[Congressional Record Volume 150, Number 55 (Tuesday, April 27, 2004)]
[Senate]
[Pages S4390-S4396]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         INTERNET TAX NONDISCRIMINATION ACT--MOTION TO PROCEED

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of the motion to proceed to S. 150, which the 
clerk will report.
  The assistant legislative clerk read as follows:

       A motion to proceed to the bill (S. 150) 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.

  The PRESIDING OFFICER. Under the previous order, the Senator from 
Tennessee controls 2 hours of time.
  Who seeks recognition?
  The Senator from Tennessee.
  Mr. ALEXANDER. Mr. President, yesterday we began our discussion of 
legislation which, if it should pass, would be a Federal law giving a 
tax break or a subsidy to the high-speed Internet industry, and the 
Federal law would then send the bill for that to State and local 
governments. There is a bipartisan group of us who object to that, who 
believe if Congress wants to give a subsidy to the fastest growing 
technology, high-speed Internet access, then Congress ought to pay for 
it and not send the bill to State and local governments.
  I, for one, also question whether there is any need to spend 
additional taxpayer dollars on this sort of subsidy since, as far as I 
can tell, high-speed Internet access must already be the most heavily 
subsidized technology in the country. But, nevertheless, we have 
reached a point in the discussion where we are trying to create a 
compromise result.
  To go back through a little bit of history, the House of 
Representatives sent a bill to the Senate toward the end of last year, 
and that bill, while it was named ``Internet tax moratorium,'' did much 
more than that. It purported to make permanent the temporary timeout 
from taxes the Federal Government set in 1998, and then renewed in 
2000, on State and local taxation of Internet access, but the bill did 
much more than that.

  As I pointed out at length last night, the House bill exempted this 
industry from a great many State and local taxes--telephone taxes 
States currently collect, business taxes States currently collect, more 
business taxes, and then sales taxes. So for all of these, we had the 
Federal Government saying to the State governments: You cannot do this; 
You cannot collect these taxes.
  We have a phrase for this. We call it unfunded Federal mandates. It 
means: Do no harm to State and local governments.
  The Republican majority was elected in 1995, promising to end the 
practice of we Congressmen and Senators coming up with some big idea, 
taking credit for it, and then sending the bill to State and local 
governments. So we went to work to try to change the bill. Senator 
Carper of Delaware and I and nine other Senators of both parties 
offered a compromise. We said: Since the Federal Communications 
Commission, and since Senator McCain and the Commerce Committee, and 
Senator Stevens, our President pro tempore, and others, have said we 
need to take a comprehensive look at this phenomenon of digital 
migration of services to the Internet that is being caused by this new 
high-speed Internet access, since we want to do that, let's take a 
comprehensive look at it, so let's just extend the old moratorium for a 
couple more years.
  In the meantime, let's try to create a level playing field so all 
high-speed Internet access providers are treated the same and do no 
harm to State and local governments. That is the Alexander-Carper 
proposal.
  The majority leader and Senator McCain and others asked me and 
Senator Carper to work with Senator Allen and Senator Wyden and others 
to see if we could narrow our differences. We did, but we still had 
differences.
  As I pointed out yesterday, Senator Allen's bill, S. 150, which is 
the bill we are now considering, is permanent, not temporary. It still 
puts at risk $3 to $10 billion that State and local governments 
collect. It also causes the sales taxes that were being collected to 
expire.
  Let's recall that what we are talking about is not lowering anybody's 
taxes. If you lower one tax, another tax is going to go up, or the 
government is going to be cut. Lower taxes for the service industry 
means higher taxes for somebody else. That is a fact.
  Then Senator McCain came to the floor yesterday and offered a new 
proposal. I want to comment for the next 3 or 4 minutes on that. I have 
written Senator McCain a letter outlining my reaction to it, which I 
hope is being delivered now, but since we only received his proposal 
yesterday afternoon at about 2:15, I want to let the full Senate and 
others know my reaction to his proposal.
  First, I appreciate his proposal and his efforts to create a 
compromise. We all want a result. That is why we are moving ahead at 
2:15 to consider his proposal. Unfortunately, Senator McCain's new 
proposal still harms States and still creates a huge loophole for the 
high-speed Internet industry.
  Let me be specific. No. 1, the definition that the McCain proposal 
uses is the same definition the Allen-Wyden proposal uses. That 
definition eliminates $500 million annually of telephone taxes, 
business taxes that State and local governments collect today. That is 
an unfunded mandate.
  No. 2, the bill does not protect States and their ability to make a 
decision about whether to continue collecting taxes on telephone 
services. This is very important to State and local governments. Last 
year, according to the National Governors Association, State and local 
governments collected $18 billion in taxes on telephone services. In 
the State of Tennessee, it was $361 million. In California and Florida 
and Texas, it is more than $1 billion. It is 5 percent of our State 
budget. Almost every State is affected by this. While Senator McCain's 
legislation in one section appears to try to protect telephone calls 
made over the Internet so that States may choose to continue to

[[Page S4391]]

tax telephone services as opposed to food, for example, it doesn't do 
that. So that is the second problem with the bill. It takes away from 
the States a substantial tax base.
  No. 3, the bill is 4 years in duration. We think 15 months, 2 years 
would be much better. Four years is better than permanent, but once you 
freeze into place these decisions, it is like trying to take a 
billboard down. You can prevent one going up, but you can't ever take 
it down. We believe 4 years is not much better than permanent. And then 
there is the grandfather clause. The moratorium is 4 years starting 
last November. The States that were already taxing Internet access with 
sales taxes before this legislation moratorium took effect in 1998, we 
think those States and other States now collecting taxes on high-speed 
Internet access should be permitted to continue to exercise their 
option to collect those taxes.
  I have suggested to Senator McCain in my letter that there is a way 
to fix each of these four problems. The way to fix the definition 
problem is to use the language of the original moratorium. After all, 
if all we are doing is extending for 4 years the original moratorium on 
State and local taxation of Internet access, why not use the original 
moratorium?
  No. 2, make the extension for no more than 2 years.
  No. 3, express in plain English what I have heard the Senator from 
Virginia say, that he has no intention of trying to ban State and local 
taxation of telephone calls made over the Internet. So why not say, 
``nothing in this Act shall preclude State and local governments from 
taxing telephone services, including telephone calls made over the 
Internet''?

  And, finally, all the grandfather clauses should end at the same time 
the moratorium expires.
  I am glad Senator McCain worked to offer this new proposal. I regret 
that it still has many of the same problems of the original proposal. 
The term is a little better. The protection for State prerogatives on 
taxing telephone services is worse. But I would hope we could take the 
four suggestions I have made and correct the McCain proposal. If we 
can, we can pass a bill and get on to something else. I wanted to come 
to the floor quickly, after we have had a chance to review the 
proposal, to make those suggestions.
  I will return to the floor within a few minutes with further 
comments. For now, I yield the floor and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. 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 rescinded.
  The PRESIDING OFFICER (Mr. Bunning). Without objection, it is so 
ordered.
  The Chair wishes to inform the Senator he has approximately 81 
minutes remaining.
  Mr. ALEXANDER. Mr. President, sometimes when we talk about this 
Internet tax proposal, eyes glaze over. It is a hard subject for people 
to get into their brain because we are talking about a new way of doing 
things. We are talking about Internet access, how one connects their 
computer, for example, to the Internet, but we are especially, in this 
case, talking about high-speed Internet access.
  High-speed Internet access has been known to us just for the last few 
years. When Congress passed the Telecommunications Act of 1996, it is 
possible that nobody in Congress had ever heard of high-speed Internet 
access. The commercial Internet was just a few years old at that time.
  High-speed Internet access is another one of America's great 
adventures. The Industrial Revolution was caused by the internal 
combustion engine. That was a great invention.
  The telephone was a great invention. Television was a great 
invention. The use of high-speed Internet access is a great discovery. 
What is possible with it is that suddenly a lot of the everyday 
services of life, such as making telephone calls as an example, 
downloading movies, even watching our regular television channels, may 
be done through the Internet. Maybe it will be easier; maybe it will be 
less expensive; maybe there will be some other advantages.
  So for a long time, everybody has been excited about high-speed 
Internet access, which we call broadband. As a result of that 
excitement, there has been a phenomenal amount of subsidy of high-speed 
Internet access by the Government.
  The Federal Government spends approximately $4 billion a year already 
to encourage the spread of high-speed Internet access. Almost every 
State spends its taxpayers' money to encourage the growth of the high-
speed Internet access industry.
  The State of Texas, for example, has done at least two things. One is 
that it has a fund. Texas does things in a big way. So it is collecting 
$1.5 billion over 10 years, which will be spent to encourage high-speed 
Internet access just in Texas.
  Also, in 1999, when President Bush was Governor Bush, Texas decided 
it would give consumers a break on high-speed Internet access. Texas 
said the first $25 a consumer pays for their high-speed Internet access 
bill each month is exempt from the State sales tax. That is what Texas 
has done since 1999.
  Now, the irony is that the Governors and States of this country came 
to Congress and said, Why do we not make President Bush's Texas plan 
the national plan? That really helps consumers. It is pretty easy to 
understand.
  I am in Tennessee, the Chair is in Missouri, somebody else is in 
Texas, and we all get the bill each month from our Internet service 
provider. Now consumers can get this high-speed Internet access a lot 
of places. They can get it from their Internet service provider, such 
as America Online, for example, or they can get it from their cable 
company, the person who brings people television, or they can get it 
from their telephone company. They will charge about $30 or $40 a month 
for that.
  In Manassas, VA, consumers can get it from their power company. That 
has helped us understand that there is not going to be any digital 
divide problem. Almost everybody, thanks to the rural electrification 
system, has a power wire running to their home or near their home and 
they can get their high-speed Internet access from the electric 
company. They do it in Manassas, VA. It costs $25 a month, which is 
just the amount of money President Bush, when he was Governor Bush, 
thought ought to be the subsidy to consumers who decided to use this 
fastest growing new technology in the United States, high-speed 
Internet access.

  The reason I raise that is, since we already had that in Texas, what 
if the States say to the Congress that we will accept that unfunded 
Federal mandate? We will ask for that one. You know, just exempt all of 
our 100 million consumers across the country from the $1- to $3-a-month 
bill that they will pay in taxes on high-speed Internet access.
  But, no, from the House comes this legislation last year that would 
drive a Mack truck through the State budgets of virtually every State. 
It would drive it through the State of Texas, too. The State of Texas 
collects $1.7 billion a year in taxes on telephone services. That comes 
from the National Governors Association. This year they called up all 
the States and got this information. State and local governments, in 
taxes, collect $1.7 billion a year on telephone services.
  Under the proposal that is coming to the floor this afternoon that 
Senator McCain has suggested, as those telephone calls are made over 
the Internet, they would be tax free. That sounds good at first, until 
you think about what comes next. Let's say Texas loses a third of its 
revenues from telecommunications taxes. Let's be conservative about 
this. Of the $1.7 billion that Texas collects on taxes on telephone 
services, only about a billion comes from telephone calls. These are 
the monthly bills that you get.
  So Texas collects $1 billion a year. According to the Congressional 
Budget Office, in a letter to the Senate that I had printed in the 
Record yesterday, the estimate is that within the next 5 years at least 
a third of all the telephone calls will be made over the Internet.
  I think it is coming faster than that. I believe Michael Powell, the 
Chairman of the Federal Communications Commission, believes it is 
coming faster than that.

[[Page S4392]]

  So under the McCain proposal, Texas loses one-third of the revenues 
it collects in telephone services. That is $300 million a year. In 
Tennessee, it is $100 million.
  Then that keeps going. So gradually if you are the Governor of Texas, 
you are the legislators of Texas--and I know right now they, as most 
States, are going through a difficult time financially--they are 
talking about other taxes in Texas so they can pay for their schools.
  But I can predict what is going to happen in Texas and in Tennessee 
and in Washington State and in Florida. Florida collects $1.4 billion 
in taxes a year on telephone services. About $1 billion of that is from 
telephone calls.
  Take all that out and what happens, dancing in the streets because 
people aren't paying taxes on telephone calls over the Internet? No. 
What is going to happen is that some unfortunate Governor in Texas and 
in Florida is going to have to propose a State income tax.
  You may stand up and say we should reduce taxes by $1 billion in 
Texas, or reduce it by $1 billion in Florida, and maybe you can. Maybe 
you can. But that is a substantial challenge to those States.
  What we are really doing here is something I never thought I would 
see. We have legislation which has zoomed through the House and which 
the distinguished chairman of the Commerce Committee, despite his 
efforts to have meetings and to compromise, is still insisting on, is 
that we in the Congress give a big subsidy to the high-speed Internet 
access industry and send the bill to State and local governments, and 
it is a potentially big bill.
  I suggested in my earlier remarks that the McCain proposal can be 
easily fixed. For example, we can just say: Nothing in this act shall 
preclude State and local governments from taxing telephone services, 
including telephone calls made over the Internet. That is very plain 
English.

  I don't know why we don't try plain English in a statute every now 
and then. That would remove a lot of that problem. Then we could make 
it a 2-year extension instead of 4 and that only leaves two problems. 
One is the definition of Internet access. They have cooked up a new 
one. We had one since 1998. We banned taxes on Internet access in 1998. 
We did it again in 2000. I supported that. Instead of really banning 
taxes on Internet access, they are creating a big tax subsidy to a 
whole industry. We could fix the definition problem by going to the 
Alexander-Carper definition, which we suggested in December, or just by 
going to the 1998 definition. Then we could make all the grandfather 
clauses expire at the same time the moratorium ends, that would be it, 
and we could pass the bill and be on to reducing taxes for 
manufacturing companies.
  Sometimes I think I have not been able to get my point across as 
effectively as I would like. I was thinking about it this way. The 
Presiding Officer is the Senator from Kentucky. Kentucky has a big 
Toyota plant. I visited with the chairman of Toyota in Tokyo a few 
weeks ago. Toyota is leading the way--Ford is doing a lot, Nissan is 
doing a great deal, other companies are--in hybrid cars. I see the 
Senator from Delaware, and I am going to yield to him within 3 or 4 
minutes. They tell me at Toyota in Tokyo that Toyota is selling hybrid 
cars in America this year at the rate of 100,000 this year. That is 
very important in Tennessee because we have a big clean air problem and 
hybrid cars have electric motors and internal combustion engines both 
and burn less gas and pollute the air less, so the air would be cleaner 
in Tennessee. So I am thinking about, perhaps, recommending a Federal 
law that tells Kentucky and Tennessee and Delaware they cannot tax 
hybrid cars.
  Why wouldn't that be a good idea? That would clean the air.
  The reason it would not be a good idea is that in Delaware and 
Kentucky and Tennessee, some unfortunate Governor and some unfortunate 
mayor is going to have to figure out what to do about the property tax 
to pay for the schools and whether to raise the tax on food if you 
can't raise it on telephones. And even though he or she might want to 
lower taxes, if we give a big break to one industry, if we give them 
lower taxes, it is going to be higher taxes at some tax level for 
somebody else.
  Whether it is hybrid cars or whether it is solving the obesity 
problem by passing a Federal law that we can't tax low-carb foods, or 
solving the energy problem by saying we can't have a State tax on solar 
panels on the roof--all those things sound good, but it is not our 
responsibility in a Federal system to tell State and local governments 
what services they can provide and what taxes they can charge. And 
especially that is true when already the Congress and the States are 
subsidizing this industry.
  I believe if Congress wants to give a big subsidy to the high-speed 
Internet access business, Congress ought to pay for it. The way to do 
it is to adopt the George W. Bush Texas proposal that was enacted in 
1999. That is relatively inexpensive. It benefits consumers. It would 
say to everybody in the country, the first $25 you pay on high-speed 
Internet access every month is tax exempt. The States have asked us to 
do it. Why don't we do it? Why do we insist on rushing through the 
Congress legislation that gives a big break to the industry that is 
already, at least as far as my research shows, the most highly 
subsidized and fastest growing new technology in America today?
  The Department of Commerce and the Congressional Budget Office both 
have advised us it is growing so fast it needs no subsidy, that there 
is no need to spend more taxpayer money on that.
  I see the distinguished Senator from Delaware, former chairman of the 
National Governors Association. He has been a leader in the fight to 
remind us we have a Federal system, and that it is not up to us to come 
up with big ideas, take credit for it, and send the bill to the local 
governments. I would like to yield to him whatever time he may require.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. CARPER. Mr. President, I thank the Senator from Tennessee for 
yielding the time. Let me say how much I enjoyed the opportunity to 
work with the Senator on this issue and, frankly, on a number of other 
issues. I think he has shown a lot of courage, and I am grateful to 
him. I thank him for the opportunity to be his partner.
  I take some time this morning to address one of the important 
arguments made by our colleagues on the other side of this debate. 
Proponents of the legislation argue the only way to encourage broadband 
deployment is to provide subsidies to telecommunication industries with 
no strings attached. Furthermore, they argue the only way to create 
such subsidies is to pass a large, new, unfunded Federal mandate. I 
submit if what all of us here want to do is determine the taxes and 
spending policies of our State governments, then we should do what 
Senator Alexander did, what Senator Voinovich did, what Senator 
Hollings, I, and others did. We ran for Governor. We were elected. As a 
result we had the opportunity--in my case for 8 years--to decide what 
the taxing and spending policies of our States' governments should be. 
That is what we did.
  The authority we are granted here in the Senate by the Constitution 
is to decide the taxes and spending policies of the Federal Government, 
not the taxing and spending policies of the State governments, and not 
the spending and taxing policies of local governments. Our job is to 
determine the taxing and spending policies of the Federal Government.
  That being said, it is not as if we the Senate are somehow without 
the power to create incentives for industries to encourage certain 
activities we deem to be desirable. Senator Alexander mentioned a 
couple of areas where we are involved with tax policies in other cases 
and with spending policies to encourage the development of fuel cell 
vehicles, or to develop the creation of leaner burning diesel vehicles, 
or to incentivize creation of coal-fired plants that don't pollute a 
great deal. We have that spending and taxing authority, and we are 
using it--some would argue not to great effect, but that is our 
responsibility. We have the authority, after all, of a Federal budget. 
It is over $2 trillion.
  If we believe telecommunications companies need more money to build 
and market their broadband networks, and if we believe we can do better 
than the private sector in providing that money, then there are any 
number of ways we can provide money at the Federal level. After we do 
that, first of all,

[[Page S4393]]

we could provide Federal grants. We can provide Federal tax breaks. We 
can provide loan guarantees. We can provide additional spectrum for 
unlicensed use. The only reason not to provide the money in these ways, 
if it is needed, is because Congress would have to find a way to pay 
for it rather than simply sending the bill to our friends in our State 
and local governments. If we pass a new unfunded mandate this week or 
next week, it will be a matter of choice rather than a matter of 
necessity.
  In case anyone doubts that, I would like to bring to the attention of 
our colleagues here in the Senate a few of the many bills that have 
been introduced in the Congress to create Federal incentives for 
broadband deployment. These bills have already been written. These 
bills have already been introduced. Many of them have a rather broad 
cosponsorship. If we wanted to, we could bring one or several of them 
to the floor today, debate them, and perhaps pass them.
  I will mention a number of those bills. I want to start first with 
bills that have been introduced by Senators who have joined us in 
opposing the unfunded Federal mandate we are debating here today. I do 
so because there has been some suggestion made by our colleague on the 
other side of this issue that those of us who oppose unfunded mandates 
also oppose the Internet, or oppose efforts to encourage the 
development of broadband. That is not true. While I doubt many of our 
colleagues believe this to be the case, I do believe it is important we 
clarify matters for the record.

  Let me start with a bill authored by Senator Hollings, a 
distinguished ranking member of the Commerce Committee. One year ago, 
Senator Hollings introduced the Broadband Deployment Act. It is a true 
Federal broadband bill, and as such it would be a much more appropriate 
piece of legislation for us to be debating here today. Instead of 
handing State and local governments an unfunded mandate, Senator 
Hollings' bill would provide broadband to support State and local 
broadband initiatives. Rather than being unfunded, Senator Hollings' 
proposal would be financed by moneys from the Federal telephone access 
tax.
  Besides block grants, Senator Hollings' bill would also provide 
direct grants for broadband deployment. It would also support 
university research on next-generation broadband technology and pilot 
projects deploying new wireless broadband technology. I think that 
sounds like a worthwhile proposal.
  However, for Senators who are opposed to providing outright grants, 
perhaps we should consider another proposal; that is, one by Senator 
Dorgan.
  His proposal is to make low-interest loans available to companies 
that are deploying broadband technologies in rural areas such as North 
Dakota. We have rural areas in Kentucky. There are rural areas in 
Tennessee. Believe it or not, we still have rural areas in Delaware. 
That proposal might be of some interest to a lot of us, and I suspect 
to other of our colleagues.
  On the other hand, if Senators would rather provide tax incentives 
and either grants or loans, then perhaps we should be debating Senator 
Rockefeller's Broadband Internet Access Act. Senator Rockefeller's 
legislation would provide tax credits for companies investing in 
broadband equipment. It would provide a 10-percent tax credit for 
investments in so-called ``current generation'' broadband services.
  For investment in higher speeds for next-generation broadband 
services, his bill would provide a 20-percent tax credit.
  If it is a Republican tax proposal my colleagues are looking for, we 
could always turn to Montana and Senator Burns' proposal to allow the 
expensing of broadband investments by companies. That might work. I 
find that attractive.
  If party affiliation is not the hangup, but Senators are 
uncomfortable with providing tax incentives directly to companies, 
perhaps they would prefer the approach suggested by our colleague from 
New York, Senator Clinton. She proposes a different approach. She 
proposes providing an income tax credit to holders of bonds that are 
used to finance the deployment of broadband technology.
  Finally, if Senators don't want to provide grants, loans, or tax 
incentives, they can consider an approach advocated by one of our 
colleagues who happens to represent, among other places in California, 
Silicon Valley; that is, Senator Boxer. Senator Boxer has proposed we 
allocate additional spectrum for unlicensed use by wireless broadband 
devices.
  Those are only a few of the proposals that have been made, 
introduced, discussed, and in some cases subject to hearings, and which 
have cosponsors.
  Those are a sampling of the things we can do as Federal legislators 
in a proactive way if we are interested in strengthening the ability of 
companies to market and extend their broadband systems.
  What I think this array of proposals indicates is there is no limit 
to the ways in which we could act, if we wanted to, to encourage 
broadband deployment at the Federal level. The Senators I have 
mentioned--I mentioned five of them--span the ideological spectrum, 
from liberal to conservative. They come from different parts of our 
country. Their proposals reflect their ideological diversity. Some 
would increase spending; others would cut taxes. Some would finance 
their proposals by reallocating existing resources; others would add to 
the deficit.
  But what is clear is all these proposals are harder to pass here in 
Washington than an unfunded mandate because we would have to pay the 
bill ourselves. We could not stick anyone else with the tab. We would 
have to pay the tab.
  Admittedly, at a time when our Federal budget deficit is out of 
control, I have to confess passing the buck does have a certain amount 
of appeal. But it is not as though State and local governments are in 
much better shape financially than we are. State and local governments 
are struggling to cope with the worst financial crisis they have faced, 
I am told, since World War II. Classrooms are becoming overcrowded as 
school budgets are cut. Prisoners are being released from jails as 
correction budgets are cut. Governors and mayors are pushing through 
unpopular and frequently regressive tax increases.
  New industry subsidies can be created for all sorts of wonderful 
purposes, but if they are conceived in Washington, and then the cost of 
those subsidies is passed on to State and local governments, what it 
all amounts to is political welfare. We spend, they pay.
  If we are going to pass on our costs to our friends in State and 
local governments, we ought to at the very least have the courtesy to 
tell them how much expense we are planning to run up on their tab. 
Perhaps the worst part about this new unfunded Federal mandate we are 
proposing is we cannot honestly look our Governors in the eye, we 
cannot honestly look our mayors in the eye, we cannot honestly look our 
State legislators in the eye, and even tell them how much this unfunded 
mandate is going to cost them and their State or their city or their 
county. We cannot do that because, in truth, we have no idea.
  I would ask how my colleagues would react to the following proposal 
from me: Suppose I proposed a bill to create new Federal subsidies for 
the poultry industry.
  The poultry industry is big in our State and the entire Delmarva 
Peninsula. In fact, for every person living in Delaware, there are 300 
chickens. Let's say I proposed a bill to create new Federal subsidies 
for the poultry industry, or any industry, for that matter. Suppose 
these subsidies would be provided in the form of mandatory spending 
outside the control of annual appropriations. Suppose CBO evaluated my 
proposal and indicated they could not estimate, they could not even 
guess how much my proposal would cost, except to say: We believe it 
could grow to be large. We believe it could grow to be large.
  That is what CBO has said about S. 150: We believe its cost to State 
and local governments could grow to be large. But they are unable to 
say how large and how soon.
  If I proposed some kind of proposal that helped our poultry industry, 
and CBO said, ``We don't know how much this is going to cost,'' would 
my colleagues in the Senate pass that kind of a proposal? Would they 
even allow it to be considered on the floor of the Senate? As 
convincing as I might be, I do

[[Page S4394]]

not think they would. Yet this is exactly what we are asking our 
Governors to accept from us. This is why the Governors united--
Republican and Democrat alike--in opposing the subsidies in the 
underlying bill we are debating today.
  If my colleagues have not yet read CBO's analysis of this bill, I 
urge they do so. The Congressional Budget Office tells us this 
legislation is written in a way that is so broad and so vague they 
cannot even give us a rough estimate of what its effect will be on 
State and local governments, except to say: We expect it to grow to be 
large. They say the language in this legislation is so confusing that 
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.
  My friends, that is unacceptable. It is beneath us as the world's 
greatest deliberative body. It is an abdication of our responsibility 
as the body our Founders created in part to protect the interests of 
the respective States of our Union.
  We can do better. We all agree the current moratorium on Internet 
access taxes should be extended. I say ``the current moratorium.'' It 
is a moratorium that was in place for 5 years and expired last 
November. But we agree the moratorium should be restored. We disagree, 
though, on what should be done beyond that. But we all agree the 
moratorium should be extended.
  If we are going to write this bill on the floor rather than 
negotiating a compromise everyone can live with, we ought to begin with 
what we can all agree on, and debate what to do beyond that. We ought 
to call up a bill that simply extends the old moratorium.
  I want to expand that moratorium to make it technology neutral. Along 
with Senator Alexander, I expect to offer an amendment to do that. If 
others want to add billions in new subsidies to the bill on top of 
that, then they can offer their own amendments. If we want to propose 
ways to pay for such subsidies, as others may propose, and to do so 
here at the Federal level rather than passing the bill to the States, 
then we should put our proposals forward. If others want to propose 
different inducements to industries, such as low-interest loans or 
allocations of spectrum, then they should bring those proposals forward 
as well.
  That seems, to me at least, to be the fairest way to proceed. If the 
goal is to have a genuine debate on this issue and to let the Senate 
work its will, we would welcome that. On the other hand, if the 
intention is to proceed to a fundamentally flawed bill, and then 
immediately file cloture to close off debate, we have no choice but to 
use every procedure available to us to protect our rights and to 
protect the interests of our States.
  My hope is we will still be able to work this one out and reach an 
acceptable compromise, one that extends the moratorium and makes it 
neutral with respect to technology, but also one that first does no 
harm to State and local governments, that are struggling to cope, as I 
said earlier, with their worst financial crisis since World War II.
  In 1995, when the Senate debated and, along with the House of 
Representatives, passed the unfunded mandates law, I was not working in 
the Senate. I had been a Member of the House of Representatives, but I 
left at the end of 1992. Former Governor Mike Castle and I sort of 
swapped jobs. He became a Congressman from Delaware, and I was 
privileged to become its Governor.
  Starting in 1993, my first year as Governor, I began working with 
other Governors, including Senator Voinovich. What we sought to do was 
to work actually initially with a bunch of Republicans who were part of 
the so-called ``Gingrich Revolution'' which was able to capture the 
majorities in the House and Senate in 1994. One of the platforms of the 
``Gingrich Revolution'' was the Federal Government should not tell the 
State and local governments what to spend their money on, and then not 
provide that money; nor should the Federal Government tell State and 
local governments what they could or could not tax without providing 
some offset if we cut their revenue base.
  One of the first laws enacted in the year 1995, signed by then-
President Clinton, is one that said: Unfunded mandates are wrong, 
whether they are on the spending side or on the revenue side.
  In 1998, the Congress passed an unfunded mandate, not a big one but a 
little bitty one. The reason they did it, they said, was to make sure 
the Internet has an opportunity to get up on its feet and successful 
because we think it could mean good things for our economy. It has.
  At a time when State and local governments were beginning to put 
taxes or fees in place on access to the Internet, the Congress and 
President Clinton said: State and local governments, if you are already 
imposing some kind of tax on access to the Internet or some fees on 
access to the Internet, essentially your AOL bills of consumers, if you 
already have one in place, you may keep it in place, but if you haven't 
done it, you are not going to be able to do so. So a moratorium was put 
in place in 1998. Most people thought it was a good idea. States went 
along with it. They were not crazy about the idea, but they went along 
with it.
  After 3 years the moratorium was supposed to expire. When it was 
about to expire, it was extended, almost by acclamation, in 2001. The 
States were not crazy about the idea, but there was not a whole lot of 
push back. Then late last year, that 2-year extension expired.
  With Senators Alexander, Voinovich, Graham of Florida, Feinstein, 
Dorgan, Enzi, Hollings and I, and others opposing the underlying bill, 
I don't believe you would see that kind of opposition if some things 
were different.
  If there had never been an unfunded mandates law in 1995, we may not 
feel so strongly, although the idea that the Federal Government is 
telling the States what to do and to pay for it, the Federal Government 
is taking away the revenue base of the States and not making up the 
difference, that still rubs me the wrong way. I find it galling. But if 
there were no unfunded mandates law, we would probably not be making 
this kind of fuss today over this issue.
  If the Internet were still in its infancy, still struggling to hit 
its stride, not yet making the impact it does today in our economy here 
and around the world, we probably wouldn't be making the fuss we are 
today in opposition to the underlying bill.
  If States today were awash in money and not facing the largest fiscal 
crisis they have faced in over 50 years, we probably would not be 
making the kind of noise we are in opposition to the underlying bill.
  If telecom companies were not beginning to enjoy very decent profits 
as they are today--and the prospect is for more of the same--then we 
might not be making the kind of fuss we are in opposition to the 
underlying bill.
  As it turns out, there is an unfunded mandate law, and even if there 
were not, what we are seeking to do in my judgment is morally wrong. 
The Internet is no longer in its infancy. It is a grown child, not just 
trying to walk or crawl. This grown child is running at full speed. The 
States are not awash in money. They are hurting. They are hurting in 
ways we have not seen in a long time.
  It is not just the classrooms that are crowded. It is not just the 
prison doors being opened to let people out who frankly should still be 
incarcerated in many cases. It is not just the caseload burdens of 
folks whose job it is to work with families in trouble. All of those 
problems are facing State and local governments, and they do not have 
the revenues to cope with them in many cases.
  The telecoms are doing pretty well these days. They went through a 
tough patch, but they seem to be coming through it.
  I don't know if Senator Alexander still has to go somewhere or not. 
Is he able to stay on the floor a bit longer?
  Mr. ALEXANDER. I am going to leave within 4 or 5 minutes.
  Mr. CARPER. Let me yield before the Senator leaves, if he would like 
to make some comments. I have a few more things I would like to say.

  Mr. ALEXANDER. I have been listening to the Senator from Delaware 
carefully.
  Mr. CARPER. You have heard some of this before.
  Mr. ALEXANDER. What was going through my mind was: I don't recall a

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time when I was Governor of Tennessee that I ever saw the Congress do 
anything like this. There were unfunded Federal mandates that we didn't 
like. Back in the early 1970s, before I was Governor, Congress said: We 
ought to help children with disabilities. We will pay for a certain 
percentage of it, but they never did. I hear about that all the time 
from local school boards and local people. But I cannot remember a time 
when the Congress passed a law saying: We have come up with a great 
idea here, and we are going to give a State tax break to somebody to 
pay for it. I think we would have laughed about that.
  Then we would have gotten really mad about it. It is so farfetched.
  We are having a very serious debate about this in the Congress. 
Everybody is going through the motions, making bills doing all these 
things. But what we are doing is, U.S. Senators are passing State laws. 
That is what we are doing.
  If I had known that I could have run for the Senate in 2002, I could 
have probably been elected by a big margin in Tennessee. I could have 
said: When I get to Washington, I am going to pass a Federal law 
abolishing the State income tax, in case you ever pass it, making it 
illegal for Tennessee to pass a State income tax. We don't have one and 
people don't want one, although they may get one, if this bill passes. 
Or I could say, as we have said a little earlier, hybrid cars are a 
great invention. I think I will pass a Federal law telling Tennessee, 
Kentucky, and Delaware they can't tax cars. Car taxes are hated. Or 
obesity is a national problem. I think I will pass a Federal law 
saying: No sales taxes on low-carb or low-fat food.
  Housing is important to all of us in the United States and in the 
Senate, but we don't pass a Federal law lowering local property taxes 
in Louisville or Nashville or Wilmington in order to encourage housing. 
Why don't we do that? It is because we have a Federal system. We are 
not Belgium. We are not France. We have Governors. We have mayors. This 
is America. It is a part of the American character that we like to make 
our decisions at home.
  When I go to a Lincoln Day dinner--I don't go to the Democratic 
meetings--I always say something about local control. If I were to go 
to any Republican meeting in Tennessee and say, I especially don't like 
it when a Congressman gets up and passes a Federal law and takes credit 
for the idea and sends the bill to the Governor or the mayor, I would 
get a big round of applause for that because we believe that in the 
Republican Party in Tennessee, and most Tennesseans do as well.
  I was enjoying the remarks of the Senator, and that was going through 
my mind. I wish I could think of some way to convey to my colleagues 
that we are talking out of the box here. We are not talking about 
Federal taxes, Federal subsidies, or Federal programs; we are talking 
about State programs. That is what we are doing here. It is totally 
inappropriate, against the spirit of the tenth amendment and Ronald 
Reagan and everything else we stood for on the Republican side in the 
Contract with America. It is offensive to that spirit. That is why I am 
here today.
  Mr. CARPER. Mr. President, it is ironic. The Senator talks about some 
of us here who would like to almost usurp the responsibilities of our 
State and local officials.
  I always describe myself, when people ask what I do, as a 
``recovering Governor.'' Although I love being in the Senate and 
working with particularly the folks we are engaged with on this 
particular issue, we are not Governors, we are not mayors, we are not 
county executives, and we are not State legislators; we are Federal 
legislators. We have the ability, the power, through the Federal purse, 
through our appropriations process, to offer grants and provide tax 
credits. We are in a position to nurture industries, promote them. We 
have talked about some of them today. This is one industry that should 
be nurtured and strengthened. We can do that and we should do that on 
our dime.
  I see the Senator from New Hampshire on his feet. I will make one 
more comment and then I will yield the floor.
  Senators Alexander, Voinovich, and I just returned from a press 
conference upstairs a couple minutes ago. We were asked about the 
proposal Senator McCain has offered. I have a huge respect for him. We 
were colleagues in the House together, and we served in the Navy at 
about the same time. I believe what he submitted is a proposal made in 
good faith. However, I also ask my colleagues to keep this in mind. 
Whether you look at the underlying bill, S. 150, considering the 
alternative Senator Alexander and I offered, also on behalf of other 
colleagues, and consider what Senator McCain offered and other 
proposals that may come to the floor, there are really four areas of 
contention. They include, No. 1, and maybe most important, what is the 
definition of what is tax exempt under the moratorium? I will say that 
again. The first area of contention may be the most important. It is 
the definition of what is tax exempt under whatever moratorium is being 
proposed.
  Other areas of contention, though I think not as important, include 
the duration of the moratorium. Should it be 15 months, 2 years, 3 
years, or 4 years? That is an area of contention. But it is not as 
critical as the definition of what is tax exempt under whatever 
moratorium is being proposed.
  The third area of contention is, what is the duration of the 
grandfather clauses for State and local governments which would be 
deprived of revenue that they currently collect?
  Finally, what is the application of the moratorium to traditional 
taxable voice communications, when those communications are routed over 
the Internet? Those are really the four areas of contention.
  If you look carefully at the proposal submitted by Senator McCain, 
the definition of what is tax exempt under his proposal looks a whole 
lot like that which is included in the bill authored by Senators Allen 
and Wyden. While the duration of the moratorium is a little different, 
it is shorter. That, in my judgment, is not really the key factor here. 
Of interest, though, is the duration of the grandfather clause. I think 
the moratorium under the McCain proposal is 4 years, but the 
grandfather clause protecting State and local governments is only for 3 
years. There appears to be, superficially, an effort in the McCain bill 
to address the issue of the application of the moratorium to 
traditional taxable voice communications when those forms of 
communications are routed over the Internet. On the one hand, the 
legislation appears to address, with some sensitivity, that concern. 
But on the other hand, it takes it back. We have to look at the entire 
language as it pertains to this provision.
  These are not easy issues to understand. I have spent a fair amount 
of time on them and they are not easy for me. For those of us not on 
the Commerce Committee and have not had the benefit of the extensive 
hearings, these are not easy issues. I have tried to come up to speed 
on these issues, and the rest of us in this body have struggled to come 
up to speed. I want to make sure we use the time before us this week, 
and maybe next week, to provide the kind of primer that I have been 
privileged to have for others of our colleagues, so that at the end of 
the day, when we vote, we are casting an informed vote.
  I yield back my time.
  The PRESIDING OFFICER. The Senator from New Hampshire.
  Mr. SUNUNU. Mr. President, I ask unanimous consent to be allowed to 
proceed for 5 minutes and that it not be charged to anyone's time.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. SUNUNU. Mr. President, I wanted to speak on this topic to address 
a couple points that have been made. I appreciate the sincerity and the 
interests of those who oppose this bill. They have opposed it 
vigorously and aggressively. But I believe very strongly, having seen 
this debate unfold, that this is not a question of their support for an 
alternative as much as it is their opposition to any legislation that 
protects the Internet from taxation.
  I draw that conclusion because we are debating a motion to proceed. 
If there was a genuine interest in bringing different alternatives to 
the floor and having a vote on those alternatives or amendments, we 
would not be in what is effectively a stonewalling scenario, delaying 
tactic, if you will, to

[[Page S4396]]

have to force a cloture vote on simply proceeding to the bill. There 
are a handful of people who vehemently oppose any legislation that 
protects the Internet from taxation. I think that is why this has taken 
so long to move forward.
  Some people do not support the underlying legislation, and it is 
certainly true that it would protect the Internet from taxation. But 
what it would not do is create special considerations for the Internet 
or broadband access. The legislation specifically says we will preempt, 
or prohibit, any discriminatory taxes, taxes that are specifically 
addressed to Internet service providers or broadband providers, but 
those businesses are still subject to State property taxes, sales 
taxes, capital gains taxes, and all of the other taxes that are levied 
broadly and uniformly within a State.
  Second, the suggestion was made that we are writing State law here, 
and that is simply wrong. This is an item and an interest and issue of 
interstate commerce. Just as the Federal Government exercises its 
prerogative to clarify legislation with regard to other interstate 
commerce activities, such as shipping, trucking, railroads, or 
aviation, the national and global Internet broadband communication 
system that has been established by entrepreneurs over the past 15 
years ought to, at some level, be protected from multiple and 
discriminatory regulations and taxation because of its importance to 
interstate commerce.
  We are writing Federal law here, not State law. I think it is a 
little bit disingenuous to suggest we are writing State law and to 
raise concerns about us writing State law, when in fact, when this bill 
is dispensed with--and I hope passed and signed into law--the very 
opponents of this bill who said they are worried about us writing State 
law will come right back to the floor of this Senate and support 
legislation to authorize States to collect taxes from businesses that 
do not reside or have facilities or domiciles in those States.
  Many opponents of this bill also want the Federal Government to 
authorize the collection of taxation from businesses outside of their 
States, which is not only an intervention in States' rights or State 
laws, but it is effectively an authorization of taxation without 
representation because the residents of those States will then have to 
remit taxes to other States in which they do not have a voice.
  We will have that debate and discussion. Some will support that 
process; some will oppose that process. But the very opponents of this 
bill who raise the concern about writing State law will come back and 
ask for that very power to be authorized and approved by the Congress 
because only Congress can give States that power.
  I think there is a little bit of a mixed message here looking for an 
argument that might seem to be useful in stopping or thwarting this 
bill, but it is an unfair argument and an improper argument.
  Some people think that cities, counties, and States should have the 
right and the ability to tax the Internet. They want those cities and 
States to tax the Internet. I do not think that is right for consumers, 
it is not right for America, it is not right for investment, and it is 
not right for broadband access or deployment. If they want to take the 
floor and say, We don't support Internet taxes, we are looking out for 
the interest of these cities and States, I say think again because the 
whole reason they are raising the issue of the unfunded mandate and 
supporting a point of order against this bill because of the so-called 
unfunded mandate is precisely because of those States that are 
collecting the tax today.
  If you support striking this bill on the unfunded mandate, then you 
are effectively standing up for those States, cities, towns, and 
counties that are taxing the Internet today. That should not be allowed 
to continue. It is not good for our economy, and it is certainly not 
the right incentive to create if we want to ensure broadband reaches 
throughout the country.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. SUNUNU. Mr. President, I ask unanimous consent that when the 
Senate resumes debate on the motion to proceed at 2:15 p.m., the debate 
time be allocated as follows: 20 minutes to Senator Alexander, 20 
minutes to Senator Dorgan, 20 minutes to Senator McCain. I further ask 
unanimous consent that the Senate now recess until 2:15 p.m., subject 
to the previous order.
  Mr. REID. Mr. President, reserving the right to object, what this 
does for Members and staff, so they fully understand, is this adds 20 
minutes to the debate. That is all it does. I ask my friend modify his 
unanimous consent request to allow me to speak as in morning business, 
and following my remarks, we will go into our normal Tuesday recess.
  Mr. SUNUNU. Mr. President, I have no objection to that request.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Nevada.

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