communications also has a pilot project with Pepco
in Potomac to test the new Internet service.
``There are a lot of utilities out there that really,
really want to do this,'' said Jay Birnbaum, vice president
of Current Communications, a privately held firm founded four
years ago.
Main.net Powerline Communications in Reston is working with
Manassas, which owns its electric plant, to deliver Internet
content over the power lines.
Main.net and Current Communications are two of the primary
companies in a small cluster of firms that market technology
to send Internet data over power lines and make the modems
that subscribers plug into wall sockets.
Experts long have known power lines could accommodate
Internet data. Electricity travels at a lower frequency than
an Internet signal, so the two can share a power line.
Public works department employees in Manassas hook up new
Internet subscribers nearly every day.
``They're beating down our doors,'' said John Hewa,
assistant director of the city's electric utility.
That's because few people there have high-speed Internet
access, Mr. Hewa said.
``A lot of people are telling us they can't get high-speed
services where they live. There are a lot of areas where it's
not available, and they're using dial-up service,'' he said.
The FCC found in June 2003 that there were no high-speed
Internet subscribers in 9 percent of U.S. zip codes, where
about 1 percent of residents live. In another 16 percent of
U.S. zip codes, there was just one broadband provider.
The American Public Power Association, which represents
utilities, says 75 percent of its members serve communities
with fewer than 10,000 people, many of whom don't have high-
speed Internet access.
About 24 million people subscribe to broadband service,
according to Washington research firm Precursor Group.
But spokesmen for Verizon Communications Corp. and Comcast
Corp. both say they are equipped to deliver high-speed
service in Manassas.
The new broadband service in Manassas also might be popular
because the city charges $26.95 a month, less than digital
subscriber lines (DSL) or cable Internet providers. Current
Communications charges a basic rate of $29.95 a month in
Cincinnati. Customers typically pay $30 to $40 a month for
DSL service and $40 to $50 a month for Internet access over
cable.
Although the FCC is hopeful that broadband over power lines
helps lower prices and provides access to underserved areas,
Precursor Group analyst Pat Brogan isn't so sure the service
will take off because DSL and cable Internet services have
been around for years. Broadband over power lines simply
might be too late to catch up, he said.
But electric companies want to make money off their power
lines, and consumers who have been relegated to using low-
speed dial-up services are interested in subscribing to
broadband access over power lines, said Joseph Marsilii,
president and chief executive of Main.net.
``I firmly believe there is a huge market for this,'' he
said. ``I think we're on the cusp.''
Exhibit 3
[From the Atlanta Journal-Constitution, Sept. 2, 2004]
A Georgia City Decided To Provide Its Residents With; A Year of Free
Internet Access. But Only Half Have Signed on. Why LaGrange Isn't More
``Wired''
(By Ernest Holsendolph)
LaGrange.--A delegation of 11 Japanese legislators came
calling on the city of LaGrange recently to learn more about
its efforts to connect every household in the city to the
Internet free of charge for a year.
The assemblymen for Gunma Prefecture were here ``to
understand the community strategy,'' said Kazuo Aikyama,
chairman of the delegation.
They aren't the first to come on such a quest.
A well-worn path to city hall on Ridley Street has seen
similar delegations from England, Canada and Bulgaria as well
as curious groups from cities and towns in the United States.
At the urging of City Manager Tom Hall and others, LaGrange
set out to provide easy access for residents to create a
``wired'' community able to interact with one another--and do
business more easily with City Hall, agencies and other
stopping points.
They would do it by connecting the homes, for free at
first, hopefully showing people how valuable the service was
and later get them to pay for subscriptions.
However, Dave McGee, a LaGrange native who is a glass
worker, was unaware of the program. ``I have heard things
about this Internet, but I don't know anything about it,''
said McGee, 47, as he walked along a side street off
Lafayette Square.
And Mable Abercrombie, who gave her age discreetly as
``over 65,'' said she had heard of the LaGrange project but
was keeping her distance from it.
``I am too busy in my garden; need to spend more time
there,'' she said over the counter of the Merle Norman
cosmetics display where she works.
McGee is an African-American, Abercrombie a senior citizen.
Each represents a group that has been a special challenge to
LaGrange's effort to bring all its residents online.
``We expected that with the service offered free of charge,
we would have big interest in communities where people had
been unable to afford Internet service,'' said Joe Maltese,
economic development director.
Instead, he said, there was an overall acceptance of nearly
50 percent--with no high interest in the southern city
communities where the black population is heaviest.
Interestingly, LaGrange recently was named one of the top
seven ``intelligent'' communities in the world by the
prestigious World Teleport Association.
In addition, LaGrange, about 65 miles southwest of downtown
Atlanta, has been cited as ``Intelligent City of the Year''
by the
[[Page S4351]]
association. And so, while gaining recognition for its
technological push, the distinction seems lost on a major
share of its 26,000 citizens.
Partly to keep plugging away with residents who remain
unexcited, city officials decided two weeks ago to extend the
free offer for another year.
``We have worked hard to make service relevant to people's
lives,'' said Hall, 40, the city manager of LaGrange since
1994.
Under Hall and Maltese, the city has pushed to get interest
and response, working with school officials and holding
rallies in public housing communities with U.S. Sen. Max
Cleland (D-Ga.) as a speaker. They also have advertised in
papers and on television and have mailed letters directly to
residences.
Subscribers can get the service either through cable modems
and personal computers, or they can access it via television
through the black set-top box.
Residents can use wireless keyboards, as with WebTV, to
connect to the Internet, or to special city networks where
they can learn about community activities, church events,
shopping opportunities, the weather and other information.
That's all the stuff tech-savvy people now take for granted
in the information age. But there's a problem, says Greg
Laudeman, a community information specialist with Georgia
Tech's economic development outreach program.
There is a gap, he said, between segments of society who
embrace computers and digital information, and other people.
``Early adopters (of new ideas and technology) and the
group that comes right behind them have different needs,
desires and interests than others,'' he said.
``And in a curious way, the technology companies, early
adopters start coming up with more and more that suits their
interests at the same time that others ignore it because they
do not need it, or immediately see the usefulness of it.''
Laudeman and others say the ``digital divide,'' when
examined this way may not be racial, or even economic
entirely, but more a different way people view developments.
``Many of us (early adopters) learn to value information
apart from what we do, or apart from the material or physical
things we own or use . . . we value it as a resource,''
Laudeman said, ``while other people value information only
as it relates to what they are doing.''
He added, ``It's like the world is divided between those
who enjoy talking and thinking about technology, and those
who simply use it.''
Hall and Maltese grapple with that dichotomy between groups
nearly every day.
``Some people say the service has no relevance to their
lives,'' said Hall, ``and others are just against it because
. . . well, because it is new and something they're not
accustomed to.''
Jabari Simama, who directed the establishment of community
technology centers in Atlanta, said his staff noticed also
that access alone is not enough to get response from
predominantly black, lower-income areas.
``Income may be a barrier, but it is not the only one,''
Simama said. ``Other factors that keep people from getting
involved in Internet technology include lack of reading
ability, and an absence of information they want or need.
``It's one thing to say you'll put up information about the
city or city services, but you need to put up things about
the neighborhoods and communities where people live--and that
means you must use the same focus-group approach cable TV and
others have used to reach those audiences.''
Simama's view is corroborated by a study of the Children's
Partnership, a Los Angeles-based nonprofit organization that
mostly focuses on the needs of young people. But it also
reached conclusions about reaching lower-income people.
Among the barriers to strong Internet interest in the hard-
to-reach communities, the study found, are literacy,
language, culture and lifestyle, and the ``lack of most
urgently needed local information.''
How specific might that information be? One respondent
said:
``Many of the people in the housing project where I work
want to find out about jobs they can do in the neighborhood.
If the neighborhood was more connected and mapped online,
this kind of information would really make a difference to
residents.''
The study projected that some 50 million Americans may be
inhibited by one or more of the barriers, with 41 million
specifically held back by lack of reading ability.
These are the kinds of extended considerations the leaders
in LaGrange will have to confront in the second year of
effort to get more residents involved in Internet
communication.
Among the barriers that must be scaled, are inertia among
people who see no ``need'' as well as others who are outright
suspicious.
Abercrombie, the gardener, when asked why she would not try
something that is free of charge, replied: ``Well, yes, but
what happens after the year when it's free?''
The LaGrange arrangement allows someone to try it, then to
decide what it's worth. ``But,'' she said, ``I am not sure I
want to be interested.''
She was given a computer by her son, who wanted her to
trade e-mail, but she has not done that, despite prompting by
grandchildren and others.
Patricia Graves, who works in the city cemetery office, has
been a subscriber to the Internet service for a year and
loves it.
Graves, who is black, said she enjoys e-mail, learning
about places to vacation, and just gathering information.
``I have not made a purchase yet, but I am thinking about
it,'' she said.
Asked why some of her friends had not shown the same
enthusiasm, she was candid. ``I just find many people are
just afraid of computers. And some people are suspicious of
the city and wonder why this interest in putting these
machines in their homes. Some even wonder if they are for
watching them.''
State Rep. Carl von Epps, a south LaGrange merchant, said
he does not subscribe to the city service.
``Don't get me wrong,'' he said. ``It is fine, and it is a
great way for people to get their foot in the door and learn
about the Internet, but it is not as fast as my service that
I've had for some time.''
Von Epps, who is black, said he was aware of some feelings
of suspicion and fear. ``But a lot of that will be overcome
by working more with churches and community organizations and
people the neighbors trust,'' he said. ``It's just a matter
of time.''
____
[From the Washington Post, Nov. 4, 2003]
Tax and Click
State and local governments have broad power to tax as they
see fit--everything from clothes and food to electricity and
telephone service. Nearly everything, that is, except the
Internet. Under a supposedly temporary law passed in 1998 and
already extended once, Congress prohibited states from taxing
Internet access fees, monthly charges imposed by Internet
service providers. Proponents argued that the nascent engine
of the Internet shouldn't be slowed by taxing it and that it
would take time to devise a system to prevent duplicative or
discriminatory taxes. Now, with the tax moratorium having
expired on Saturday, Congress is poised to make the ban
permanent, broaden its reach and wipe out existing taxes that
had been grandfathered in under the previous law. With state
budgets under stress and the Internet thriving, this is an
unnecesary--and costly--incursion on states' rights.
The argument for permanently barring taxes on Internet
services centers on two issues. One is the argument that
taxing Internet access, whether through phone lines or cable
modems, would amount to double taxation, because the phone
lines and cable service are already taxed. That's true, but
purchasing Internet access provides a separate--and
separately taxable--bundle of services. Terming this double
taxation is like saying that a shopper who pays tax on a pair
of slacks should then be exempt from being taxed on a shirt
bought with it.
The other argument is that taxing Internet access would
worsen and prolong the digital divide, the computer gap
between rich and poor. This may be a problem, but prohibiting
taxation is not the answer. It's not the extra few cents on a
monthly bill that's stopping the less well-off from Googling
their way to the middle class. A policy to erase the digital
divide, however laudable, doesn't justify the no-tax
solution. The federal government wants to spur home ownership
for low-income familes--surely a bigger problem than lack of
Internet access--but that doesn't lead it to tell local
governments that they can't impose property taxes.
What's driving this legislation is that telecommunications
companies and Internet service providers see an opportunity
not only to make the tax moratorium permanent--in itself a
bad idea--but to save what could amount to billions in
additional taxes. The law frees service providers from having
to pay taxes on telephone service they use to provide
Internet access. And as the Internet becomes a more effective
medium for providing phone service and delivering products
such as downloaded movies, software and music, the
legislation could sweep such offerings within the ambit of
services that states are prohibited from taxing.
The Internet shouldn't be subject to conflicting taxes, but
that's no reason to argue that it shouldn't be taxed at all.
There should be a level playing field for taxing Internet
access, whether it comes through ordinary dial-up, cable
modems or high-speed telephone lines. The last thing Congress
should do now to cash-strapped states is pass a law that
would not only permanently put Internet access off limits for
taxation but also deprive them of revenue that they now
collect. Proponents of the law are busy demagoguing the
issue, suggesting, as Senate sponsor Ron Wyden (D-Ore.) put
it the other day, that users ``could be taxed every time they
send an e-mail, every time they read their local newspaper
online or check the score of a football game.'' Congress
should step back from the brink, temporarily extend the
moratorium and sort this all out in a way that doesn't
intrude on state prerogatives.
Exhibit 5
[From Dallas News.com, Mar. 30, 2004]
Internet Access Fees: Don't Let Removal Have Unintended Effects
Getting rid of a bad tax isn't as easy as one might think.
Late last year, a couple of bills that would have done away
with Internet access fees began winding their way through
Congress. (An Internet access fee is one of those mysterious
fees you find near the bottom of your monthly phone bill.)
The bills had gained support until lawmakers discovered a
major problem. The
[[Page S4352]]
bills also would have exempted virtually all
telecommunications activity from taxation. Cities and states
would have been left out on a precarious financial limb,
possibly unable to collect traditional right-of-way and
franchise fees that fund city and state operations.
Welcome to the law of unintended consequences.
For that reason, we urge Congress to go slowly in this area
and to extend a moratorium on new Internet access fees for
another two years.
We aren't thrilled about leaving in place a bad tax that
encumbers an emerging technology--even one that provides $45
million annually in Texas. But it's the right decision and
one that buys time for a more thoughtful discussion of the
Internet and taxes. The moratorium has support from a growing
number of lawmakers, including Sen. Kay Bailey Hutchison, R-
Texas.
Technology breakthroughs are changing telecommunications
faster than legislation can keep pace. For years, Congress,
the Federal Communications Commission and state regulators
have wrestled with how much to regulate the Internet but have
had less-than-satisfying results.
The Internet shouldn't become an easy target for revenue-
hungry jurisdictions, but neither can it expect to be a tax-
free haven for commerce. Congress has a responsibility to
find a satisfactory middle ground, recognizing the revenue
needs of cities and states while also not crippling the
telecommunications and information services industries.
Congress must get this right, and a two-year moratorium on
all new Internet access fees will give it enough time to sort
through the issue.
Exhibit 6
State of Tennessee,
Department of Revenue, Nashville, TN, January 9, 2004.
Re S. 150--the Internet Tax Moratorium.
Senator Lamar Alexander,
Hart Building,
Washington, DC.
Dear Senator Alexander: It was a pleasure to see you at the
recent meeting for the National League of Cities in
Nashville. Again I want to thank you for your courageous
assistance with regard to protecting the interests of the
State of Tennessee on the subject of the Internet Tax
Moratorium.
I wanted to make you aware of a recent development in this
matter. Tennessee has taxed Internet access as a
``telecommunications service'' under its sales and use tax
laws since 1996. In my presentations to Harrison Fox and Joe
Cwiklinski concerning the adverse impact S. 150 and the
Managers' Amendment would have on Tennessee's tax base, I
explained that Tennessee has been involved in lawsuits
concerning whether Internet access falls within Tennessee's
definition of ``telecommunications.'' The Court of Appeals
decision in Prodigy Services Corp., Inc. v. Johnson, 2003 WL
21918624 (Tenn. Ct. App., Aug. 12, 2003) has now become
final. In this case, the Court held that, under Tennessee
law, Internet access is not taxable as a telecommunication
service in Tennessee. Therefore, the Tennessee Department of
Revenue will issue a notice in the near future explaining
that Internet service providers should no longer collect
sales tax on sales of Internet access to consumers. I advised
your office that the sales tax on the true Internet access
component of the prior Internet Tax Freedom Act was
approximately $18 million annually for Tennessee.
This Tennessee Court decision does not in any way impact
our stringent opposition to S. 150 and the Managers'
Amendment. Both S. 150 and the Managers' Amendment put
Tennessee's entire telecommunications sales tax base at risk
because the amendment sought by the telecommunications
companies incorporates the very broad definition of
``Internet access'' under the original Internet Tax Freedom
Act. While certain constituencies have questioned the states'
estimates of the bills' fiscal impact, the critical problem
is about the language in the bill and about the policy. As
long as the amendment sought by the telecommunications
industry includes the phrase ``Internet access'' and as long
as the definition of ``Internet access'' remains as it was
under the federal law, then the fiscal problem identified by
the states and local governments remains.
Tenness strongly supports the amendment that you proposed
to S. 150, the Alexander-Carper amendment. If there is
anything that I can do to assist on this matter or any other
matter concerning Tennessee taxes, please do not hesitate to
let me know. Thank you again for all of your help.
Very truly yours,
Loren L. Chumley,
Commissioner.
Exhibit 7
The Alexander-Carper Internet Access Tax Moratorium Bill, S. 2084: a
True Compromise That Substantially Broadens the Original Moratorium
(By Michael Mazerov)
Summary
Senators Lamar Alexander and Thomas Carper, with nine
original cosponsors, have introduced S. 2084, the ``Internet
Tax Ban Extension and Improvement Act.'' This bill would
reinstate and broaden the ``moratorium'' on state and local
taxation of Internet access services originally imposed in
1998 by the Internet Tax Freedom Act (ITFA). S. 2084 would
bar state and local governments for two more years from
taxing the typical $10-$50 monthly charge that households and
businesses pay--to an Internet access provider like America
Online, or to the local phone or cable TV company--to be able
to access the World Wide Web and send and receive e-mail.
S. 2084 would broaden the original ITFA moratorium
substantially by newly exempting from taxation all
telecommunications services ``purchased, used, or sold by an
Internet access provider to connect a purchaser of Internet
access to the Internet access provider.''
This new language in S. 2084, which amends ITFA's
definition of Internet access, exempts from new state and
local taxes almost all communications services that an
Internet access subscriber can use to connect to her Internet
access provider--so-called ``last mile'' telecommunications.
S. 2084 would, however, grandfather existing state and local
taxes on ``last-mile'' telecommunications services.
Grandfathering currently-collected taxes is consistent with
the sponsors' position that Congress should not impose a new,
expensive, ``unfunded mandate'' on state and local
governments, especially at a time of severe fiscal stress.
The new language to be added to ITFA's Internet access
definition by S. 2084 seeks to achieve ``technological
neutrality'' in the tax treatment of high-speed access by
exempting from tax all the forms in which the ``last mile''
connection is made: cable modems, ``Digital Subscriber
Lines'' (DSL), dedicated ``T-1'' lines used by businesses,
wireless connections (e.g., Blackberry), and satellite
transmissions. The only exception to the tax exemption for
``last mile'' telecommunications would be ordinary voice
telephone lines used for ``dial-up'' (conventional modem)
access to the Internet; taxes on such lines would still be
allowed under S. 2084.
S. 2084 is a significant expansion of the moratorium. As
enacted in 1998 (and as renewed in 2001), the Internet Tax
Freedom Act had excluded (carved out) from the definition of
tax-exempt ``Internet access'' all telecommunications
services--as that term is defined by the Federal
Communications Commission. Thus all states and localities
were allowed to continue taxing all telecommunications
services, even those used to obtain or provide Internet
access on the ``last mile.''
The authorization of state and local governments to
continue taxing telecommunications was consciously and
intentionally included in ITFA in order to preserve state and
local taxes and fees imposed on all forms of
telecommunications services used at any point along the
Internet. While some have claimed that S. 2084's grandfather
provision condones ``illegal'' taxes on Internet-related
telecommunications imposed by states and localities
attempting an ``end run'' around ITFA, the legislative
history of ITFA clearly refutes those claims.
Renewing ITFA in its original form would preserve state and
local taxes on all Internet-related telecommunications. The
proposed S. 150 would prohibit all state and local taxation
of both ``last mile'' telecommunications services and the
``upstream'' telecommunications services that constitute the
underlying infrastructure and ``backbone'' of the Internet.
(According to the Federation of Tax Administrators, states
and localities would lose approximately $500 million annually
if ``upstream'' telecommunications services were no longer
taxable.) In prohibiting new taxes on ``last mile''
telecommunications, S. 2084 represents a true compromise
between these two alternatives.
The PRESIDING OFFICER. The Senator from Ohio is recognized.
Mr. VOINOVICH. Madam President, first of all, I want to thank the
Senator from Tennessee for the tremendous amount of time and effort he
has put into this issue. We all got into this together last year when
we saw the train moving very fast and we wanted to do what we could to
slow it down. We were able to accomplish that. Since that time, the
Senator from Tennessee and the Senator from Delaware have been working
on a bipartisan basis to try to spend a great deal of time with the
folks who have a different point of view, trying to reconcile the
differences.
Unfortunately, those differences have not been reconciled. But it
certainly is not based on a lack of trying. The Senator from Tennessee
now has become the expert on this. Madam President, I wish you had been
at a meeting I had with him last week, where he was teaching the
teachers on this legislation. I thank him so very much for all of his
hard work and dedication to this issue. I hope our colleagues will
listen to us today and perhaps come up with another compromise that
will allow us to spend more time to deal with this subject. This is a
very complicated issue and we need to be careful how we proceed.
Today we are going to consider a motion to proceed on S. 150, the
Internet Tax Nondiscrimination Act of 2003. When the Senate first
considered this legislation last November, I argued the
[[Page S4353]]
debate on S. 150 was not about taxing e-mail or increasing taxes on
Internet access. It was suggested by some members of this legislative
body that we were in favor of taxing the Internet or e-mail. In fact, I
stand here today in opposition to taxes on Internet access and firmly
opposed to any and all taxes on e-mail by any level of government--
Federal, State, or local. But that is not what today's debate is about.
Rather, the debate on S. 150 is about federalism, unfunded mandates,
and protecting the States' ability to collect revenue at a time when
State and local governments are struggling to make ends meet.
As a former State representative, counter auditor, counter
commissioner, Lieutenant Governor, mayor of Cleveland, and Governor of
Ohio, I have seen firsthand how the relationship between the Federal
Government and our State and local counterparts affect our citizens and
the communities in which they live.
My experience has fueled my passion for federalism and the need to
balance the Federal Government's power with the powers our Founding
Fathers envisioned for the States. This very body was created in part
to guarantee that States have adequate and equal means to assert their
interests before the Federal Government, and I can assure you that if
we Senators were still elected State legislators, this issue would not
be before us today.
The relationship between the Federal Government and State and local
governments should be one of partnership. However, that is not always
the case. I am concerned about the tendency of the Federal Government
to preempt the functions of State and local governments and force on
them new responsibilities, particularly without also providing funding
to pay for these new responsibilities. Madam President, that is why I
fought for the passage of unfunded mandates reform.
As a matter of fact, I will never forget the first time in my life I
set foot on the floor of the U.S. Senate was when the unfunded mandates
reform legislation passed. Then, later at the Rose Garden, I was there
representing State and local governments when President Clinton signed
UMRA in 1995. As I said, I was representing State and local
governments, and, Madam President, your husband a former Senator from
Kansas, Mr. Dole, was representing the national interests. It is a day
I will never forget. In fact, I have the pen that was used to sign the
legislation proudly displayed in my office in the Senate.
As I will explain in a moment, S. 150 violates the principles of
federalism. When S. 150 was pulled from the Senate floor last November,
advocates on both sides of the issue agreed to resolve our differences.
For the past 6 months, we have been engaged in meaningful dialog, but
we just cannot reach an agreement. At this point in time, I am
concerned that the philosophical differences between the two sides may
be too deep to bridge.
Madam President, I have three problems with the definition of
Internet access:
First, it is so broad that it prevents State and local governments
from collecting taxes on all telecommunications services used to
provide Internet access over the entire broad band network. We are
talking about the entire network, last mile, middle mile, and backbone.
States are currently collecting between $3 billion and $10 billion
annually in telephone taxes. I am concerned that this tax base may
erode as traditional phone service migrates to cutting edge technology
called voice over Internet protocol, VOIP. In fact, the migration is
happening at a rapid pace. For example, on April 9, 2004, Newsday
reported that AT&T expects to add 1 million VOIP customers by the end
of 2005 and there are many other companies rolling out this service as
well. This will have a tremendous change in the way telephone service
is provided in the United States.
As a part of our good-faith negotiations on S. 150, Senators Allen
and Alexander were working on language to preserve the States' ability
to collect taxes on VOIP, but they have not yet reached an agreement.
In addition, the Federation of Tax Administrators noted that S. 150
would prohibit States from continuing to tax some transactions such as
business-to-business transactions between Internet service providers
and telephone companies, and they estimate this could cost State and
local governments $500 million annually in lost revenues.
Second, S. 150 violates the spirit of the original moratorium by
making a brand new definition of Internet access permanent. The
original 1998 moratorium was 3 years in duration, and in 2001, Congress
extended it for 2 more years. With technology changing so rapidly, we
must be cautious when trying to define Internet access.
Third, according to the CBO, S. 150 imposes an intergovernmental
mandate under the Unfunded Mandates Reform Act. Let me repeat, CBO says
it is an unfunded mandate. On page 6 of the September 29, 2003,
Commerce Committee's report on S. 150, CBO said:
By extending and expanding the moratorium on certain types
of State and local taxes, S. 150 would impose an
intergovernmental mandate as defined in the Unfunded Mandates
Reform Act. CBO estimates that the mandate would cause State
and local governments to lose revenue beginning in October
2006; those losses would exceed the threshold established in
the Unfunded Mandates Reform Act . . . by 2007. While there
is some uncertainty as to the number of States affected, CBO
estimates that the direct costs to State and local
governments would probably total between $80 million and $120
million annually, beginning in 2007.
There is no question, this is an unfunded mandate.
Furthermore--and this is the part to which we really need to pay
attention:
Depending on how the language altering the definition of
what telecommunications are taxable is interpreted, that
language also could result in substantial revenue losses for
States and local governments. It is possible that States
could lose revenue if services that are currently taxed are
redefined as Internet access under the definition of S. 150 .
. . However, CBO cannot estimate the magnitude of these
losses.
In other words, at this stage of the game, they have no idea how
large these losses will be to State and local governments if the
definition of Internet access in S. 150 is passed.
To follow up on CBO's assessment, I went to my own State and said:
Can you examine the proposals and let me know what they would cost our
state?
Under S. 150, as reported, it would cost the State of Ohio $350
million a year at a time when they are trying to balance their budget.
They are making cuts in services right now to try to balance the State
budget. The Allen-Wyden managers' amendment we discussed in November
would cost about $150 million for 2 years, and the Alexander-Carper-
Voinovich amendment would cost my State about $40 million a year. So
any proposal under consideration would cost my State money.
Logic tells me that if CBO cannot calculate the potential loss in
revenue to the States, and my State projects large revenue losses, why
would we make dramatic and permanent changes to the Internet tax
moratorium? Why would we do that to our friends in State and local
government?
Last month, Senator Collins, chairman of the Governmental Affairs
Committee, confirmed in a letter to me that the Allen-Wyden managers'
amendment to S. 150 also contained unfunded mandates as defined by
UMRA. The CBO says it and the Governmental Affairs Committee says it is
an unfunded mandate.
Unlike Congress, by law States must balance their budgets. They do
not have the option of printing money like we do. Therefore, if the
Senate passes S. 150 or the managers' amendment, Congress will, in
effect, force States to raise taxes or cut services in order to make up
the difference, which is why each State and local government and
organizations are opposed to this legislation with the exception of the
NCSL.
However, NCSL did send a strong message earlier this year. In fact,
they were in favor of this bill last November but have since removed
their support and are now neutral on the legislation. They are giving
more consideration to this issue.
The financial impact of S. 150 would be devastating to our State and
local governments, but there are other problems with the legislation
that are beyond our control. The Federal Communications Commission
classifies DSL as both an information service and telecommunications
service. I just wonder how many of our colleagues really understand
what this is all about. This is a very complex issue and we really need
to pay attention to both the language in the proposals and, now to the
courts as well. Under the 1998 moratorium, State and local governments
are
[[Page S4354]]
able to collect taxes on the telecommunications portion of DSL service.
The problem that supporters of S. 150 point out is that cable modem
Internet service has been classified by the FCC as an information
service and, therefore, it is not subject to State and local
telecommunications taxes. My colleagues argue that we need to bring
parity to the industry by enacting an expanded definition of Internet
access. I agree with them in principle. However, earlier this month the
Ninth Circuit overruled the Federal Communications Commission decision
that cable modem broadband service was a single information service.
The court ruling means that cable modem service now can be classified
as part information service and part telecommunications service, just
like DSL. So under the Ninth Circuit, there is now parity between DSL
and cable modem.
The Ninth Circuit case may be appealed to the Supreme Court. This
whole area still is in flux. But it does not end there.
As I mentioned, we think it will go to the Supreme Court, and, if so,
they may not render a decision until June of 2005. The case, obviously,
has significant impact on the debate today.
When we have so much uncertainty, Congress should proceed very
cautiously and not run out and do something that will have a tremendous
impact on all the future decisions that are made on this issue.
I am one of 11 Members joining Senators Alexander and Carper on S.
2084, the Internet Tax Ban Extension and Improvement Act. The bill
provides a 2-year solution that expands the definition of Internet
access to the level playing field for all Internet providers: DSL,
cable, modem, wireless, and satellite. In other words, our bill would
put them all in an equal position and would resolve the issue with the
Ninth Circuit Court because it would basically say we agree with the
court.
Our legislation would make the last mile of Internet service from the
Internet provider to the customer tax free. In addition, our
legislation retains the existing grandfather clause in effect for 2
years, that is 11 States; expands the grandfather clause by allowing
States that are now collecting taxes on DSL service to continue to do
so for 2 more years, currently 16 States; and prohibits States that are
not collecting taxes on DSL from doing so.
It would also prevent them from collecting taxes on cable and other
services on the Internet. Unfortunately, our legislation was not
acceptable to the sponsors. We thought it was very reasonable because
they believed we needed a broader policy to promote the growth of the
Internet. However, recent trends on the growth of broadband services
may suggest otherwise.
When I was chairman of the National Governors Association back in
1998, I helped negotiate the first Internet tax moratorium because
there was a big concern about what it would do to the Internet. Our
goal then and our goal today is the same: to encourage the growth of
the Internet as a driving force in our economy. We want that to happen.
I believe we have been successful.
In fact, I will highlight how much Internet technology has grown over
the past years. It is unbelievable. According to a study released by
the Pew Internet and American Life Project last week, 55 percent of
American Internet users have access to broadband either at home or at
the workplace. The report also noted that home broadband usage is up 60
percent since March of 2003, with half of that growth since November of
2003. DSL technology now has a 42-percent share of the home broadband
market. This figure is up from 28 percent in March of 2003. What I
would like to point out is that it all happened since the moratorium
ended.
I think the Chair will recall that our opponents were concerned that
if the moratorium expired, States would rush out and tax the Internet.
That has not happened. In fact, we have just seen an exponential growth
in the use of the Internet. Additionally, on April 21, a major
telecommunications company, SBC released their 2004 first quarter
earnings.
I will read the first two sentences from the company's press release
because it illustrates how fast this technology is growing.
SBC Communications, Inc., today reported first-quarter 2004
earnings of $1.9 billion as it delivered strong progress in
key growth products. In the quarter, SBC added 446,000 DSL
lines, the best ever by a U.S. telecom provider . . .
I congratulate this company for fostering the growth of DSL service
in our country and for building a solid business plan that allowed them
to have such a positive impact on their bottom line. Their financial
outlook proves that Congress should not subsidize a growing industry at
the expense of our State and local governments.
As I mentioned earlier, not one State has passed legislation to tax
Internet access in the absence of a Federal moratorium. In fact, we
have reports that a couple of States have even backed off from what
they were doing before. Therefore, the sky that was predicted to fall
has not.
That is not to say that I am opposed to an Internet tax moratorium.
Nothing could be further from the truth. There is still more room to
compromise, and I think it is fair to say that some of my colleagues
agree with my assessment.
The inability of both sides to reach an agreement prompted Senator
McCain to offer a new proposal. I commend my good friend from Arizona
for trying to reach a middle ground on this complex issue and, for that
matter, I congratulate him on trying to bring us together.
I do not know whether the Senator from Tennessee is going to opine on
that proposal, but the four principles are: Establishes a 4-year
moratorium; allows States to collect taxes on telephone calls made over
the Internet; extends the original grandfather clause for 3 years;
initiates the 2-year grandfather clause for States that are currently
collecting taxes on DSL services.
I am very concerned because the term of the moratorium is longer than
the two grandfather clauses, which may trigger the unfunded mandate
that I have been talking about in the point of order.
I appreciate the attempt of the Senator from Arizona to offer a
solution. But here we are here again at the last minute trying to get
something done, and now we have a new proposal. We have no idea of what
impact it is going to have. I for one, would like my state to review
the proposal.
It seems to me that at this stage the best thing we can do is to
understand that we have unresolved issues, and that S. 150 was passed
out of the Commerce Committee by voice vote. That is the way it came
out of the committee. If one examines S. 150 and they examine the
Alexander-Carper-Voinovich, et al., bill they will find both bills have
11 cosponsors. There are 11 for our bill and 11 for the legislation of
the Senator from Virginia. Six cosponsors of each bill are from the
Commerce Committee.
So it is evident that even within the Commerce Committee there are
genuine differences of opinion on the best way to proceed. I think we
understand that given the longstanding impasse on negotiations and the
possible Supreme Court action, there has to be an easier way to get
this done.
I understand Senator Enzi will introduce a 15-month extension of the
original moratorium, and perhaps that is the most reasonable solution
because it will provide all stakeholders, including the Commerce
Committee, the FCC, the State and local government groups, and the
industry time to draft a reasonable bill.
If the motion to proceed to S. 150 passes this afternoon, I believe
the Senate will not be able to reach an agreement on the underlying
bill, which may signal the end of the Internet tax moratorium. If we
cannot agree, that is the end of it. I do not want that to happen.
Therefore, I implore my colleagues to continue negotiations on the
Internet tax moratorium.
Our goal should be to reach a sensible solution with two simple
principles in mind: First and foremost, do no harm to the States.
Second, foster the growth of high-speed Internet access by leveling the
playing field for all Internet service providers.
So a way out of the thicket may be to extend the moratorium for
another 2 years or for 15 months, give the Commerce Committee more of
an opportunity to work on the issue, give the FCC more time to be
involved, see
[[Page S4355]]
which way the court cases are going, and come back with something where
all of us can agree that makes sense. We need a proposal that respects
the State and local governments, does not violate unfunded mandates,
and at the same time make sure we can move forward with the Internet
and achieve the phenomenal success that it already has achieved.
I yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Madam President, I have already spoken, so if the
Senators from Virginia or Delaware want to speak, I will certainly
yield to them.
But I certainly congratulate the Senator from Ohio. He knows what he
is talking about when it comes to State and local government. He has
been a mayor. He rescued a major American city from bankruptcy. He
chaired the National Governors Association. The people of Ohio know he
works in a very principled way. He understands, as I believe I do, that
this train is on the wrong track.
I say this to the Senators from Ohio and Delaware and then I will
stop and yield to the Senator from Delaware: How much subsidy is enough
subsidy? I notice, in this thick list of subsidies that States give
high-speed Internet access, Texas is generating $1.5 billion of subsidy
just to encourage the growth of high-speed Internet access. Then, in
addition, it has already made exempt from taxation the first $25 you
pay for high-speed Internet access. Now we are talking about giving
further subsidies to the companies that provide that access. I don't
see the sense of that.
I congratulate the Senator from Ohio, look forward to working with
him, and now that I see the Senator from Delaware with whom I have
enjoyed working, I yield the floor.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. CARPER. Madam President, I am delighted to be on the floor with
you and particularly pleased to be with Senators Voinovich and
Alexander.
I wish to ask a question of Senator Voinovich, if I could--I know,
before he was the Senator from Ohio, he was the Governor of Ohio. We
served together at that time--to what other elective positions Senator
Voinovich has been elected by the people of Ohio? As I recall----
Mr. VOINOVICH. I have already listed them in my formal presentation
on the floor. There are so many it is hard to remember.
But I did mention the fact that we all worked together as members of
the National Governors Association. In fact, the Senator from Delaware
was vice chairman of the National Governors Association when I was
president of the National Governors Association, and we worked together
and collaborated on a lot of issues.
I have been concerned about this issue since I was president of the
National League of Cities back in 1985. As the Presiding Officer knows,
one of the biggest issues we had in 1995 and 1996 was unfunded
mandates. We went right across the country pointing out how devastating
these mandates coming out of Washington were for State and local
governments. We thought we had done something very significant about
it.
But to answer the question of the Senator from Delaware, from my
perspective, the passage of this bill would be the most egregious
unfunded mandate we have seen since 1995, when the unfunded mandates
relief legislation was passed. It seems to me we still have Members of
this body who were around when unfunded mandates relief legislation was
passed and there was great support for it. It seems to me those who
supported it at that time should give some real consideration to the
fact that we are about, if this were to pass, to have the biggest
unfunded mandate, as I said, since that bill passed.
Mr. CARPER. I would say, Madam President, Senator Voinovich is not a
Johnny-come-lately on this subject. I recall, early in my time as
Governor, working through the National Governors Association, the kind
of leadership he provided, encouraging the Congress, the House and
Senate, and then President Clinton, to pass and enact an unfunded
mandates law. He played a major role in getting that done.
It is kind of ironic that a decade or so later, we are back again and
the issue is very much the same. I am pleased to see we stand today
where we stood then. I am honored to be involved in this battle on the
same side with Senator Voinovich and Senator Alexander.
We have been joined on the floor by the former mayor of San
Francisco, Senator Feinstein, and I see we have been joined on the
floor by another former Governor, Governor Allen, who in this instance
is our adversary but remains our very good friend.
That having been said, I do have some other comments I would like to
make. Let me observe we have gotten into some very bad habits here in
Washington. We all know we are living beyond our means. We all know
about our growing budget shortfall and our escalating level of
indebtedness. We all know the most popular way to pay for things around
here is simply to issue more and more debt on our Nation's credit card
and on our taxpayers' dime.
Moreover, we all know that our budget shortfall is actually bigger
than we report it to be. We all know we are using Social Security funds
to mask the actual size of our Federal budget deficit.
We are using the payroll tax contributions that working Americans pay
into Social Security, and employers pay, to pay for other Government
spending and to partially offset corporate tax breaks and reductions in
taxes on inherited estates.
What we do not talk about very often is that piling up more debt and
drawing on Social Security are not the only means we are resorting to
these days to continue to spend more than we take in. The other way we
found to spend without constraint or accountability was to pass the
buck to our friends in State and local government.
If you think about it, it is a sweetheart deal. We order up a feast
here in Washington of more spending or more special interest tax breaks
and more corporate subsidies. Then we stick the Governors, mayors, and
State and local taxpayers with the tab. It is not surprising that we do
this. In doing so, we get to take credit for helping an array of
different groups and businesses represented here in Washington. Yet we
don't have to raise a single tax or cut a single program to pay for it.
In government as in business, however, there is no such thing as a
free lunch. This policy of passing unfunded mandates has not been
nearly as convenient for our Governors, for our mayors, and State and
local taxpayers as it has been for us here in our Nation's Capital. I
don't have to tell my colleagues their States and localities
are struggling to cope today with the worst fiscal crisis--some say
since World War II. Classrooms are becoming even more crowded as school
budgets are cut. Prisoners in a number of States are being released
from jail as corrections budgets are cut. Governors and mayors are
pushing through unpopular and frequently regressive tax increases
because they have a constitutional mandate to balance their budget.
We all know this. Yet when it comes right down to it, we proceed to
act here in Washington as if we are oblivious to what is going on all
around us. We continue to treat State and local budgets almost as piggy
banks that we can break in order to pay for our own priorities.
Just about everyone in this body supports a moratorium on State and
local taxes on Internet access. In 1998, the Congress passed such a
moratorium. In 2001, we extended that moratorium. In fact, I believe we
did so just about unanimously.
Last year the Internet tax moratorium expired. There was no reason
why that should have happened. If the bill had been brought to the
floor of the Senate simply to extend that moratorium once again, it
would have passed once again by acclamation. The American people
support the moratorium. I support the moratorium. All of us want to see
it extended.
However, as was the case last year, the bill we are debating this
week does not simply extend the expired Internet tax moratorium. I wish
that it did. Instead, what this bill does is to take advantage of the
need to extend that moratorium to attach billions of dollars in new
subsidies for the telecommunications industry.
Such a bill would not normally stand much of a chance of passage in
the Senate.
[[Page S4356]]
The simple truth of the matter is we don't have the money at this
time of budget deficits at home and war abroad to pay for billions of
dollars in new subsidies for what is already a highly profitable
industry. But the proponents of this legislation have discovered an
easy solution to their problem. Why pay when we can send the bill back
home to our Governors and to our mayors? Just think of it as political
welfare. We spend and they pay.
Passing the buck in this way is bad enough, but it gets worse.
Believe it or not, we can't actually say what this legislation will
cost our friends in State and local governments. We know it will not
cost us a dime here in Washington, but the truth is we do not know how
much it will cost in Dover, DE, in Raleigh, NC, in Richmond, VA, in
Columbus, OH, in Nashville, TN, or in Sacramento, CA.
The Congressional Budget Office tells us this legislation is written
in a way that is extremely broad and vague. In fact, the Congressional
Budget Office cannot even give us a rough estimate of what the effect
will be on State and local budgets except to say this:
We believe it could grow to be large.
Here is what we are saying in effect to our Governors and to our
mayors: We are extending to you the great honor of picking up our
dinner tab tonight. We can't tell you exactly how much we have ordered
or what the final bill will be, but we believe it could grow to be
large.
At times like these when property taxes are being raised, when sales
taxes are being raised, when school budgets are being cut, when
prisoners are being released prematurely, our first responsibility in
dealing with our partners in State and local government should be to do
as Senator Voinovich has already said--no harm. Indeed, that is the
pledge our Senate majority leader, Senator Frist, made to our Nation's
Governors when he spoke to them back in February, a couple of months
ago, when they were here in town. As a doctor--and a good one--the
majority leader said his approach to legislation would be, ``First, do
no harm.'' This, it seems to me, at least is a sensible approach. My
hope is that rather than wasting time with an unproductive fight here
on the floor, we will return to the negotiating table and work out a
compromise that keeps faith with this Hippocratic pledge to do no harm.
Unfortunately, the way it stands, we are choosing the way of lawyers
around here rather than the way of the doctors. The Congressional
Budget Office says the language of the legislation we are proceeding to
here in the Senate is so confusing lawyers will ultimately have to get
involved and we will not know what the implications for State and local
budgets will be until it all gets sorted out in the courts.
If we had to choose between extending the Internet tax moratorium and
keeping faith with our pledge to do no harm, we would truly be faced
with a difficult decision. But in reality, that is not the decision
with which we are faced. We can extend the Internet tax moratorium.
Nobody I have talked to is opposed to that. States and localities have
been living under the Internet tax moratorium for more than 5 years
now. None of them are counting on revenues from taxes prohibited under
the Internet tax moratorium.
Extending the Internet tax moratorium is not what creates a large,
new, unfunded mandate. What creates a large, new, unfunded mandate is
using the occasion of the Internet tax moratorium renewal to create new
industry subsidies and then emptying State and local treasuries to pay
for those subsidies.
This bill departs from the original intent of the previous moratorium
which was to ensure the monthly bills our constituents receive from
their Internet service providers remain tax free. Instead, this
legislation picks the pockets of State and local taxpayers who have
already suffered their fair share of tax increases over the past 3
years.
Senator Alexander and I are Senators. Like all of our colleagues, we
have constituents who use the Internet and who want the Internet tax
moratorium to remain in place. Like most others in this body, we want
to extend the Internet tax moratorium. But Senator Alexander and I are
also former Governors. We know what it is like to be on the receiving
end of unfunded Federal mandates, as do my colleagues Senator
Feinstein, former mayor of San Francisco, and Senator Hutchison, a
former State treasurer from Texas.
Senator Alexander and I, together with Senator Voinovich, Senator
Graham, Senator Hutchison, Senator Feinstein and others, have offered
what we believe is a straightforward, commonsense alternative. As we
did in 2001, let us examine the Internet tax moratorium for another 2
years. If we need to expand the moratorium slightly to ensure all
consumers can access the Internet tax free, regardless of whether they
choose cable or DSL, then let us do that. But beyond that, let us do no
harm.
Let us do no harm because doing harm is not necessary to ensure
consumers can access the Internet tax free. Doing harm is only
necessary if we believe the telecommunications industry needs billions
of dollars in new subsidies. Beyond that, doing harm is only necessary
if we believe Congress cannot or should not pay for such subsidies it
decides to create.
Senator Alexander and I, together with Senators Voinovich, Feinstein,
Hutchison, Graham and others, have been working in good faith with our
colleagues on the other side of this issue. We are committed to
reaching a reasonable compromise. We are willing to meet every day if
necessary to work out such a compromise. However, what we are not going
to do is turn our backs on our former colleagues in our Nation's State
houses and our Nation's city halls. We are not going to stand by as yet
another unfunded mandate gets passed down and wreaks havoc on the
operations of State and local governments.
We don't think it is constructive to try to write this bill on the
floor. Furthermore, we believe we should only proceed to consideration
of a bill that adheres to the principles of doing no harm.
If our colleagues want to attach industry subsidies to an Internet
tax moratorium, they should offer an amendment to do so, and that
amendment should be debated openly here on the floor of the Senate.
If the majority leader wants to try to write this bill on the floor
despite our reservations, then we are prepared to go through that
exercise.
We have many specific concerns with the bill that has been called up.
We have a number of amendments we will offer for our colleagues'
consideration, including amendments to return to the original intent of
the moratorium and to require any new subsidies be directly passed on
to consumers in the form of reduced rates.
We will also offer our colleagues an opportunity to pay for the
billions of dollars of subsidies that have been added to this bill.
If this body does not believe the resources exist at the Federal
level to pay for these subsidies, we will raise a point of order
against the bill.
As the Congressional Budget Office has already indicated, this bill
violates the promise Congress made in 1995 that we would not continue
to pass large, unfunded mandates. The Senate has the power to waive the
point of order that is supposed to prevent Congress from passing large,
unfunded Federal mandates. If we are going to do so, however, Senator
Alexander and I believe the Senate ought to be put on record as
acknowledging our continued reliance on unfunded mandates as a chosen
means to avoid our fiscal responsibility, and it should not have to
come to that. Our hope is it will not come to that.
We believe the negotiations we have had with our friends on the other
side, though they have been limited, have been productive, and we have
tried as fully as we can consistent with our principles to address
industries' demands.
We believe we have come a long way since this debate began early last
year. We are committed to continuing that process. If that process is
short circuited, however, as it seems it will be, at least for now, we
will insist upon a serious and informed debate in the Senate this week.
This is the body that our Founding Fathers created to represent the
interest of States. This is the body that must defend our Federal
system of government and stand against the trend of passing more and
more unfunded Federal mandates.
[[Page S4357]]
Win or lose, Senator Alexander and I are committed to ensuring that
this is one unfunded mandate that will not be passed silently in the
dead of night.
I yield the floor.
The PRESIDING OFFICER. The Senator from Virginia.
Mr. ALLEN. Madam President, I rise this afternoon to urge my
colleagues to support the motion for cloture to proceed to S. 150, the
Internet Tax Nondiscrimination Act. This bill does have strong
bipartisan support.
Let me say a few things in response to my good friend, the junior
Senator from Delaware, Mr. Carper. If those who oppose this measure
want to extend the moratorium, why are we having this debate tonight?
Why are we going to have to have a motion for cloture on moving to
proceed on the bill?
I agree that we should do no harm. Those who are for this measure
want to prevent harm to consumers so that they are not loaded up with
taxes from State and local governments. I will get into the details of
that in my remarks.
The cost, the so-called unfunded mandate aspect of this is a very
small amount in the scheme of things, $80 to $120 million, then another
$40 million for the taxing of DSL. Updates in the new technologies need
to be made in the definition of Internet access to make sure DSL and
digital subscriber lines using telephone lines get high-speed Internet
access or broadband. We need to have that changed to make sure the
folks at the State and local level recognize that there has been an
update and upgrade, there have been advancements in technology in the
transport of the Internet, particularly broadband, but DSL lines should
not be subject to taxation.
The intent of the first Internet tax moratorium was to make sure the
Internet was free of taxation. The Internet is a freeway. If you want
access to information, you click on. Now that transport is being taxed.
Who pays? The consumer pays.
I will use an analogy. Now we have a freeway. You are going to
Charlotte, NC, from Washington, DC, you get on Interstate 95 and switch
over to Interstate 85. It is a freeway. Then you get off on an exit to
wherever you want to get in the city of Charlotte, NC.
The advocates of taxing the Internet and those who oppose S. 150
would like to turn that freeway into the New Jersey Turnpike, a toll
road.
Clearly, the consumer getting that information on the backbone of the
Internet is going to have to pay for it, increasing their costs.
Companion legislation was passed by the House 8 months ago. My
colleagues have heard me say on many occasions, I believe what we ought
to be advocating in the Senate, in the Congress, at the Federal level,
and every level of government in the United States of America, are
policies that allow people to compete and succeed. That means tax
policy, regulatory policies that promote freedom and opportunity for
all Americans. We ought to, as leaders, be advancing ideas that help
create more investment, creating, thereby, more jobs and more
prosperity rather than more burdens of taxation and regulation.
Senator Wyden from Oregon and I joined together early last year with
this bill. We want to make sure there is equal access to the Internet
for all consumers and also protect e-commerce transactions from
discriminatory taxes or multiple taxes. The Internet is one of the
greatest tools invented by this country. It is a symbol and an actual
tool of innovation and individual empowerment. Accordingly, I would
think everyone in the Senate would want to help the Internet continue
to grow and flourish as a valuable tool for commerce, for information,
for education.
However, as of November 1 of last year, the Federal moratorium, which
was originally enacted in 1998--and Senator Wyden was a key sponsor of
that measure--expired, leaving consumers vulnerable to harmful
regressive and discriminatory taxes for the first time in 6 years.
If the Senate does not act now and move to consider S. 150, it is
unlikely we will get another chance in this election year. If we do not
invoke cloture, the Senate will be known as a Senate that favors new
taxes on the Internet; the Senate that turned a blind eye; and a Senate
that limited individual opportunity while enabling harmful, regressive
taxation of access to the Internet.
When Senator Wyden and I introduced this legislation over a year ago,
it was consistent with the founding principles of the original
moratorium that the Internet ought to remain as accessible as possible
to all people in all parts of the country forever. Unfortunately, in
the last year of debate, the focus has shifted away from that
principle, causing unnecessary confusion and delay.
Let me be clear, this legislation is not about tax breaks for
telecommunications companies. It is not about mayors and Governors. It
is certainly not about the 1994 Republican revolution that has
absolutely nothing to do with traditional telephone calls migrating to
the Internet. Rather, our legislation has everything to do with
consumers and the impact of taxation on real people and our American
economy.
All of the protax arguments and misleading accusations presented by
the opposition are unrelated distractions aimed at confusing Senators
and stalling consideration of this very important measure. In fact, the
issue is not about telephone services migrating to the Internet.
Rather, it is the ongoing campaign by State and local tax lobbyists to
make sure telephone taxes, which average 15 to 18 percent, migrate to
the Internet.
I ask my colleagues and anyone else who might be listening to think
of their telephone bill. Think of the bill you receive each month with
all sorts of taxes included--usually multiple local taxes, State taxes,
as well as Federal taxes.
In effect, the opponents of our measure would have our monthly
Internet service provider bill be loaded down with all those taxes, as
on our telephone bill.
Mr. WYDEN. Would the distinguished Senator from Virginia yield for a
question?
Mr. ALLEN. I yield.
The PRESIDING OFFICER. The Senator from Oregon.
Mr. WYDEN. I thank my colleague for an excellent presentation.
Is it not correct that in the late 1990s we heard the same kind of
arguments we are hearing today, that the States and localities would be
bereft of revenue, and there would be financial calamity? Is it not
correct in 1997, 1998, the National Governors Association said the
State and local revenue system would collapse, and that very next year
revenue went up something like $7 billion? Was that not the history all
through this debate over the last 6 or 7 years, that we have had the
projections from State and local officials that there would be
disastrous financial consequences, and then you and I and Senator
Sununu would look a short time later, and every single time revenue
went up; is that correct?
Mr. ALLEN. I say to my friend, the Senator from Oregon, he is exactly
correct.
I recollect back in 1997, I was Governor of the Commonwealth of
Virginia when Senator Wyden and Congressman Chris Cox of California
introduced this measure. I was one of four Governors who believed this
was clearly interstate commerce. If there is anything that is
interstate in nature by its architecture, design, and engineering, it
is the Internet. I thought we ought to have a national policy, that it
be more ubiquitous or more available, understanding that taxation harms
it.
I believed, as did the Senator from Oregon and Senator Sununu, this
would be a great engine for innovation, growth, investment, and jobs.
That is exactly what happened.
The amount of revenues lost by those first, most avaricious, those
desiring to go in and start taxing at the local and State level, is
very small.
But if you look at the economic growth led by the Internet, and the
revenues that came after it--and it does not have to be a technology
business; it could be a mom-and-pop startup business; it could be a
major corporation; it could be somebody working from their home on
eBay--you see the revenue growth, you see more jobs and, therefore,
more revenue for the Government.
So when you look at the effect of the localities and States not being
able to tax this interstate commerce, you find that it actually has
been beneficial for the economy. The lost revenues are very small. In
fact, there were about 10 States, I believe it was, that were
[[Page S4358]]
grandfathered in that had already started taxing prior to 1998. About
three-quarters of those States are still taxing Internet access.
Six years later, you would figure they would wean themselves off of
it. But there were about a quarter of these States--South Carolina,
Connecticut, Iowa and the District of Columbia, and others--that have
said: Gosh, this is harmful. This makes our jurisdiction, our State
less attractive for investment and jobs, and it is bad for our
citizens, and they voluntarily stopped taxing the Internet.
The reality is, all of these fiscal impacts that we hear of are so
farfetched. In fact, the CBO confirmed that our opponents and the State
tax agencies have overstated the revenue impact of this clarification
to make sure that DSL and broadband is not taxed. They overstated it by
100 times. The fiscal impact, if you throw them all together, at best,
would be $200 million. Across the whole country, our opponents are
saying it is going to cost $20 billion.
Mr. SUNUNU. Madam President, will the Senator from Virginia yield for
a question?
Mr. ALLEN. I am happy to yield to my friend from New Hampshire.
Mr. SUNUNU. The Senator from Virginia has mentioned those 10 or 12
States that were grandfathered under the original Internet tax
moratorium. I think it is important to understand--because the
opponents have claimed there is an unfunded mandate--isn't the only
reason the Congressional Budget Office will score an unfunded mandate
because those 10 or 12 States were grandfathered in the first place? In
other words, if we had not made any effort to allow those States to
continue to collect some taxes on Internet access, there would be no
unfunded mandate because those taxes would have been eliminated, as one
might argue they should have been in the first place? But isn't that
the only reason there is a so-called unfunded mandate in the first
place?
Mr. ALLEN. I say to my friend, the Senator from New Hampshire, he is
exactly correct. The unfunded mandate aspect of this is a kind of
perverse reasoning because the States that were grandfathered back in
1998 have yet to wean themselves off of this tax on Internet access. We
are actually giving them, in our measure, 3 more years, and that is a
loss of revenue to them? Then there are those in the last couple years
that have made rulings that are taxing the backbone or the transport,
more importantly, the high speed transport or broadband. That is about
$40 million. So the point is, they have had plenty of time to wean
themselves off of this tax, and we are actually going to give them even
more time.
Also, it is not unprecedented for Congress to recognize the
importance of a coherent national policy regarding matters of
interstate commerce. In 1973, States were prohibited from imposing a
tax, a fee, or a head charge on all air commerce. In 1985, Senator Bob
Dole led a measure affecting food stamp purchases. States were putting
sales taxes on food stamp purchases, and Senator Dole introduced a
bill, and it passed in 1985, prohibiting States from imposing sales
taxes on food stamp purchases.
Most recently as we were passing the Medicare drug bill this last
winter, just a few months ago, Congress prohibited States from imposing
insurance premium taxes on drug insurance policies. The fiscal impact
of that was approximately $60 million.
Now, in the last 10 years, of course, the Internet has grown, with
the policy of our country that we would not tax it. We wanted it to
flourish, to grow, and provide opportunities for individuals. What our
opponents will have us do, though, is--again, remember, they want to
have unelected tax administrators or local and State governments to tax
the Internet backbone or, for that matter, high-speed or broadband
telephone service.
Let me speak about everyone's telephone bill. Look at all those taxes
on it. This is why the moratorium is so essential, that we stop them
from taxing anymore than they are now, and wean them off.
Realize it is nearly impossible to repeal taxes because--do you know
what?--on your telephone bill, for every single citizen, every single
person in America who has telephone service, part of those taxes that
you are paying is a luxury tax that was put on 105 years ago as a
luxury tax on telephone service to finance the Spanish American War.
Guess what? We are still paying it. That war has been over for over 100
years and we won. Yet we are still paying that tax.
That is why it is important, number one, to wean the few States and
localities off of this negative, burdensome tax on opportunity and
freedom but also to stop it from happening in the future.
The President of the United States, on numerous occasions--recently,
in New Mexico, in Michigan, in Minnesota--has stated a goal for this
country, in the year 2007--which is also the 400th anniversary of the
founding of Jamestown by the Virginia Company--he wants to have
everyone in this country having access to broadband.
Broadband is essential for rural areas. I know in southwestern
Virginia, in Southside Virginia, in any rural areas in this country,
they look at having broadband, high-speed Internet access as key to
their young people having opportunities--whether it is educational
opportunities or health care with telemedicine, or for small businesses
to be able to be competing internationally, as opposed to young people
having to leave their home and their roots and their heritage to find
jobs elsewhere.
It is the President's view that we are falling behind--and we are
falling behind--other countries as far as broadband and high-speed
access. You see a disparity, one based on income. Every study and
anybody with a scintilla of common sense will understand, if you tax
something, fewer people can afford it. Those who are lower income or
lower middle income cannot afford it. Every study--by Pew and others--
shows that the cost of Internet access is the reason for them not being
online. For broadband, if you want to get broadband deployed and
available in rural areas, and have competition and choice for
customers, clearly DSL will be an approach, wireless will be an
approach, maybe satellites. Most cannot use a cable modem because there
is just a lot of dirt to dig to get to many rural areas that are
sparsely populated.
The fact is, the most recent studies show there is a disparity not
only in the economic digital divide, which manifests itself with
Hispanic Americans and African Americans, but also rural versus city
areas. City areas have almost three times as much utilization and use
of broadband in their homes than out in the country in rural areas.
Broadband deployment is only 10 percent in rural areas while it is over
28 percent in city or suburban-city areas.
For rural areas to be able to compete, and for the vitality of their
future, adding a 15- to 18-percent tax--these are the
telecommunications taxes that our opponents would impose--will diminish
the availability of the Internet. That 15- to 18-percent tax means it
is going to take more money to get broadband access to those people,
and fewer people will be able to access it. Therefore, the investors
will not invest the money to get into that community.
Mr. SUNUNU. Madam President, will the Senator from Virginia yield for
one additional question?
Mr. ALLEN. I am happy to yield to my friend from New Hampshire.
Mr. SUNUNU. Madam President, the Senator from Virginia is talking
about the kind of Internet access-specific taxes that the opponents of
this bill would like to apply. There are a number of States that are
taxing Internet access today. There are a handful of others that have
begun to tax DSL and other forms of broadband. These are all taxes that
are unique to Internet access. Yet the opponents continue to suggest
that there is a subsidy involved here.
I want to ask the Senator from Virginia to clarify this point because
I can't think of any taxes that are applied broadly from which this
bill would exempt Internet access providers. Isn't it true that if you
are an Internet access provider, you would still have to have pay State
payroll taxes?
Mr. ALLEN. Yes, you would still have to pay corporate taxes, State
payroll taxes.
Mr. SUNUNU. Would they be subject to capital gains taxes in those
States where it was applicable?
Mr. ALLEN. Yes, they would.
[[Page S4359]]
Mr. SUNUNU. Would they have to pay property taxes in those States
where they owned property and operated facilities?
Mr. ALLEN. Absolutely, they would have to pay those taxes.
Mr. SUNUNU. If there were an Internet transaction that was selling a
good within a State that had a sales tax, just like a mail order
product, wouldn't they be responsible for the applicable sales taxes in
those States?
Mr. ALLEN. Sales and use taxes, if they have a physical presence in
that State, yes, they would have to collect and remit those taxes.
Mr. SUNUNU. Would the Senator agree that there are no taxes that are
being applied uniformly or broadly in States that these Internet access
providers would be exempted from? This is a bill that simply avoids
discriminatory taxes that single out Internet access or multiple
taxation where you can have taxes levied at the State level and the
county level and the city level; isn't that the ultimate goal of the
bill?
Mr. ALLEN. I would say to the Senator from New Hampshire, he has it
exactly correct, as well as protecting consumers from access taxes. The
Senator from New Hampshire understands this issue very well. Maybe the
opponents would like to stop these delay-of-game tactics so we can
actually get to protecting the people.
I find it interesting--and as I said, this has nothing to do with
subsidies of telecommunications companies--that virtually every Senator
will say, let's figure out subsidies; let's figure out tax breaks to
get broadband to rural areas. Why would you want to have subsidies and
expenditures and then on the other hand say, let's tax it, when you are
trying to get more people utilizing and having access to broadband for
a variety of reasons?
I see the chairman of the Commerce Committee has arrived. I will
simply say, the United States has been a leader for freedom. We are
falling behind other countries in broadband, its deployment, and its
use to Asian and European countries. Simply put, taxes on access to the
Internet reduce the number of consumers who can afford to purchase this
service, thereby limiting opportunities for millions of Americans.
Reduction of demand will stifle investment in rural and underserved
areas. It will slow the deployment of the next-generation broadband
technologies.
I urge, most respectfully, my colleagues to stand on the side of
freedom, embrace innovation and improvement, and not tax this tool for
individual empowerment and opportunity. I urge my colleagues to support
cloture on the motion to proceed. It is a motion to proceed for
opportunity and for freedom.
I yield the floor.
The PRESIDING OFFICER (Mr. Cornyn). The Senator from Arizona.
Mr. McCAIN. Mr. President, may I ask the Senator from California if
she would like to take 5 minutes. I know she has been patiently
waiting.
Mrs. FEINSTEIN. I would be happy to speak after the vote.
Mr. McCAIN. I thank the Senator from California. I appreciate her
patience and hope she is able to speak, as I know she has strong
beliefs on this issue.
Over 5 years ago, Congress took appropriate action to pass the
Internet Tax Freedom Act which encouraged the growth and adoption of
the Internet by exempting Internet access from State and local taxation
and by protecting e-commerce transactions from multiple or
discriminatory taxes. As my colleagues know, since then the Internet
has grown from a tool used by a relatively small percentage of our
population to a broadly utilized communications, information,
entertainment, and commercial medium as well as an important vehicle
for political participation.
To keep promoting the growth of the Internet, many of my colleagues
have made efforts to extend the Internet tax moratorium. Regrettably
these efforts have stalled. Six months ago, we left unfinished business
before the Senate. At the time, many of us were prepared to vote to
extend the Internet tax moratorium. Unfortunately, a vote never took
place because of disagreement over what components of Internet access
should be free from taxation and how long the moratorium should last.
As a result, the moratorium expired and State and local governments are
now free to impose new taxes on the Internet.
Today, we return to the consideration of S. 150, the Internet Tax
Nondiscrimination Act, which would permanently extend the moratorium on
the taxation of Internet access. After 10 months of negotiations, there
is still no clear consensus in the Senate over what types of Internet
access services should be tax free, nor is there any clear consensus
over how long the moratorium should last. One thing is clear, though:
There is broad agreement that the Internet tax moratorium should be
reinstated. It is also clear that the Members who have been involved in
this long negotiation process have listened closely to the concerns of
State and local governments.
For example, to address issues raised by opponents of S. 150,
Senators Allen, Wyden, Sununu, Ensign, Warner, Smith, Leahy, Grassley,
Baucus, Hatch, Boxer, Chambliss, Lincoln and I--a strongly bipartisan
effort--offered a substitute amendment that would have narrowed the
scope of the moratorium and clarified its effects on State and local
revenues. This time around, we will go a significant step further by
offering a compromise amendment written to address the core concerns
expressed by State and local governments over the extension of the
Internet tax moratorium.
Before I get into the details of the amendment, let me be crystal
clear about one thing: This compromise will not make everyone 100
percent happy. There are several aspects that will accommodate State
and local governments, but the legislation also contains components
that are favored by industry and ultimately benefit consumers. So there
continue to be disagreements.
The Members who sit on the edges of this debate bell curve will
continue to oppose anything that falls short of their desired outcome.
However, any practical person who reads the amendment objectively will
have to agree. What we are offering constitutes a reasonable middle
ground in the debate between those who want to make the Internet tax
moratorium permanent and broad and those who want to make the
moratorium brief and narrow.
Throughout the negotiation process, State and local groups asked for
a temporary extension to the Internet tax moratorium. Specifically,
they have asked for a 2-year extension of the moratorium. The
substitute amendment would extend the moratorium for 4 years from
November 1, 2003. This alone is an extraordinary concession, especially
considering the fact that the House of Representatives, in a strongly
bipartisan effort, passed a permanent extension of the moratorium last
year, and there remains significant support in the Senate for such a
measure.
President Bush has expressed his strong support for a permanent
extension of the moratorium. Nevertheless, I hope my colleagues who
favor a permanent moratorium will support this proposal in an effort to
reach an acceptable compromise between industry and consumers and State
and local governments.
Another concern we have heard from State and local governments is
that extending the Internet tax moratorium would somehow impact
traditional telephone services. That certainly was never the intent of
the original legislation, as has been made clear by the Commerce
Committee's report accompanying the bill.
The report reads:
The modified definition [of Internet access] would not
affect the taxability of voice telephony over the public
switched telephone network (so-called ``plain old telephone
service'' or ``POTS'').
The matter is further clarified in this amendment. Simply put, this
legislation would not impact in any way, shape, or form the revenue
generated by State and local governments from traditional phone
services. Again, a concern of State and local governments was
accommodated to the full satisfaction of State and local authorities.
State and local governments have also expressed worry that this bill
would hamper their ability to tax voice services and other services
that run over the Internet.
For example, the National Governors Association has stated that one
of its main concerns is that this legislation will prohibit states and
localities from taxing telephone services as they migrate to the
Internet. The Senators
[[Page S4360]]
from Tennessee and Ohio today have also emphasized that this is one of
their three core concerns in this debate. In an attempt to respond to
the concern about the migration of telephone services to the Internet,
Senators Allen and Alexander agreed in principle to carve voice over
Internet Protocol, VOIP, telephon services out of the scope of the
Internet tax moratorium. Unfortunately, their negotiations over the
precise definition of VOIP telephone services were not successful.
The amendment that I offer bridges the gap in this matter by setting
forth a broad definition of services--including voice services--that
are provided over the Internet that would not be considered Internet
access and would therefore not be subject to the Internet tax
moratorium. My compromise would further narrow the definition of
Internet access, while ensuring that services incidental to Internet
access--such as e-mail and instant messaging--would remain tax-free.
Once again, this provision fully addresses the concerns of state and
local governments.
Mr. President, the list of compromises goes on and on. For example,
my amendment would clarify that the Internet tax moratorium does not
apply to nontransactional taxes such as taxes on net income, net worth,
or property value.
My amendment would clarify that otherwise taxable services would not
become tax-free solely because they are offered as a package with
Internet access.
The amendment would grandfather for three years from November 1,
2003, the States that were taxing Internet access in October 1998.
My amendment would grandfather for two years from November 1, 2003,
the States that began to tax--according to many, improperly--Internet
access after October 1998.
The amendment would ensure that universal service would not be
affected by the moratorium.
And finally, my amendment would ensure that 911 and E-911 services
would not be affected by the moratorium.
Each of the compromise provisions is included in direct response to
State and local government concerns about S. 150. And so my amendment
will ensure that the $20 billion in telecommunications taxes that is
collected annually by State and local governments will largely remain
protected. Any statement to the contrary would be patently false.
Mr. President, my amendment goes a long way to meeting the concerns
of the States and localities. However, before those on the other side
of this debate start to protest, I would remind them that what I am
proposing is truly a compromise between the interests of State and
local governments on the one side and industry and consumers on the
other. This legislation therefore doesn't--and, as a compromise,
can't--adopt the State and local governments' position wholesale.
For that reason, the legislation would make Internet access 100
percent tax-free for all States in its fourth year.
Some question whether it's wise for Congress to make Internet access
tax free, but this body has a long history of giving tax incentives and
other economic support to industries and commercial activities that we
believe help our society. The Internet is clearly a technology that
also merits strongly the support of Government, as it is a source of
and vehicle for significant economic benefits to our country.
Contrary to statements that have been made on the floor, yes, the
railroads were assisted; yes, highways are assisted; yes, our airlines
continue to be subsidized; and yes, we need to assist this new
incredible technology that is changing America and the world.
In the case of the Internet tax moratorium, however, we are not
talking about subsidies. We are merely talking about a national policy
of taking a hands-off approach to the continued growth of the Internet.
The Internet is now accessed at home by 75 percent of the population--
an estimated 204 million people in the U.S.--up from 64 percent in
2002, and 26 percent in 1998 when Congress rightly decided to implement
the ban on taxes on Internet access. That's an impressive 3 times what
the Internet use rate was just over 5 years ago. And though the
Internet tax moratorium has obviously had its intended effect of
contributing to the growth of the Internet, our job is not yet done.
Today, the Internet offers the promise of broadband access services,
which provide higher bandwidth connections that permit faster data
transmissions and thus facilitate and enhance services such as
streaming audio and video. Nevertheless, many of the households with
Internet access have only basic dial-up access, and have not migrated
to broadband services. In fact, the Pew Internet Project estimates that
only 24 percent of American households have broadband access, while
most homes still connect through dial-up modem connections. In fact,
the United States is falling behind many other developed countries such
as Japan, South Korea, and Canada in our deployment of broadband
services--and many experts even call the broadband services that we
have ``broadband on training wheels'' because they do not provide the
speeds provided by the broadband networks of other nations.
Clearly, there remains a strong need to ensure that taxes on Internet
access will not pose a hurdle to the continued adoption of basic dial-
up access or to the migration from basic Internet access to broadband
Internet access. Keeping the Internet tax-free translates into lower
costs for consumers, and lower costs give our citizens freer access to
important online services like telemedicine and e-learning.
Mr. LOTT. Will the Senator yield briefly?
Mr. McCAIN. I am glad to.
Mr. LOTT. Mr. President, I want to commend the Senator for his
tenacity. Typically, he wants to work to find a compromise that can
satisfy both sides. I think he has done that. I am sure there are those
on both sides of the issue and the aisle who may not feel this is
perfect, but they will have an opportunity, when we get on the
legislation--the substance of it, as this is a vote on the motion to
invoke cloture on the motion to proceed--they will be able to offer
amendments.
I thank the Senator from Arizona for what he has done. I urge my
colleagues to certainly support this motion on cloture and allow us to
get to the substance of the bill and to be able to reach conclusion on
this important issue. So I recognize the Senator's efforts.
Mr. McCAIN. Mr. President, I thank the Senator from Mississippi. I
thank him for his involvement in this issue. As everyone knows, he is a
genius at working his way through difficult and thorny issues. I
appreciate his involvement in seeking to try to resolve differences
between the two sides--at least to a point where we can move forward. I
look forward to his continued assistance as we address this issue.
Mr. LOTT. I thank the Senator for yielding.
Mr. McCAIN. Wider adoption of broadband services could also
translate into economic growth and greater job creation for our
country. I would suggest then that, as States and localities are
shoring up their budgets and increasing their tax revenues after a few
years of budget shortfalls, we should not move to stifle economic
growth by taxing the Internet.
But this debate isn't just about the economic benefits of affordable
Internet access. During my presidential candidacy, one of the many
rewarding experiences I had was seeing how the Internet served as a
medium for political participation. Hundreds of thousands of people
logged on to my campaign Web site where they were able to access
information and organize. For me, keeping Internet access tax-free is
about protecting consumers' wallets and about helping our Nation's
economy, but it also is about improving our political process and the
right and ability of our citizens to participate fully in that process.
Because my amendment is not one-sided, I know that a few of my
colleagues who have been firmly on one side of this debate or the other
will not join us in this compromise. Some of my colleagues, for
example, believe that Internet access should receive little--if any--
protection from taxation. We have heard statements from some on that
side that my amendment is not a true compromise, which both boggles the
mind and indicates that for some in this debate the attitude is ``my
way or
[[Page S4361]]
the highway.'' Others I'm sure continue to believe that all data
transmissions over the Internet--including VoIP services--should be
tax-free. But I ask those Members who see merits to both sides of this
debate to join me in this effort to break the deadlock that has delayed
action on this matter for far too long. Doing so will not only strike a
fair balance in this debate, but it will also clarify the confusion
that has been hanging over the tax treatment of Internet access for
several months.
Mr. President, for all of the reasons stated, I urge my colleagues
to vote in support of cloture on the motion to proceed to S. 150 and in
favor of the Internet tax compromise that I will offer. I trust that we
will add this measure to the long line of pro-consumer legislation we
have passed during this Congress--including the Do-Not-Call registry
legislation. I hope that we will again join together to give American
consumers affordable access to the Internet, which we all agree is a
crucial medium of communications, education, commerce, and political
participation in America.
Again, I will summarize. This proposal is a temporary 4-year
moratorium, which makes the Internet access 100 percent tax free, but
narrows the definition of ``Internet access'' by excluding traditional
telephone service, and it further narrows the definition of Internet
access by carving out voice and other services provided over the
Internet, while ensuring that services incidental to Internet access,
such as e-mail and instant messaging, remain free.
My amendment grandfathers States that were taxing Internet access in
1998 for a 3-year period. It grandfathers States that currently tax
Internet access, including those that tax the last mile that were not
protected by the 1998 grandfather clause, for a 2-year period, and it
incorporates all other components of the substitute amendment to S. 150
and the Alexander Internet tax bill, the accounting rule to address
bundling, and the explicit inclusion of nontransitional taxes from the
Internet tax moratorium and savings clauses addressing the regulation
of Internet access, universal service, and e-911.
Mr. President, I yield the floor.
Cloture Motion
The PRESIDING OFFICER. The hour of 5:30 p.m. having arrived, under
the previous order, pursuant to rule XXII, the Chair lays before the
Senate the pending cloture motion, which the clerk will report.
The legislative clerk read as follows:
Cloture Motion
We the undersigned Senators, in accordance with the
provisions of Rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on the motion to
proceed to Calendar No. 353, S. 150, a bill to make permanent
the moratorium on taxes on Internet access and multiple and
discriminatory taxes on electronic commerce imposed by the
Internet Tax Freedom Act.
Bill Frist, George Allen, Jon Kyl, Orrin Hatch, James
Inhofe, Elizabeth Dole, Larry Craig, John Ensign,
Gordon Smith, Mitch McConnell, Norm Coleman, Sam
Brownback, Trent Lott, Conrad Burns, Jim Talent, John
E. Sununu, Mike Crapo.
The PRESIDING OFFICER. By unanimous consent, the mandatory quorum
call has been waived.
The question is, Is it the sense of the Senate that debate on the
motion to proceed to S. 150, the Internet Tax Nondiscrimination Act,
shall be brought to a close? The yeas and nays are mandatory under the
rule. The clerk will call the roll.
The legislative clerk called the roll.
Mr. McCONNELL. I announce that the Senator from Rhode Island (Mr.
Chafee), the Senator from Wyoming (Mr. Enzi), the Senator from Illinois
(Mr. Fitzgerald), the Senator from Nebraska (Mr. Hagel), and the
Senator from Pennsylvania (Mr. Specter) are necessarily absent.
Mr. REID. I announce that the Senator from Delaware (Mr. Biden), the
Senator from North Carolina (Mr. Edwards), the Senator from Hawaii (Mr.
Inouye), the Senator from Massachusetts (Mr. Kerry), the Senator from
Wisconsin (Mr. Kohl), the Senator from Louisiana (Ms. Landrieu), the
Senator from New Jersey (Mr. Lautenberg), the Senator from Maryland
(Ms. Mikulski), the Senator from Georgia (Mr. Miller), the Senator from
Maryland (Mr. Sarbanes), are necessarily absent.
The PRESIDING OFFICER (Ms. Murkowski). Are there any other Senators
in the Chamber desiring to vote?
The yeas and nays resulted--yeas 74, nays 11, as follows:
[Rollcall Vote No. 71 Leg.]
YEAS--74
Allard
Allen
Baucus
Bayh
Bennett
Bingaman
Bond
Boxer
Breaux
Brownback
Bunning
Burns
Byrd
Campbell
Cantwell
Chambliss
Cochran
Coleman
Collins
Conrad
Cornyn
Corzine
Craig
Crapo
Daschle
Dayton
DeWine
Dodd
Dole
Domenici
Dorgan
Ensign
Feingold
Frist
Graham (SC)
Grassley
Gregg
Harkin
Hatch
Hutchison
Inhofe
Johnson
Kennedy
Kyl
Leahy
Levin
Lieberman
Lincoln
Lott
Lugar
McCain
McConnell
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Nickles
Pryor
Reed
Reid
Roberts
Santorum
Schumer
Sessions
Shelby
Smith
Snowe
Stabenow
Stevens
Sununu
Talent
Thomas
Warner
Wyden
NAYS--11
Akaka
Alexander
Carper
Clinton
Durbin
Feinstein
Graham (FL)
Hollings
Jeffords
Rockefeller
Voinovich
NOT VOTING--15
Biden
Chafee
Edwards
Enzi
Fitzgerald
Hagel
Inouye
Kerry
Kohl
Landrieu
Lautenberg
Mikulski
Miller
Sarbanes
Specter
The PRESIDING OFFICER. (Ms. Murkowski.) On this vote, the yeas are
74, the nays are 11. Three-fifths of the Senators duly chosen and sworn
having voted in the affirmative, the motion is agreed to.
Mr. McCAIN. Madam President, I thank all of my colleagues for their
vote. It is certainly a signal that a majority of Senators want to move
forward and address this issue. I believe many believe they would like
to get involved as well.
If the opponents are going to talk for a while, after that is over,
since we are in 30 hours of postcloture debate, if it is sought to be
used, it is my intention to propose tomorrow the amendment which I
described earlier. I hope we can then move forward with amendments and
debate and votes.
I yield the floor.
The PRESIDING OFFICER. The Senator from Florida.
Mr. NELSON of Florida. Madam President, I defer to the leadership. I
have some remarks to make on another subject as in morning business, to
come out of my hour with regard to the motion to proceed.
Mr. REID. I know the Senators who are concerned about this
legislation are trying to make a decision as to what is going to happen
next, what they are going to do next. It would be to everyone's best
interests if we had some time when we could go to the bill tomorrow.
I direct this question through the Chair to the Senator from
Tennessee: When do you think you will be in a position to decide
whether we can have a time certain to go to the bill or whether we will
work off the 30 hours postcloture?
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Madam President, I thank the assistant Democratic
leader. I thank Senator McCain for his efforts over the weekend to
develop a substitute amendment which we received this afternoon and
which we are studying.
My hope is we have a constructive movement toward a result this week
that does no harm to States, that bans State and local taxes for a
short period of time, and that gives Congress time through the Commerce
Committee to create a comprehensive approach.
The leadership has asked us to try to do this in an orderly way. I
want to do that. I have two or three Senators to discuss that with in
the next 30 minutes or hour. The Senator from California has remarks
she would like to make, so I say to the assistant Democratic leader,
within the next 30 minutes or hour I will have a response to him and
the majority leader about how we would like to proceed.
The PRESIDING OFFICER. The Senator from Florida still has the floor.
Mr. NELSON of Florida. I yield to the Senator from North Dakota.
[[Page S4362]]
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Madam President, I was simply going to observe now that
we have had the cloture vote on a motion to proceed, there is a 30-hour
period postcloture. My expectation is we would go on this bill at some
point tomorrow. My hope is it would be at 2:15, for example, following
the caucus meetings tomorrow. However, that is a decision those who
oppose the cloture motion will want to address.
The bill we are going to be considering in the Senate is a piece of
legislation that came out of the Commerce Committee. When it came out
of the Commerce Committee, it had one area that was not resolved. We
understood when we voted it out it was not resolved. It could have some
very significant ramifications on State and local revenue base and
other issues. We decided to try to resolve it on the way to the floor.
It is not yet resolved. As a result, it will require substantial work--
amendments, debate, some compromise here and there--to see if we cannot
get a piece of legislation that does what all of us want it to do; that
is, to have a moratorium on the taxation of access to the Internet but
done in a way with respect to definitions that is not going to have
loopholes big enough to drive trucks through.
There have been circumstances in which if you have a definition that
is not appropriate and not carefully crafted, the moratorium on taxing
the Internet itself could be a moratorium on taxing a wide range of
products that are already taxed. We are going to have to work through
this in the coming days.
I would like to see us work in a cooperative way and get on the bill
and find a way to find some middle ground that accomplishes the
objectives we all have. Speaking for myself, I supported the moratorium
previously. I support a moratorium now. But it must be done in a manner
that is consistent with definitions we all understand and one that
accomplishes the objectives we all set when we wanted to pass this
legislation in the first instance.
I appreciate very much the Senator from Florida yielding.
Mrs. FEINSTEIN. Madam President, we are not on the bill, is that
correct?
The PRESIDING OFFICER. We are on the motion to proceed.
The Senator from Florida.
Venezuela
Mr. NELSON of Florida. Madam President, while we are getting all of
our ducks in order with regard to the procedure and there is this
momentary lull in the consideration of the instant legislation, I rise
to discuss conditions facing the United States with regard to an
important neighbor of ours in this hemisphere; that is, Venezuela.
Venezuela is a country in deep crisis. I worry, as has been the case
with so many of our neighbors to the south, that it is not getting
enough attention in relation to this crisis. We all should know the
President of Venezuela, President Chavez, is right now the subject of a
petition drive aimed at holding a referendum on a recall of his
Presidency. That is provided for under section 72 of the Venezuelan
Constitution. What is also well known is President Chavez and his
allies have done everything in their power to make it impossible to
hold a legitimate referendum.
A week ago I was in Venezuela. I spoke to numerous officials of the
Chavez government, including the Foreign Minister, the Energy Minister,
the Vice President of the National Assembly. I also spoke to leaders of
the opposition who have been leading the drive to hold a recall
referendum under the provisions of the Venezuela Constitution. This is
a recall on whether the President will continue in office.
In addition, I met with numerous business leaders from American
companies, many in the energy sector, to hear their views on what is
likely to happen to Venezuela, what is going to happen to Venezuela-
United States relations, and what our policy should be there.
Everyone I spoke with recommended the United States must strongly
support a negotiation led by the OAS and the Carter Center aimed at
resolving disputes related to holding the referendum. Typically, this
would not be a dispute. They have many more signatures than is required
for the referendum. However, an objection has been raised that
signatures are not accurate as to the people. That is easy to check.
I met with one of the mediators at the Carter Center who described to
me the proposals his team and the OAS team had made to try to bridge
the gap between the Chavez government and the opposition. When I asked
if anyone outside of the government, any of the opposition in the
business leaders actually think the Chavez government, and specifically
President Chavez, will allow the continuation of this referendum to go
forward, I got the same answer from all quarters. It was, ``No.''
Because of the way President Chavez has governed, because of the way
he has tried to silence opponents, it is widely believed he will never
allow the recall referendum to go forward. I hope he will hear this
chorus of concern being expressed now from the Senate that under
section 72 of the Venezuelan Constitution he should allow the process
of democracy to work.
Just last week, the Venezuelan National Election Commission announced
procedures for conducting the reparos--the verification of over 1
million disputed signatures on the original recall petitions. For a few
days at the end of May, those who signed the petitions will have the
opportunity to come forward and present evidence that verifies their
signature.
It is a cumbersome process. Even if it works perfectly, and even if
the signatures are legitimate, there may not be enough time to verify
them all. That is another concern, that the process is being drug out
purposely, so as to avoid the timeframes involved. But even worse,
there is so little trust being expressed that the Chavez government is
going to conduct the process fairly that the effort may be doomed even
before it starts.
This political crisis, which has been going on in one form or another
in Venezuela for 3 or 4 years, leaves me deeply concerned about the
direction of Venezuela and the prospects for its democracy. It is a
tragedy that a country of such enormous promise, with vast natural
resources, and a vibrant entrepreneurial population and well-
modernized, could find itself in such a dire circumstance.
I am afraid that the United States is not doing enough to make clear
how much we have at stake in the protection of democracy in Venezuela.
With a recent United Nations report indicating that a majority of the
people in Latin America have their doubts about the value of democracy,
we cannot afford to leave any doubt about where we, the United States,
stand and what our policy is. I think we also have reason to worry
about the impact on the economy in our hemisphere of a major oil
supplier to the United States, the fourth largest supplier to the
United States; we have to be concerned. What about the interests of the
United States if suddenly Venezuela were destabilized?
That is why I was so impressed with the impact that a statement by
Senator John Kerry had on both the Government and the opposition in
Venezuela. Senator Kerry's call for strong U.S. support for the
Organization of American States and the Carter Center process genuinely
shook up the Chavez government, and it gave renewed hope to the
opposition.
Without a sustained push by the United States at its highest levels,
I have grave doubts that President Chavez will ever permit the
referendum. Senator Kerry made this statement, much to the delight of
the opposition in Venezuela, on March 19 of this year. It is a very
strong statement on reform that is needed, and how the Chavez
government needs to get behind democracy and stop the kind of direct
attacks on the United States in which it is engaging.
Now, other nations to which the United States should be reaching out,
to use their influence as well: Brazil, Chile, Spain, and France, are
all, in some respects, better positioned than the United States to try
to influence the Venezuelan Government. But those states need to see
sustained leadership from the United States.
The threat to democracy in Venezuela is not, by any means, the only
reason for our concern. President Chavez has caused us a number of
other headaches recently. He struck up a close alliance with Fidel
Castro. He has started to strike up an alliance with a
[[Page S4363]]
gentleman named Morales in Bolivia who is trying to expand the drug
trade in Bolivia. And there is extensive evidence of cooperation
between Cuban and Venezuelan intelligence services. There is also the
employment of a great number of Cuban nationals in Venezuela.
Venezuela has provided assistance or, at a minimum, safe haven to
even those who are drug runners, such as the FARC, a group that
basically is involved in the drug trade, fighting the legitimate
Government of Colombia. And the FARC continues to conduct a terrorist
campaign against the Government and the people of Colombia. At a time
when Colombia is making slow but steady gains in its long struggle
against the FARC, the last thing it needs is to have a neighboring
power; namely, Venezuela, give assistance to this brutal adversary, as
they would go across the line into Venezuela.
President Chavez has also made some truly outrageous statements, such
as praising Iraqi insurgents who attack American soldiers. He has also
tried to use his oil supply relationship to have a lever on the small
nations in the Caribbean to get them to oppose U.S. policies. And
President Chavez has threatened to cut off oil exports to the United
States.
Venezuela also suffers from a potent market in false documentation,
such as passports and other identity cards. I am becoming increasingly
concerned at the ease, by paying $800 or $900, of getting full
documentation of everything from a passport to a driver's license, all
of which is legitimate, simply by buying off officials. I am certainly
concerned that international terrorist groups will discover their
ability to acquire and make use of forged Venezuela documents to
conduct terrorist attacks.
We may have a net set up to try to protect people from coming into
our borders, but Venezuelans can travel on their documents to European
countries. And that begins to start the process of mischief. The
Venezuelan Government is not doing nearly enough to put a stop to this
practice.
I had a friendly meeting with the Foreign Minister, and I raised all
of these concerns with him. He said, with regard to the forged
documents that are legion in Venezuela, that he was not aware of the
problem. But 3 days after I left, the Government announced the arrest
of nine people for trafficking in forged documents. I hope that is the
beginning of a crackdown. If that is the case, I thank the Foreign
Minister of Venezuela for taking my comments to heart.
You can see that the whole picture adds up to a very disturbing
conclusion. If things do not improve soon, I worry that we may
eventually reach the point where we have to treat this Venezuelan
Government as an unfriendly government that is hostile to U.S.
interests. That is not what I want. And I do not think that is what the
U.S. Government wants. In the interest of fostering free and fair
elections and democracy in all of Latin America, that certainly is not
what we want, that is not what the Organization of American States
wants, but that seams the direction in which we are headed. That is one
of the reasons for me making this statement to my colleagues in the
Senate.
If those deteriorating relations between our governments continue,
that would be a tragedy for a longtime ally, and it would represent a
reversal of the longstanding good relationship the United States and
Venezuela have had.
At this stage we cannot be anything but clear with the Venezuelan
Government about the direction this relationship is headed. If
Venezuela's democracy continues to be undermined by its Government, if
President Chavez continues to side with those who are trying to be
adversaries to the United States, and if Venezuela does not prove
itself to be a reliable ally in the war on terrorism, if Venezuela does
not continue to abide by its own constitution, then we will scarcely be
able to draw any other conclusion from these actions.
For this reason, I commend Senator Kerry for making crystal clear, in
his statement of March 19 of this year, what the stakes are. He has
made certain that no Venezuelan official can doubt that if the present
course continues, things will get no easier for them in a future Kerry
administration.
My hope is this knowledge will cause the current American
administration to make clear to President Chavez that our Government
places a high priority on democracy, the rule of law, and responsible
conduct in international relations, and that the Government of the
United States will come down hard on the words and the deeds of the
Chavez government and that Chavez' failure in these areas--it will be
made clear--will have consequences, not only in his relations with us
but in his relations around the world.
This is a matter of grave importance when you consider how dependent
we are on foreign oil. That is one reason. We have always relied on
that oil coming out of Venezuela. So many of our refineries on the gulf
coast of the United States are established to handle the kind of oil
with its content to be able to refine it into American fuel. Many other
refineries in the world don't have that capability. So it is clearly in
Venezuela's interest that they continue that commerce and continue good
relations with the United States.
I hope and pray our relations will improve and that we will get back
into the longstanding friendship we have had for years and years.
I yield the floor.
The PRESIDING OFFICER. The Senator from California.
Mrs. FEINSTEIN. Madam President, I rise to claim an hour under the
motion to proceed to speak on the bill.
Before I do, I compliment the Senator from Florida on his comments on
Venezuela. He may not know this, but I had the pleasure of spending
some time in Venezuela when I was mayor, leading a delegation. We had a
sister city relationship with Caracas. I saw the vibrancy of that
democracy at that time. This was in the mid-1980s. All the progress
that had been made in the Bolivar nations and the closeness that
existed between Venezuela and our country, it was something very
special to see. You could say, I think, that Venezuela led all the
nations in terms of its relationship to us. So the deterioration of
that relationship is very much regretted by me. I associate myself with
the comments of the Senator from Florida and thank him very much for
making them.
I wish to speak about a bill that I am not sure everybody understands
very well, let alone exactly what it is. There are essentially three
bills floating around. One of them is S. 150. This is a permanent
measure. It includes a 3-year grandfather on Internet access if the
taxes existed in 1998. That is the Allen-Wyden bill.
There is a McCain proposal that may be brought forward. And, as I
understand it, in would last for 4 years. It includes a 3-year
grandfather on Internet access taxes that existed in 1998 and a 2-year
grandfather on Digital Subscriber Lines (DSL) taxes.
And there is the Alexander-Carper bill, of which I am a cosponsor.
This is a 2 year temporary moratorium that includes a 2-year
grandfather on Internet access taxes that were in place in 1998 and a
2-year grandfather on DSL service.
What all that means is very difficult. The last time this bill was on
the floor was November 6 and 7 of last year. I remember coming to the
floor and saying I had been approached by more than a hundred
California cities to oppose the bill. It was a deluge. I had never had
that kind of opposition from California cities before in my 12 years in
the Senate. That deluge has only increased.
Interestingly enough, I have not received a single letter from a
telephone company in support of any of these bills, which is very
interesting.
The most dominant voice has been the League of California Cities,
firefighters, labor. The League in particular represents over 470
California cities. These cities believe this bill, S. 150, will cost
billions of dollars nationwide, and in California it will cost local
jurisdictions as much as $836 million once it really gets started.
Cities and counties across the Nation are facing budget crises. These
cuts only make the situation worse. There would be less money to pay
for police officers, firefighters, libraries, and parks. Passing this
bill, which essentially would end revenue streams which cities have
counted on for years to fund vital services, is something I can't do.
That is why you have Senator Carper, a Governor, Senator
[[Page S4364]]
Voinovich, a former mayor and Governor, Senator Alexander, a Governor,
and myself, a mayor, all saying, please don't do this.
I support legislation sponsored by Senators Alexander and Carper
which would extend the recently expired moratorium on Internet access
by 2 years, and make the moratorium technology neutral.
The Allen-Wyden bill changes the definition of Internet access
significantly. That is the problem. Simply put, the definition included
in the bill before us is far too broad. The bill says that
telecommunications are taxable, and then it adds this:
. . . except to the extent such services are used to provide
Internet access.
But what does the phrase ``to provide Internet access'' actually
mean? Cities, counties, and States believe it means they won't be able
to tax telecommunications services, which they currently can, to the
tune of $2 to $9 billion annually all across the United States. So that
is really what is at stake.
Let me read what the Center on Budget and Policy Priorities says
about the definition contained in Allen-Wyden:
The ban on State and local taxation of telecommunications
services used to provide Internet access would effectively
eliminate billions of dollars' worth of taxes on voice
telephone service as the provision of that service is
migrated to the Internet, a process that is well underway.
Then it goes on and it says there will be substantial revenue losses
for State and local governments. It points out that 11 States would
lose between $80 million to $120 million: Colorado, Hawaii, New
Hampshire, New Mexico, North Dakota, South Dakota, Ohio, Tennessee,
Texas, Washington, and Wisconsin. It says 28 States and the District of
Columbia would lose $70 million annually. Let me quickly mention which
ones they are: Alabama, Alaska, Arizona, Colorado, Connecticut, DC,
Florida, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana,
Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, Ohio, Rhode Island, South Carolina,
Tennessee, Texas, Washington, and Wisconsin.
A lot of States stand to lose. It goes on to say many more State and
local governments would lose their ability to tax telecommunications
services purchased by Internet access providers, such as the high-speed
lines providers use to link to the backbone of the Internet.
A lot of States stand to lose. Now, you can talk to authors of the
bill and they will say, oh, no, that really is not true. But the fact
is that even CBO cannot give you a real estimate because companies
don't maintain records; but cities, interestingly enough, have retained
specialists to estimate for them.
Let me read from one of those specialists. His name is William T.
Fujioka. He is the administrative officer for the city of Los Angeles.
He points out that:
In California, the utility user tax has been applied to
telecommunications services on a technology-neutral basis for
over 30 years. With 150 cities receiving over $830 million--I
have been over that.
He goes on to say:
For the city of Los Angeles, our telecommunication's
utility user tax covers local exchange service, long
distance, and wireless, which total $260 million. S. 150
places all of these revenues in jeopardy. The loss would come
from: 1, the migration of traditional telephone services to
Internet-based telephone services, or Voice over Internet
Protocol; and 2, the application of S. 150 to local exchange
and wireless services that also provide voice and Internet
access (in the same manner as DSL and cable modem), which
would prevent the city of Los Angeles from taxing these
services.
He then goes on to point out:
The migration of telecommunication services to the Internet
is not just speculation. AT&T, SBC, Verizon, and Time-Warner
have all announced their intent to introduce Internet
telephone service in California this year.
It is important to note that currently, DSL and cable modem are not
subject to the Federal excise tax, or UUT, utility user tax, because
until recently these broadband communication services were not used for
voice and were properly deemed private communication services.
Now, the Ninth Circuit Court of Appeals has changed even that and is
essentially saying that both cable and DSL can be taxed. That just came
out. I am told that it will take another 18 months to 2 years just to
straighten that out and to see if there is an appeal on a writ of
certiorari to the U.S. Supreme Court.
So this whole area is in flux and it could change dramatically. It
makes no sense to do a permanent piece of legislation at this point in
time, in my view, particularly with this Ninth Circuit case recently
coming down.
If Allen-Wyden is approved, phone services, which are currently
taxable, will become tax exempt. This means local jurisdictions will
lose revenues they can collect today. In turn, this means less revenue
to pay for local priorities.
I support making business and residential access to the Internet tax
free. There are primarily three ways to access the Internet today:
dial-up service; cable modem; and DSL, digital subscriber lines. Under
the recently expired moratorium, two of these methods--dial-up service
providers and cable modem--were exempted from taxation. The third, DSL,
could be taxed, though many jurisdictions, including California, didn't
tax that. But, as I have just told you the Ninth Circuit has just made
a change by saying that you can now tax cable modem.
Alexander-Carper--the bill I support--would level the playing field
and make DSL tax exempt, except in those jurisdictions which already
taxed it. This grandfather would last for 2 years. And, it would
grandfather access taxes in place in 1998--again for 2 years. It is
hoped that this will ensure that the Internet could continue to mature.
I must say, also, it is my understanding that Senator Enzi is going
to introduce a bill that will be a simple extension of the 2-year
moratorium, which expired a few months ago. If the Alexander-Carper
bill isn't successful, I will support this solution.
I really believe that is the solution--that we should simply extend
it, let the Ninth Circuit case go up to the Supreme Court, and let the
Supreme Court speak. Or we should add an amendment to S. 150 that says
that all present taxes remain unaffected, so that cities, counties, and
States, through your State, Madam President, and my State, as well as
every other State, can know with certainty that the revenues they have
counted on they can continue to count on.
If you ask people whether they want police and fire, the answer is
yes. If you ask them whether they want local services, the answer is
clearly yes. To pass a bill that ends the method of revenue collection
and funds up to 15 percent of these local services in many
jurisdictions, I think, is an unconscionable thing to do.
Much like the tax cuts, they explode in outer years. So while Members
that vote for that may be popular for a short period of time, to be
able to go home and say they are assuring their local jurisdiction that
they are protecting their revenue sources, they cannot do that by
voting for S. 150. Just too much is unknown.
Fifteen percent means layoffs, and it could mean major cuts in
service. It could mean higher local taxes.
The cities that have contacted me, large and small, are like San
Francisco, Los Angeles, Sacramento, LaVerne, San Leandro, and Santo
Rosa.
Let me quote from the comptroller of the city of San Francisco, Ed
Harrington. Again, this is a technical person writing:
For the city of San Francisco, our telecommunications UUT--
utility users tax--covers local exchange service, long
distance, and wireless, which totals $32 million a year. S.
150--that is Allen-Wyden--places all of these revenues in
jeopardy.
The loss would come, again, from the migration of
traditional telephone services to the Internet-based
telephone services or Voice Over Internet Protocol; and, 2,
the application of S. 150 to local exchange and wireless
services that also provide voice and Internet access, which
would prevent the city of San Francisco from taxing these
services.
That is the same as Los Angeles.
So you have two of the major cities in the State and their technical
and financial people both saying the same thing.
The League of Cities, which represents all of California's 478
cities, its county administrators, its police officer associations, its
firefighter associations, all oppose this bill.
In the city I served as mayor for 9 years, the current definition of
telecom
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services could lead to a loss of $32 million annually. This translates
into 300 police and firefighters.
I want to also cite the city of Pasadena. Mayor Bill Bogarrd wrote my
office to protest that his city would lose $11.4 million under Allen-
Wyden, and he writes:
By using vague language to include broadband Internet under
the moratorium, we fear that the bill will allow telephone
and cable companies to use that protection to avoid paying
local franchise or utility fees.
Which is exactly what is going to happen.
He goes on to state:
It is our understanding that it was not the intent of the
bill sponsors to endanger local franchising authority, but
the legislation has yet to be changed to correct these
unintended consequences.
Virtually every technical person who looks at this bill--the Center
for Budget and Policy Priorities, as well as every controller,
technical professional employee of cities and counties--says the same
thing: The definition is flawed, it is vague, and under that
definition, any number of things can happen.
Madam President, 150 cities in my State levy a utility user tax. That
includes telephone and cable television services. These taxes provide
the contribution that I mentioned of approximately 15 percent in
general purpose revenues. So they make a utility user's tax vital in
helping fund critical city services.
I know why telephone companies do not want this. They do not want to
be bothered by local taxes. But on the other hand, why not say that
present taxes are excepted, present taxes would not be covered? Cities
can continue those taxes where they are.
I believe that because of the determination that this bill is an
unfunded mandate and other reasons, S. 150 is subject to a point of
order when it is under consideration, and I fully expect that this
point of order will be raised. For this Senate to pass a bill that
further ties the hands of local government I think will be unfortunate
just at a time when so many States face budget deficits and so many
cities have the same situation.
In short, the problem with Allen-Wyden is that it changes the
definition of Internet access in the recently expired Internet tax
moratorium in such a way that cities lose billions nationally, that
this escalates over time, and that this will lead to reduced
preparedness of our cities, to fewer firefighters, and to fewer police
officers.
Anyone who has ever done a city budget knows you cannot lose up to 15
percent of your revenue and keep services at the same level.
I am hopeful that as the days go on and as we consider amendments to
the bill, there will be a straight amendment that will just simply
extend a 2-year moratorium to give the Supreme Court case Brand X
Internet Services v. the FCC the opportunity to go up on appeal,
hopefully for the Supreme Court to take it up, or else to leave in
place the appellate court opinion which makes very clear that States
will be able to tax cable modem service since the 1996 act allows
States to tax telecommunications services.
One of the most disturbing aspects about the bill is some people
think that it imposes Internet sales taxes when this is not true at
all. These taxes are all at the point where the Internet comes in to
the home, and yet they reach back in the chain as various services come
together substantially before the Internet reaches the house. I think
if that currently taxable aspect of the service is made unavailable to
local communities that have very few revenue sources, it is going to
present a substantial hardship for the quality of life of the people we
care about in our cities and in our States.
I will oppose S. 150. I will vote for the Alexander-Carper bill and
will also vote for Senator Enzi's bill should he make that available.
I reserve the remainder of my time and yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee.
Mr. ALEXANDER. Madam President, I congratulate the Senator from
California. She represents a State that has 12 to 13 percent of all the
people in our country with lots of cities and counties. She has been a
leader as a mayor, as I have been a Governor. Once you get to the
Senate, you are not supposed to forget what you learned as a mayor or a
Governor, and what you know for sure is that if Congress comes along
and says, You can't tax property in San Francisco, for example, then
you are going to have to raise taxes on something else. Or, on the
other hand, if they said, You can't tax automobiles in California, then
you will have to raise taxes on something else.
When Congress comes along and says to California, to 118, 122, or
however many, we are going to take $260 million potentially from Los
Angeles, $32 million potentially from San Francisco, that is not
lowering anybody's taxes. You just raise other taxes. If you say,
Senator Alexander, we think you are special, you don't have to pay
taxes, the Senator from California is going to have to make up what I
have not paid, or someone is. If you say, We will just cut Government,
we will cut services, good, maybe we should do that, but still I would
be paying lower taxes and you would be paying higher taxes.
What we are talking about is a very simple idea: Should the Congress,
in its wisdom, decide to give yet one more subsidy to the high-speed
Internet access industry and then send the bill to mayors and
Governors? I can see us having a big debate and getting all excited
about high-speed Internet access. When the internal combustion engine
was invented, somebody in the Senate got excited about it, or when the
telephone was invented, somebody got excited about it, or when the
railroad was invented, somebody got excited about it, but we did not
say in order to encourage them, there may be no taxes by State and
local governments on these great new inventions. Whenever we decide
something is worth a subsidy, we do it ourselves, or we should do it
ourselves. That is the great irony here.
Here we have one of the most subsidized technologies in America and
the fastest growing technology in America. There is nothing to indicate
anything is stopping it from growing. Yet we are piling on more
subsidies and giving the bill to State and local governments.
I thank the Senator from California for her leadership, her
directness, and her consistency. I look forward to working with her
tomorrow.
I think we have achieved tonight some of what we had hoped. The
Senate has rules that permit a small group of Senators to make a point.
I think the point we made tonight by insisting on a cloture vote on a
procedural motion, on the motion to proceed, was to speed along some
new compromises.
I am glad to see the Senator from Arizona with a new compromise
proposal. I have been working on one for 6 months with the Senator from
Virginia.
We even made some progress, but not enough. Perhaps the proposal of
the Senator from Arizona is even a step further. We received it this
afternoon and I have not had a chance to analyze it, which is why we
need time to do that. We will move toward that objective the leadership
wants and we all want, which is to create a consensus in this body
about what we should do for the time being about State and local
taxation of Internet access.
What I believe and the Senator from California believes and many
other Senators believe is these should be our principles: No. 1, we
should take the time to give the Senate Commerce Committee and the
House of Representatives time to think carefully about this new
technology, high-speed Internet access, which has the potential to
deliver to our homes and our offices so many services. We should think
carefully about that and not deal with it in any piecemeal fashion.
That is why a short-term extension of the ban on State and local
taxation of Internet access is much wiser than anything permanent, and
I am glad to see us moving away--not far enough yet, but away from the
notion of permanent confusion, which is what would happen.
Why in the world, when the Commerce Committee, when Senator Stevens,
Senator McCain, and others have said they want to look into this, would
we short-circuit that by making a decision about a little bit of the
growth of high-speed Internet access?
We ought to carefully look at whether there is a need for an
additional subsidy to high-speed Internet access. I
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will be talking about that some tomorrow. There is $4 billion of
Federal subsidy already. I have a study by the Alliance for Public
Technology about all of the State and local subsidies to high-speed
Internet access. They may all be good things, but we should know they
are there. I mentioned this earlier, that in 1995 the Texas
telecommunications infrastructure fund put in motion raising taxes to
generate $1.5 billion over 10 years, to basically put in high-speed
Internet access everywhere. That is true in virtually every State.
I mentioned earlier today, in LaGrange, GA, they are giving it away
for free and still only about half the people want it. We cannot force-
feed it to people, and giving a big new subsidy to the high-speed
Internet access companies is not going to make people who can get it
for free in LaGrange, GA, use it if they do not want it.
While my distinguished colleagues, who have a different point of
view, say it does not cost much, well, the House bill costs a lot. Up
to $10 billion in State and local taxes on telephones are at risk. Up
to $7 billion in business taxes the States collect today are at risk.
Half a billion dollars in business taxes collected on the Internet
backbone would be wiped out. Sales taxes on Internet access being
collected now in 27 States, gone. Universal service fund fees and 9-1-1
service fees threatened. Now people may be listening to that and
saying, great, no more taxes. That is the big trick. Do not let
yourself be tricked by that, because if I run for the Senate and
promise to abolish local property tax, do not people know the mayor and
the Governor are going to have to raise sales tax on food to make up
for it? Or if I run for the Senate and say I have this great idea, I am
going to abolish the car tax in California, Virginia, Tennessee, and
all around the country, hooray, that sounds good, does it not? But they
are going to come up with another tax. They will raise sales tax on
food or on business.
So this is real money we are talking about, and that is the second
point we should be discussing in this compromise, that we do not need
any more subsidy.
The third point is we should not break our promise to do no harm to
State and local governments. That simply means this: If Congress in its
wisdom concludes high-speed Internet access needs one more subsidy,
then we ought to be big enough men and women to stand up and say, okay,
we will pay for it. But what are we doing? We are sending the bill to
State and local governments. At least that is the way the Governors,
the mayors, and everyone I have talked to, who has carefully read the
bill from that perspective, reads it.
Maybe the compromise of the Senator from Arizona moves in that
direction. I hope it does. I am studying it tonight, and I will study
it in the morning.
It is a great surprise to me to come to the Senate and find one of
the first things we do in my first 2 years is break the promise the
Republican Congress made in 1995, ``No money, no mandate. If we break
our promise, throw us out.''
I would rather not be thrown out. I would rather we keep our promise.
Everyone knows this is an unfunded mandate. To say we passed some
unfunded mandates is like asking, why are you arresting me for this
one? I robbed some other stores last week and you did not catch me.
We do enact unfunded mandates on occasion, but the Congress has done
it a lot less since 1995, and it has had to stand up and be counted.
I want to make sure everyone knows what we are talking about this
week is an unfunded Federal mandate and that every Democrat or
Republican Senator who made a speech on the floor in 1995--and I have
those speeches--or who goes back to a Lincoln Day dinner or a
Jefferson-Jackson Day dinner and starts off by making a great big
speech about local control is overlooking support for S. 150 because it
is about adding a new cost on State and local governments and not
paying the bill.
The Senator from California says it is 5 to 15 percent of the revenue
base of many of her cities. The Governor of Tennessee told me it is up
to 5 percent of the revenue base of Tennessee. In our State, if we take
out 5 percent of the sales tax base, there will be an income tax. We do
not have a State income tax because the people of Tennessee make a
choice. We thought the Governor and the legislature were elected to
decide what taxes we could impose.
Then finally, if we insist on this additional subsidy to encourage
high-speed Internet access, why do we not follow President George W.
Bush's example? Let's put in the Texas plan. It is very simple. It
avoids all of this discussion we are having about definitions, all this
argument we are having about whether it costs anything. What they did
in Texas from 1999 when President Bush was Governor Bush was the
following: They said you do not have to pay any State tax on the first
$25 of your monthly bill for high-speed Internet access.
Twenty-five dollars is all one has to pay for high-speed Internet
access in Manassas, VA, where they deliver it through the power
company, and people can also get it through the phone company, the
cable company, and from the sky through the satellite. It can be gotten
from everywhere. One cannot walk down the street without somebody
selling people high-speed Internet access. It is the fastest growing
technology in America. The Congressional Budget Office and the
Department of Commerce have told us we do not need to intervene. It
does not need a subsidy. There is no economic benefit to paying more
taxpayers' money for this one industry.
So why is it? Why are we suddenly running a railroad train through
the Congress saying we are going to pick out this one industry? This is
a country where we have had many great inventions before. This is not
the first invention we have ever had, high-speed Internet access. It is
a great thing. But so was the telephone. So was the railroad. So was
the internal combustion engine. Now we are saying more subsidies--4
billion in Federal dollars is not enough. A whole book full of State
and local subsidies is not enough. The fact that it is the fastest
growing technology in America, that is not fast enough. We want to pour
more money in here, and it is not really going to the consumers; it is
going to the companies; it is going to the industries.
My friend from Virginia will say that is passed on to the consumer.
Maybe it is. But if we are going to pass corporate taxes on to
consumers, why not do it for all corporations? We have a lot of
manufacturing companies getting ready to move jobs overseas. Let's
lower their taxes. Let's lower everybody's taxes.
I am disappointed, to tell you the truth, that this bill is even
being considered in this way. I am surprised. If I were still the
Governor of Tennessee--which maybe some in the Senate wish I still
were--I would be roaring and screaming about this. I would be calling
my Governors on the telephone saying, What are these men and women in
Washington, DC doing? If they want to decide what the taxes ought to be
in Tennessee and California and Iowa, let them come home and run for
Governor or mayor. If they want to give a subsidy to some company, let
them pay for it; don't send the bill to us. Let them come down and
figure how to keep State university tuitions from going up and how we
keep from raising State and local property taxes to deal with a Federal
law that requires more State aid to children with disabilities but
doesn't fund it. That is what I would be doing.
I would have them on the phone tonight on a conference call and
asking them to call every single Senator saying, What are you doing up
there? We have a war in Iraq. We have a national economy. We have
plenty of national issues without you trying to be the Governor of the
home State at the same time, and if you want to be the mayor of
Knoxville or Nashville or Memphis, come on home. We will share all our
problems with you and you can decide what to spend and how high the
property taxes ought to be.
When we take hundreds of millions and potentially billions of dollars
out of State and local governments, we are raising local taxes, not
cutting local taxes. We are creating permanent confusion, and we are
breaking our promise.
So I am glad we had this vote tonight. I hope by coming in here and
voting we encouraged some work over the weekend, and late last week. I
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know Senator McCain was working, Senator Allen was working, Senators
Carper and Feinstein and I were working, and I hope we have made some
progress.
Tomorrow when we come in here after our lunch and begin to move to
the bill at hand, I think we will have on our side--I mean those of us
who oppose S. 150--that we will have upheld our part of the
responsibility of keeping this Senate moving toward a conclusion. We
want a result, but we want a good result.
May I say one more time what I believe a good result is. A good
result is a 2-year ban on State and local taxation of Internet access
so the U.S. Congress can think carefully about the migration of digital
services to the Internet because of high-speed Internet access. So that
is No. 1--2 years or less.
No. 2, no big subsidy to a heavily subsidized industry already.
No. 3, let's keep our promise and do no harm to State and local
governments. Let's show the people of this country that when we make a
promise, as we did in 1995 when we said no more unfunded Federal
mandates, when 300 Republicans stood on the Capitol steps and said, If
we break our promise throw us out, let's show that we mean that and not
engage in rhetoric that tries to confuse the issue.
If we meet those three tests, then we can have a result. We can have
one quickly tomorrow, or Wednesday, or Thursday. But if we insist on
legislation here like the legislation that passed the House, that
creates permanent confusion instead of careful study, an unwarranted
expensive subsidy to a heavily subsidized fast-growing technology, and
that does harm to State and local governments, which breaks our
promises, then I am going to continue to oppose that and so are a great
many of the Democrats and Republicans who joined us in the Alexander-
Carper legislation.
I think this has been a successful day. I appreciate the time we have
been given to debate the issue. I know Senator Enzi and others will be
here tomorrow morning to continue that discussion, and I look forward
to moving in an orderly way to the legislation at hand, S. 150,
sometime tomorrow afternoon, based upon the decision of the leadership.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Talent). The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. ALEXANDER. Mr. President, I ask unanimous consent that the order
for the quorum call be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ALEXANDER. Mr. President, on behalf of the majority leader, I ask
unanimous consent that when the Senate resumes the motion to proceed to
S. 150, the Internet tax access bill, there be 2 hours and 40 minutes
for debate remaining with 2 hours under the control of Senator
Alexander or his designee, with 20 minutes under the control of the
chairman of the committee and 20 minutes under the control of Senator
Dorgan; provided further that at the use or yielding back of that time
the motion to proceed be agreed to.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________