[Congressional Record Volume 160, Number 110 (Tuesday, July 15, 2014)]
[House]
[Pages H6228-H6235]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PERMANENT INTERNET TAX FREEDOM ACT
Mr. GOODLATTE. Madam Speaker, I move to suspend the rules and pass
the bill (H.R. 3086) to permanently extend the Internet Tax Freedom
Act.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 3086
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Permanent Internet Tax
Freedom Act''.
SEC. 2. PERMANENT MORATORIUM ON INTERNET ACCESS TAXES AND
MULTIPLE AND DISCRIMINATORY TAXES ON ELECTRONIC
COMMERCE.
(a) In General.--Section 1101(a) of the Internet Tax
Freedom Act (47 U.S.C. 151 note) is amended by striking ``
during the period beginning November 1, 2003, and ending
November 1, 2014''.
(b) Effective Date.--The amendment made by this section
shall apply to taxes imposed after the date of the enactment
of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Virginia (Mr. Goodlatte) and the gentleman from Michigan (Mr. Conyers)
each will control 20 minutes.
The Chair recognizes the gentleman from Virginia.
General Leave
Mr. GOODLATTE. Madam Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous materials on H.R. 3086, currently
under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Virginia?
There was no objection.
Mr. GOODLATTE. Madam Speaker, I yield myself such time as I may
consume.
The clock is ticking down on a key law that protects Internet
freedom. On November 1, 2014, a temporary moratorium on State taxation
of Internet access will expire.
In 1998, Congress temporarily banned State and local governments from
newly taxing Internet access or placing multiple or discriminatory
taxes on Internet commerce. With minor modifications, this ban was
extended three times with enormous bipartisan support. The most recent
extension passed in 2007.
If the moratorium is not renewed, the potential tax burden on
consumers will be substantial. The average tax rate on communications
services in 2007 was 13.5 percent, more than twice the average rate on
all other goods and services. To make matters worse, this tax is
regressive. Low-income households pay 10 times as much in
communications taxes as high-income households as a share of income.
The Permanent Internet Tax Freedom Act converts the moratorium into a
permanent ban on which consumers, innovators, and investors can
permanently rely by simply striking the 2014
[[Page H6229]]
end date. This legislation prevents a surprise tax hike on Americans'
critical services this fall. It also maintains unfettered access to one
of the most unique gateways to knowledge and engines of self-
improvement in all of human history.
This is not an exaggeration. During the 2007 renewal of the
moratorium, the Judiciary Committee heard testimony that more than 75
percent of the remarkable productivity growth that increased jobs and
income between 1995 and 2007 was due to investments in
telecommunications networks technology and the information transported
across them.
Everyone in Silicon Valley knows Max Levchin's story. He came to
America from the Soviet Union at age 16. His family had $300 in its
pocket, and he learned English by watching an old TV set he hauled out
of a dumpster and repaired. Ten years later, he sold PayPal, the well
known Internet payments platform he cofounded, for $1.5 billion.
That is the greatness of the Internet. It is a liberating technology
that is a vast meritocracy. It does not care how you look or where you
come from. It offers opportunity to anyone willing to invest time and
effort. That is precisely why Congress has worked acidulously for 16
years to keep Internet access tax-free. Now we must act again once and
for all.
The Permanent Internet Tax Freedom Act has 228 cosponsors. The
Judiciary Committee reported it favorably by a vote of 30-4.
Nevertheless, small pockets of resistance remain. They argue that the
Internet is no longer a fledgling technology in need of protection. But
it is precisely the ubiquity of the Internet that counsels for a
permanent extension. It has become an indispensable gateway to
scientific, educational, and economic opportunities. It is the platform
that turned Max Levchin from an impoverished immigrant into a
billionaire. The case for permanent tax-free access to this gateway
technology is stronger today than it ever has been.
Opponents also claim that this legislation will lower State revenues.
Seven States currently enjoy an exemption from the moratorium. This
legislation lets these grandfather clauses expire. But these
grandfathered States had no reasonable expectation of maintaining their
special status. The original moratorium included a grandfather clause
to give States that were then taxing Internet access some time to
transition to other sources of revenue. Some discontinued taxing
Internet access in support of a national broadband policy. For those
that still haven't, it has been 16 years, time enough to change their
tax codes. If the revenue grandfathered States now reap is truly
essential, it should be straightforward for the State to recoup it
through a different form of taxation.
It is important to note that the Permanent Internet Tax Freedom Act
does not address the issue of State taxes on remote sales made over the
Internet. It merely prevents Internet access taxes and unfair multiple
or discriminatory taxes on e-commerce, whether inside the taxing State
or without.
I would like to specifically thank Mr. Chabot, Ms. Eshoo,
Subcommittee Chairman Bachus, and Subcommittee Ranking Member Cohen for
their work on and support of this legislation.
This bipartisan legislation is about giving every American unfettered
access to the Internet, which is the modern gateway to the American
Dream. I urge all of my colleagues to support it.
I reserve the balance of my time.
Mr. CONYERS. Madam Speaker, I yield myself such time as I may
consume.
Ladies and gentlemen, the Internet Tax Freedom Act, enacted in 1998,
established a temporary moratorium on multiple and discriminatory
taxation of the Internet as well as new taxes on Internet access. This
moratorium is due to expire on November 1 of this year.
{time} 1245
Since 1998, Congress has extended the moratorium on three occasions.
Unfortunately, however, H.R. 3086, the Permanent Internet Tax Freedom
Act, responds to the impending expiration of the moratorium by making
it permanent and ending the act's grandfather protections for States
that impose such taxes prior to the act's enactment date.
The approach taken in H.R. 3086 is problematic for a number of
reasons. First, Congress, instead of supporting this seriously flawed
legislation, should really be focusing on meaningful ways to help State
and local governments, taxpayers, and local retailers. The House can do
that by addressing the remote sales tax issue.
In addition to extending the expiring moratorium on a temporary
basis, the House should take up and send to the Senate legislation such
as the Marketplace Fairness Act, which was mentioned earlier today on
the floor of the House by the distinguished gentleman from Vermont (Mr.
Welch). That bill incentivizes remote sellers to collect and remit
sales taxes as well as require States to simplify several procedures
that would benefit retailers. Such legislation would enable States and
local governments to collect the over $23 billion in estimated
uncollected sales tax each year.
The measure would also help level the playing field for local
retailers--who must collect sales taxes--when they compete with out-of-
State businesses that do not collect these taxes. Retail competitors
should be able to compete fairly with their Internet counterparts at
least with respect to sales tax policy. The House should do its part
and adjust the remote sales tax disparity before the end of this
Congress.
In addition, this legislation will severely impact the immediate
revenues for the grandfather-protected States and all States
progressively in the long term. The Congressional Budget Office, for
example, estimates that this bill will cost certain States ``several
hundred million dollars annually'' in lost revenues.
Indeed, the Federation of Tax Administrators estimates that the bill
will cause the grandfather-protected States to lose at least $500
million in lost revenue annually. These States include Texas, which
would lose $350 million a year in revenue; Wisconsin, which would lose
about $127 million per year; Ohio, which would lose about $65 million
per year; and South Dakota, which would lose about $13 million per
year.
Further, this bill would become effective during the mid-cycle for
the grandfather-protected States. Because these States have to balance
their State budgets, they will need to cut spending or raise taxes to
balance their budgets.
Should this become law, State and local governments will have to
choose whether they will cut essential government services--such as
educating our children, maintaining needed transportation
infrastructure, and providing essential public health and safety
services--or shift the tax burden onto other taxpayers through
increased property, income, and/or sales taxes.
Meanwhile, the Center on Budget and Policy Priorities estimates that
the permanent moratorium will deny the non-grandfathered States almost
$6.5 billion in potential State and local sales tax revenues each year
in perpetuity. H.R. 3086 will burden taxpayers and services while
excluding an entire industry from paying their fair share of taxes.
Finally, the bill ignores the fundamental nature of the Internet. The
original moratorium was intentionally made temporary to ensure that
Congress, industry, and State and local governments would be able to
monitor the issue and make adjustments where necessary to accommodate
new technologies and market realities.
The act was intended as a temporary measure to assist and nurture the
fledgling Internet that back in 1998 was still in its commercial
infancy. Yet this bill is oblivious to the significantly changed
environment of today's Internet.
The bill's supporters continue to believe that the Internet still is
in need of extraordinary protection in the form of exemption from all
State taxation. But the Internet of 2014 is not the same as its 1998
predecessor. Today's Internet is considerably different in terms of
both the types of accessibility and the accompanying technology.
The Internet then was access primarily a slow, unreliable dial-up
service. But now technology has provided many types of methods to
access the Internet, and we can anticipate that
[[Page H6230]]
the Internet and its attendant technology will continue to evolve. By
permanently extending the tax moratorium, however, Congress severely
limits its ability to revisit it and to make any necessary adjustments.
Simply put, a permanent moratorium is unwise, and so I urge my
colleagues to think about this carefully and oppose H.R. 3086.
Madam Speaker, I reserve the balance of my time.
Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to
yield 2 minutes to the gentleman from Ohio (Mr. Chabot), a member of
the Judiciary Committee.
Mr. CHABOT. Madam Speaker, I would like to thank the gentleman from
Virginia (Mr. Goodlatte) for his leadership on this bill.
Madam Speaker, I rise today in support of H.R. 3086, a bill that
would make permanent the Internet Tax Freedom Act, which was passed a
number of years ago, around the time when I came to Congress the first
time.
The Internet is an essential part of our everyday lives. Americans
use it to run small businesses, to do research, apply for jobs, listen
to music, communicate with friends and family, check the weather and
traffic, and a whole bunch of things. It is really a part of virtually
all Americans' lives nowadays.
Madam Speaker, since 1998, Congress has made sure that access to the
Internet remains tax-free. Unfortunately, this protection expires in
November, as has been mentioned, at which point taxes will go up on
every American who wants to get online.
Now is the time to make this policy of having access to the Internet
free of taxes permanent. Now is the time to protect Internet access.
Madam Speaker, the Internet is an essential component of our economy.
It drives innovation, job creation, and has resulted in a higher
standard of living for virtually every American. The bill before us
today provides certainty to Americans by making the current law of the
land permanent and protecting access to the Internet from new taxes.
Madam Speaker, there is common ground in this Chamber today. We all
agree that the Internet is an essential part of our lives and an
incredibly powerful tool for communication, education, and job
creation. Let's not make accessing the Internet more costly and more
difficult.
Madam Speaker, the Permanent Internet Tax Freedom Act protects all
Americans' access to the Internet from new taxes, and I urge my
colleagues to support this important bill.
Mr. CONYERS. Madam Speaker, I am pleased now to yield 1 minute to the
gentlewoman from California, Ms. Zoe Lofgren, a senior member of the
Judiciary Committee.
Ms. LOFGREN. Madam Speaker, after nearly two decades, it does make
sense to make this moratorium permanent. The moratorium is one of the
reasons for the huge growth in the digital economy. The Internet
wouldn't be what it is today without affordable Internet access. And,
by the way, this tax relief is not to companies. It is to individuals
who access the Internet.
Madam Speaker, I applaud the Judiciary Committee for ensuring that
the moratorium is made permanent before it expires. But the work on
discriminatory taxes is not done. Wireless access to the Internet is
still vulnerable to discriminatory taxation. The average tax is 17.2
percent--it goes as high as 25 percent in some States--and a
disproportionate number of low-income Americans access the Internet
only through wireless devices.
We have the Wireless Tax Fairness Act that I introduced. It has 220
cosponsors. So, in addition to voting for this moratorium on Internet
taxation, I would encourage my colleagues to ask for a vote on the
Wireless Tax Fairness Act that, after all, is sponsored by a majority
of this House.
Mr. GOODLATTE. Madam Speaker, I want to thank the gentlewoman from
California and the gentleman from Ohio (Mr. Chabot) for their
leadership on this issue.
Now I would like to yield 1 minute to the gentleman from Indiana (Mr.
Bucshon) for his statement and thank him for his leadership on this
issue as well.
Mr. BUCSHON. Madam Speaker, I rise in strong support of H.R. 3086,
the Permanent Internet Tax Freedom Act. I believe that this permanent
extension is necessary to ensure the Internet remains accessible for
all Americans.
Madam Speaker, the Internet economy is growing and changing every
day, and this pro-growth legislation will support the vibrant online
marketplace of goods and ideas by preventing State and local tax
policies from creating barriers to access.
Americans use the Internet every day to communicate, to work, and to
get an education. They shouldn't have to pay an unnecessary and unfair
tax to do so.
Madam Speaker, I thank Chairman Goodlatte for his work on this
important bipartisan bill. I urge all my colleagues to vote ``yes.''
Mr. CONYERS. Madam Speaker, it is my pleasure now to yield 3 minutes
to the gentlewoman from California, Ms. Judy Chu, a distinguished
member of the House Judiciary Committee.
Ms. CHU. Madam Speaker, I rise to speak in opposition to H.R. 3086 in
its current form.
As a former member of the Board of Equalization, which is
California's elected statewide tax board, and as a member of the
Judiciary Committee, I support a temporary--not a permanent--extension
of the current moratorium.
Madam Speaker, when the Internet was in its infancy, Congress
rightfully put the moratorium in place to outlaw any burdensome tax
regulations on Internet access. The Internet has grown tremendously
since then, and it will undoubtedly evolve over time. As it evolves,
Congress should be called upon to revisit these issues. But I believe
that a permanent moratorium would make reexamination of technology and
market realities very difficult in the future.
A permanent moratorium would impede a State or local government's
ability to make taxing decisions that are right for them. This is the
message I have heard from States, counties, and cities. Take, for
example, the city of Pasadena, which is the largest city in my
district. Pasadena does not have any plans to impose taxes and fees on
Internet access. However, it has concerns with a permanent extension
that could shut the doors years down the line.
In fact, Madam Speaker, the National League of Cities, the League of
California Cities, and the California State Association of Counties all
oppose this bill. They are opposing it because they see a dramatic
decline of sales tax revenue due to the increase in online sales that
are not taxed, and that is why I also support the Marketplace Fairness
Act. It would require large businesses to collect online sales tax.
I can tell you that this makes a dramatic difference in whether local
government has the funds to fill the potholes and clean the streets.
Since enacting its remote sellers sales tax law, my home State of
California brought in $260 million in its first year of collection.
This is an improvement, but the potential for future growth is even
greater, with a little over $1 billion of use taxes still to be
collected from remote sales in California alone.
{time} 1300
With this act, we can stop the closing of businesses on Main Street
and have a fighting chance to keep the jobs that they provide our
communities. Keeping the Internet tax moratorium temporary helps in
this fight. A short-term moratorium strikes the right balance between
respecting the rights of local taxing authority and the ability for the
Internet to grow.
Congress must reserve the flexibility to examine the Internet Tax
Freedom Act from time to time. That is why I urge a ``no'' vote on this
bill.
Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to
yield 2 minutes to the gentleman from Georgia (Mr. Collins), a member
of the Judiciary Committee and a leader on technology issues.
Mr. COLLINS of Georgia. Madam Speaker, I am pleased to rise in
support of H.R. 3086, the Permanent Internet Tax Freedom Act, because I
support ensuring that Internet access remains free from predatory taxes
imposed by State and local governments looking to fill their coffers at
the expense of their residents.
I think we just saw why this bill is needed because there are two
different
[[Page H6231]]
philosophies. Especially for those who support this legislation, this
is an area where we want to continue to have the Internet free,
especially as the gentlelady from California (Ms. Lofgren) said, that
this goes to the user, and I think that is one thing that we need to
understand here.
This legislation ensures that no person is discouraged from accessing
the Internet and experiencing its transformative power. The Internet is
a tool for democracy and education. It is an outlet for free expression
and the megaphone for those who were previously ignored. It connects
individuals and is a means for creative entrepreneurship.
The Internet allows for all boundaries to be transcended--cultural
religious, geographical, and lingual. Our economy, the expressions of
our freedom, and our role as a beacon of hope and democracy are all
enhanced by free and open access to the Internet.
I want to applaud the work of the chairman in ensuring this Congress
is doing everything in its power to promote an open Internet that can
be accessed without predatory taxes and fees.
Again, this is about the people that we represent, moms and dads who
have the dream of a better America where they are making it for their
kids and not being imposed upon by government simply looking to fill
their coffers at the expense of citizens.
Mr. CONYERS. Madam Speaker, I am pleased to yield 2 minutes to the
gentlewoman from California (Ms. Eshoo).
Ms. ESHOO. Madam Speaker, I thank the distinguished ranking member of
the Judiciary Committee and my friend for yielding this time to me.
Madam Speaker, I rise in strong support today of this legislation,
the Permanent Internet Tax Freedom Act. This is a bill that has been
stated before that will permanently eliminate any barriers created by
the taxation of Internet access.
The current tax moratorium is going to expire shortly on November 1,
which would then open the doors to taxation on Internet access. I think
it is very important to make this very clear. This really protects
consumers because the taxation would fall to them and their access to
the Internet.
This issue should not be confused with the issue of sales taxes
collected by jurisdictions and the discrepancies between Main Street
and what is purchased on the Internet. That is not what this issue is
about. This is clearly, I think, a consumer issue.
Now, whether for communication, commerce, business, education,
research, the Internet is an integral part of the everyday lives of the
American people and around the world as well, so we need to encourage
its usage. We need to protect that usage, and I think we need to do
everything we can to ensure that the access to the Internet is
universal.
This legislation has widespread support in the House. It has been my
pleasure to work with Chairman Goodlatte as the Democratic lead on this
effort. It has 228 bipartisan cosponsors in the House--I think that is
the most eloquent statement about it--and there are 51 bipartisan
cosponsors in the Senate. It has strong support of the communications,
Internet, and e-commerce communities.
I think this is an affordability issue. It is a consumer issue. It is
sensible. It is bipartisan, and I believe that it deserves the full
support of the House.
Mr. GOODLATTE. Madam Speaker, I want to thank the gentlewoman from
California (Ms. Eshoo) for her leadership on this issue.
Madam Speaker, I yield 2 minutes to the gentleman from Texas (Mr.
Farenthold), a member of the Judiciary Committee.
Mr. FARENTHOLD. Madam Speaker, I am here to speak in strong support
of Internet tax freedom. I am a believer in the power of the Internet.
It means a lot for America. It means a lot for the world.
Because of our commitment to keeping Internet access largely
unencumbered by taxes and government control, we have created something
really cool--a dynamic market for goods and services and, most
importantly, a marketplace for ideas.
Our rights to freedom of speech and freedom of association have grown
as the Web opens new outlets for expression in advocacy. Whether it is
a group of citizens organizing to petition the government for a redress
of their grievances or somebody looking for the love of their life on
an Internet dating site, the Internet is there, but we cannot get
comfortable.
We cannot forget that the power to tax--and might I add the power to
overregulate--is the power to destroy. That is why I am up here
supporting the Permanent Internet Tax Freedom Act, and I thank Chairman
Goodlatte and our numerous cosponsors on both sides of the aisle. This
is good for America and good for the world.
Please join me in voting ``yea.''
Mr. CONYERS. Madam Speaker, I reserve the balance of my time.
Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to
yield 1 minute to the gentleman from Texas (Mr. Barton).
Mr. BARTON. Madam Speaker, I thank the gentleman from Virginia, the
full committee chairman, and I would like to enter into a little bit of
a colloquy.
I am an original cosponsor. I certainly want to prevent taxation of
the Internet, but as you know, I represent one of the 36 districts in
Texas, and in my district, my largest city is the city of Arlington,
and they currently collect approximately $1 million a year in revenue
from connection fees to the Internet in their city limits, and under
this bill, that would be prohibited.
I had been led to believe that we were going to have the same
grandfather provision that we have had for the last 16 years.
Apparently, that is not the case.
Could the chairman enlighten me why we are not grandfathering
existing local collection fees, and what might be done in conjunction
with the other body if and when this goes to conference?
I yield to the chairman.
Mr. GOODLATTE. First of all, I thank the gentleman for his question,
and I and others have been clear that we think these grandfather
clauses should expire. When they first were adopted 16 years ago, it
was with the intention that they be phased out. Of course, they have
had 16 years, and we would like to have them do that.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. GOODLATTE. Madam Speaker, I yield myself an additional 30
seconds.
Our goal is to have a clean, permanent moratorium signed into law as
promptly as possible. If the gentleman from Texas can engineer a
phaseout consistent with that goal, I am certainly willing to work with
him in that objective.
Mr. BARTON. Will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Texas.
Mr. BARTON. If the gentleman will allow me to be part of the process
and inform me at such a time that it would be possible to offer an
amendment or to work with you and the other body, I would certainly be
more than willing to do that.
Mr. GOODLATTE. As this measure is considered in the Senate and then
in conference between the House and Senate, we would look forward to
working with you.
Mr. BARTON. I thank the gentleman.
Mr. CONYERS. Madam Speaker, I yield 3 minutes to the distinguished
gentlewoman from Texas (Ms. Jackson Lee).
Ms. JACKSON LEE. Madam Speaker, let me thank the ranking member and
the chairman of the full committee. We seek opportunities on the
Judiciary Committee to compromise and work together. This legislation
would have been an excellent opportunity to be able to work together.
I appreciate the position of my chairman, but I know that Mr. Conyers
and myself worked on a compromise that I think and hope that, as we
ultimately watch this bill make its way through the process, that we
will be able to draw upon the Conyers-Jackson Lee compromise that makes
this Internet Tax Freedom Act extended for a certain period of time.
We understand that there are frustrations on all sides. This bill
would make permanent the Internet Tax Freedom Act, which imposes a
moratorium on taxing Internet services, but as written would delete the
existing grandfather clause which has been in place since the original
passage of the bill in 1998 that allowed a number of States with unique
circumstances, at the State and
[[Page H6232]]
local level, to impose tax on Internet access services.
Now, we can suggest that the present bill is a laissez-faire bill.
Let me say that there is another principle of states' rights, and I
have often heard it from my friends on the other side of the aisle.
When it is for good, we should look at it as a reasoned answer to the
uniqueness of the 50 States.
The Conyers-Jackson Lee amendment preserves the grandfather clause,
so that Texas and other States could raise this very valuable revenue,
but more importantly, it retains the moratorium for 4 years for us to
be able to address this question in a fair manner. We offered this in
the full committee, and there are many who support this compromise
beyond the States that would be impacted.
A letter that I have received from the director of Citizens for Tax
Justice writes in opposition to making permanent the Federal law--and I
will include the letter for the Record--by banning State and local
governments from subjecting Internet access to the same taxes they
impose on other goods and services.
This letter goes on to say that it was decided that this infant
industry needed special protection from taxes. Now, we are beyond that,
but we are harming States.
I just want to use, as an example, the State of Texas will lose $280
million; cities will lose $51 million; transit, $18 million; special
districts, $4 million; a total of $358 million. When we are putting
more burdens on States, we need to not remove an opportunity where they
can raise revenue innocently and in good conscience.
The SPEAKER pro tempore. The time of the gentlewoman has expired.
Mr. CONYERS. I yield an additional 15 seconds to the gentlelady.
Ms. JACKSON LEE. Why are we barring our States from doing their good
due diligence, providing resources--needed resources--for schools and
infrastructure and health care?
So I am well aware of the arguments on the other side, but listen to
our arguments. We are not stopping the taxation issue; we are putting a
moratorium for 4 years, so that we can reassess it.
I ask my colleagues to consider that as they consider this
legislation. I rise in opposition to this legislation.
Madam Speaker, the bill would make permanent the Internet Tax Freedom
Act, which imposes a moratorium on taxing Internet services, but, as
written, would delete the existing grandfather clause that has been in
place since the original passage of the bill in 1998 that has allowed
Texas at the state and local level to impose tax on Internet access
services.
At the markup in the Judiciary Committee, Ranking Member Conyers and
I offered an amendment to extend the moratorium and the grandfather
protections for four years. Unfortunately it failed on a primarily
party line vote in the Committee.
Now, the authors of this bill would deem to tell Texas what it can do
or not do regarding its tax policy. At the heart of the notion of
federalism is the right of states to legislate matters within their own
jurisdiction.
The lines of authority between states and the federal government are,
to a significant extent, defined by the United States Constitution and
relevant case law.
The Constitution does, however, provide certain specific limitations
on that power. In this instance, states would be prohibited from taxing
Internet access.
H.R. 3086 would make the moratorium permanent but it would not extend
the grandfather protections on which seven states, including Texas,
still rely on.
The Conyers-Jackson Lee amendment preserved this ``grandfather
clause'' so that Texas could continue to raise this very valuable
revenue.
And the Conyers-Jackson Lee amendment retained the moratorium on
taxation for four years instead of making it permanent.
Unfortunately, for Texas, this legislation would delete the existing
grandfather clause that has been in place since the original passage of
the bill in 1998 that has allowed Texas at the state and local level to
impose tax on Internet access services.
The original intent of ITFA in 1998 was to encourage development of
the Internet, which at the time was a new technology. The Internet is
no longer an infantile industry.
Madam Speaker, as a practical matter this justification is no longer
applicable given the substantial advancements in technology that have
occurred since 1998.
Bundling non-Internet based services with Internet services creates a
loophole for industry to avoid taxes altogether.
Again, the Conyers-Jackson Lee amendment would have preserved this
``grandfather clause'' so that the state can continue to raise this
very valuable revenue. As written the bill raises significant
federalism concerns and essentially tells Texas what to do--nobody
messes with Texas.
I urge my colleagues to vote for fairness and judicial economy by
opposing this legislation in its current form.
H.R. 3086: Effect on Texas
State: $280 million
City: 51 million
Transit: 18 million
County: 5 million
Special districts: 4 million
Total: $358 million (per year)
____
July 14, 2014.
Hon. Sheila Jackson Lee,
House of Representatives,
Washington, DC.
Dear Representative Jackson Lee: Citizens for Tax Justice
writes in opposition to making permanent the federal law
banning state and local governments from subjecting Internet
access to the same taxes that they impose on other goods and
services. This ban was first enacted with the ``Internet Tax
Freedom Act'' (ITFA) in 1998 and extended several times since
then.
Both the ``Permanent Internet Tax Freedom Act'' (H.R. 3086)
and ``Internet Tax Freedom Forever Act'' (S. 1431) would make
this ban permanent, thereby forever treating the Internet
differently from other goods and services by barring state
and local governments from deciding for themselves whether or
not to tax it.
In 1998 Congress decided that the internet was an ``infant
industry'' needing special protection from the taxes that
state and local governments impose on other goods and
services. Today, the infant of 1998 has the keys to the
American economy, yet lawmakers are still coddling it by
proposing to make the tax ban permanent.
Congress should allow the ban to expire as scheduled on
November 1.
Sincerely,
Robert S. McIntyre,
Director, Citizens for Tax Justice.
____
National Association of Counties, National League of
Cities, U.S. Conference of Mayors, International City/
County Management Association, Government Finance
Officers Association, National Association of
Telecommunications Officers and Advisors,
June 17, 2014.
Dear Representative Jackson Lee: On behalf of local
governments across the nation, our organizations want to
express our opposition to H.R. 3086, the ``Permanent Internet
Tax Freedom Act (ITFA).'' Instead, as the expiration date for
the current moratorium on taxing Internet access approaches,
and Congress considers changes to ITFA, our organizations
recommend a shorter-term extension of ITFA, as a sensible
solution that respects state and local taxing authority. In
addition, any extension must maintain both the long-standing
grandfather provisions that preserve existing state and local
revenues, as well as certain general business taxes that were
not intended to be part of the moratorium.
Over the next several years, most of the services known as
telecommunications and cable services will transition to
broadband. As a result, the scope of the services that ITFA
shields from state and local taxation will greatly expand,
even if ITFA's language remains unchanged. In light of this
substantial expansion and the need to protect the fiscal
strength of state and local governments, we encourage you to
support a temporary extension of ITFA, rather than making it
permanent, as H.R. 3086 would do. That would allow time to
assess more fully (1) the transition from telecommunications
and cable services to ITFA-protected broadband services; (2)
its impact on state and local governments' tax bases and
revenues; and (3) its impact on the relative tax obligations
of industry sectors to which ITFA does not apply. A temporary
extension of ITFA ensures that Congress has the opportunity
to revisit the moratorium to correct any unintended
consequences.
For these reasons, our organizations urge you to support a
fair, short-term extension of the Internet tax moratorium. We
look forward to assisting you and your staff in these
efforts.
Sincerely,
Matthew D. Chase,
Executive Director, National Association of Counties.
Clarence E. Anthony,
Executive Director, National League of Cities.
Tom Cochran,
Executive Director, U.S. Conference of Mayors.
Robert J. O'Neill,
Executive Director, International City/County Management
Association.
Jeffrey L. Esser,
Executive Director, Government Finance Officers
Association.
[[Page H6233]]
Stephen Traylor,
Executive Director, National Association of
Telecommunications Officers and Advisors.
____
[From the Hill, July 14, 2014]
Congress Poised To Slam States on Internet Access Charges
(By Michael Mazerov)
The House is slated to vote this week on a bill to
permanently bar states from applying their normal sales taxes
to the monthly charges that households and businesses pay
companies like Comcast or Verizon Wireless for Internet
access--potentially costing states roughly $7 billion a year
in potential revenue.
For starters, the bill would strip Hawaii, New Mexico,
North Dakota, Ohio, South Dakota, Texas, and Wisconsin of at
least $500 million in annual state and local revenue from
their existing taxes on these charges.
Beyond costing states the $7 billion a year in potential
revenue to support education, healthcare, roads, and other
services, the bill would violate an understanding between
Congress and the states dating back to the 1998 Internet Tax
Freedom Act (ITFA): that any ban on applying sales taxes to
Internet access charges would be temporary and not apply to
existing access taxes.
Enacted when Internet commerce was still in its infancy,
ITFA sought to balance Congress' desire to encourage
development of the Internet against states' and localities'
need to finance essential services. Thus, it imposed only a
temporary ``moratorium'' on new taxes on Internet access and
protected existing taxes through a ``grandfather'' clause.
Congressional extensions of ITFA in 2001, 2004, and 2007
maintained those two key features. This latest ITFA
legislation, though, eliminates both--the first time Congress
has seriously considered doing so.
Every state would feel the impact. The seven states with
taxes would start losing revenues this year, forcing some to
cut services or raise other taxes to keep their budgets
balanced. The remaining states would continue to lose as much
as $6.5 billion in potential revenue each year from their
inability to tax Internet access charges.
The forgone revenue would likely grow substantially over
time as more people sign up for Internet access and current
subscribers trade up to faster, more expensive, service.
The House bill would have other, unintended effects.
Eliminating the grandfather, for example, would put at risk
numerous other state and local taxes that Internet access
providers pay on the things they buy in order to provide
Internet service, such fiber-optic cable, or gasoline for
their vehicles. Almost all of these taxes existed before
1998, so the grandfather protects them from legal challenge.
But if Congress eliminates the clause, Internet access
providers could challenge these taxes in court as indirect
taxes on access service and therefore voided by ITFA.
The bill's proponents argue that banning taxes on Internet
access charges is necessary to close the ``digital divide''
between low- and high-income households. Keeping monthly
Internet access as inexpensive as possible by exempting it
from roughly $2-$4 in taxes will encourage low-income people
to subscribe and service providers to extend broadband
service to low-income neighborhoods, they claim.
But there's scant evidence to support this argument.
Studies haven't found a significant difference, in either the
share of households with broadband or the availability of
broadband service, between states that tax access and those
that don't. And numerous studies find that Internet access
costs are a smaller cause of the ``digital divide'' than
unfamiliarity with computers and the Internet and a belief
that the Internet is irrelevant to the person's life.
In fact, a permanent ITFA would likely impede the goal of
getting more people online--especially low-income people who
don't have Internet at home. Many people first use the
Internet in public schools, libraries, and community centers,
all of which rely on state and local tax revenue. The less
state and local revenue that such institutions receive, the
less they could provide Internet service.
Some in Congress argue that states and localities should
accept a permanent ITFA as part of a deal that would also
include enactment of the Marketplace Fairness Act, which
would empower states to require large Internet merchants to
charge sales tax on all taxable sales. Any extension of the
moratorium, however, must include the grandfather clause.
Eliminating that clause would threaten to invalidate many
existing taxes on Internet access providers, as noted
earlier.
Congress' proper course would be to end, not extend, the
ban on state and local taxation of Internet access. The
Internet is no longer an infant industry needing protection
from taxes that apply to other services for which Internet
access is a close substitute. Cable television service is
widely taxed, for example, but if someone decides to pay
Verizon $50 a month so that they can stream Netflix to their
TV, ITFA bans the taxation of the access charge. This unequal
treatment doesn't make sense.
Even if Congress wants to renew ITFA, surely the terms
should be no more favorable than in 1998--a temporary
exemption for taxes on access service, with pre-1998 taxes
still grandfathered--and must include the Marketplace
Fairness Act, which the Senate has passed with broad
bipartisan support.
Mr. GOODLATTE. Madam Speaker, it is my pleasure to yield 3 minutes to
the gentleman from Utah (Mr. Chaffetz), who has been a steadfast
proponent of Internet tax freedom.
Mr. CHAFFETZ. Madam Speaker, I thank Chairman Goodlatte for bringing
this piece of legislation forward, and I appreciate the bipartisan
manner in which it is done.
The Internet is working. It is working. It is one of the great things
about our economy. It is one of the great things that is happening in
this country. It is creating jobs, and it is creating excitement with
the younger generation. It is providing for innovation. We are leading
the world in what we are doing.
Access is not necessarily available to everybody. We have people from
inner cities to Indian reservations to rural communities to those who
are just seeking to try to be part of this community and have access
and get information and be informed and be educated and allowed to
engage in commerce.
Since 1998, this has been the position of the United States of
America, and if you look at the Internet, it truly is interstate
commerce. We can be standing side by side, right next to each other,
and you can send a tweet or a Facebook message or an email, whatever
sort of electronic communication, and it literally can zoom around the
country--hopefully through Utah--and then back to the person standing
right next to you.
{time} 1315
But in order for all that to work, the magic of the Internet and all
that to work, it needs to be unimpeded. It needs to keep those costs as
low as possible to ensure the maximum amount of access so those in our
communities who are still trying to get in there, from our seniors, the
rural communities, again, to our inner cities.
The wisdom that happened in 1998 has been reaffirmed multiple times.
Only two people in the history of this piece of legislation have ever
voted against this piece of legislation. The majority of the House of
Representatives are cosponsors on this piece of legislation that is
before us today. So, I urge its passage.
There are some other pieces of legislation that I would like the body
to look at. I think we do have to deal with the remote sales tax
issues. I think there are transactions that happen remotely. I would
like to see parity in that--another topic for another day, but
something that needs to be addressed sooner rather than later.
The issue before us today is are we going to allow the freedom for
Internet access to happen at the lowest cost possible without the
government coming in and thinking, oh, this is another bucket of funds
that we can just tax on. The consequence is we would have less people
involved and engaged. Companies are going to take care of this, but
individuals who are trying to access the Internet, we need to keep
those costs as low as possible.
Think about your telephone bill. We don't want that to be lit up. You
know how that is lit up with all these different taxes. We don't want
the Internet to be lit up like a Christmas tree with all these
different taxes. It is interstate commerce. It is the purview, I think,
of the United States Congress. That is why this bill is so needed. That
is why I proudly joined as a cosponsor and why I urge its passage
today.
And again, I thank Chairman Goodlatte and Members on both sides of
this body for bringing this bill forward. I urge its passage.
Mr. CONYERS. Madam Speaker, I yield myself such time as I may
consume.
I want to conclude by pointing out that we might be going in the
wrong direction with this misguided legislation. It will devastate
State revenues, especially those States currently protected by the
grandfather clause, and force State governments to eliminate essential
governmental programs and services and burden taxpayers.
Furthermore, 11 national organizations are concerned with the fiscal
impact on our State and local governments: the National Governors
Association, the National Association of
[[Page H6234]]
Counties, the National League of Cities, the U.S. Conference of Mayors,
and 15 other labor organizations: the AFL-CIO, AFSCME, the American
Federation of Teachers, the UAW, SEIU. Fifteen national labor
organizations and 11 national, local, and State government
organizations all join with us who are urging my colleagues to reject
this seriously flawed legislation.
Please join us in making sure that we, the people, prevail on this
measure in the House of Representatives.
I yield back the balance of my time.
List of Opponents of H.R. 3086
There is a long list of opponents of this bill. These
opponents are concerned with the fiscal impact on our state
and local governments. Opponents include such state and local
groups as--the National Governors Association, the National
Association of Counties, the National League of Cities, the
U.S. Conference of Mayors, the Federation of Tax
Administrators, the League of California Cities, the
California State Association of Counties, the International
City/County Management Association, the Government Finance
Officers Association, the National Association of
Telecommunications Officers and Advisors, and the Multistate
Tax Commission.
Also opposing this bill are labor groups such as--the
American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO), the American Federation of State,
County and Municipal Employees (AFSCME), the American
Federation of Teachers (AFT), the American Federation of
Government Employees (AFGE), the Communication Workers of
America (CWA), the Department for Professional Employees
(DPE), the International Association of Fire Fighters (IAFF),
the International Federation of Professional and Technical
Engineers (IFPTE), the International Union of Police
Associations (IUPA), the National Education Association
(NEA), the Services Employees Union International (SEIU), the
United Auto Workers (UAW), and the United Food and Commercial
Workers International Union (UFCW).
Mr. GOODLATTE. Madam Speaker, I yield myself the balance of my time.
Madam Speaker, passing the permanent Internet Tax Freedom Act would
increase access all across America for millions of Americans,
especially lower-income Americans, increase growth and increase
opportunity, increase jobs in this country.
Now is the time to act. A permanent ban on taxation of Internet
access is crucial for protecting the future of our digital economy. If
the ban on Internet access taxes is not renewed by November 1, the
potential tax burden on Americans will be substantial. It is estimated
that Internet access tax rates could be more than twice the average
rate of all other goods and services. Low-income households could pay
ten times as much as high-income households as a share of income.
The last thing that Americans need is another bill on their
doorsteps. A tax on Internet access would burden millions of Americans
who rely on the Internet to conduct business, communicate, educate, and
live.
Over the past 14 years, Congress has extended ban after ban on States
taxing Internet access. The measures have been met with enormous
bipartisan support. Only five ``no'' votes were cast in the history of
these renewals in the House and the Senate.
As price rises, demand falls. If the ban lapses, State
telecommunications taxes could take effect, and those rates are already
too high. Former White House Chief Economist Austan Goolsbee estimated
that a tax that increased the price of Internet access by 1 percent
would reduce demand for Internet access by 2.75 percent.
The permanent Internet Tax Freedom Act merely prevents Internet
access taxes and unfair multiple and discriminatory taxes on e-
commerce. It does not tackle the issue of Internet sales taxes.
Madam Speaker, this is a great issue for the Congress to move forward
on in a bipartisan fashion that will help to create jobs and economic
growth and foster continued greater access of the Internet. After all,
isn't that what we want? We want every American to have opportunity to
access this in the most affordable way so that they can have the
educational opportunities, the employment opportunities, the
recreational opportunities, the social opportunities that are created
by the Internet.
I urge my colleagues to support this legislation, and I yield back
the balance of my time.
Ms. DelBENE. Madam Speaker, several weeks ago, I joined my colleagues
on the House Judiciary Committee in supporting the Permanent Internet
Tax Freedom Act when it was reported out of committee by a vote of 30
to 4.
It is clear that there is broad bipartisan agreement that we should
not allow the current moratorium on Internet access taxes to expire.
While I joined my colleagues in moving this legislation forward to
provide clarity and certainty in this area, I also have serious
concerns that Congress has failed to resolve another critical issue
related to state taxation and the Internet: e-fairness and the current
exemption for state and local sales tax collection for online
purchases.
Since the Internet Tax Freedom Act first passed in 1998, Congress
has made far too little progress in developing a coherent policy that
addresses the intersection of state taxation and the Internet. Aside
from extending this tax moratorium three times since it first passed,
Congress has yet to pass legislation like the Marketplace Fairness Act
or similar legislation that would allow states to tax e-commerce sales
at the same rate as sales from brick-and-mortar stores. Instead we have
seen states attempting to set a patchwork of policies that simply
doesn't work. A federal solution is needed from Congress.
In the meantime, adoption of the Internet has exploded since ITFA
first passed in 1998, and today, 75 percent of American households
subscribe to broadband Internet services, and hundreds of billions of
dollars worth of commerce is done over the Internet annually. The
Census Bureau recently announced that total e-commerce sales for 2013
were estimated to have increased nearly 17 percent (16.9 percent) from
2012, totaling $263 billion in 2013.
Given the importance of the Internet to consumers and to economic
growth, it is Congress's responsibility to determine a federal approach
to e-fairness, and I am disappointed that we are simply looking at this
bill in isolation without regard to the other issues related to
Internet and taxation.
While I support an extension of the current moratorium on Internet
access taxes, I believe we cannot move this legislation forward while
also continuing to allow the Internet to serve as a sales tax loophole.
The issue of e-fairness is a related issue that we must commit to
tackling, and I know there is bipartisan support for doing so.
This is a critical jobs issue that I continue to hear about from
small businesses in my district.
It is the role of Congress to ensure that our nation's tax policies
and regulation don't unfairly burden one business model over the other.
Yet, brick and mortar businesses can't fairly compete right now because
states do not have the ability to efficiently collect the taxes owed
from online purchases. Only Congress can fix this and I believe we must
continue to move forward on legislation like the Marketplace Fairness
Act.
I hope that House Leadership does not consider our work on Internet
tax policy complete after voting today on the Permanent Internet Tax
Freedom Act and I look forward to continuing to work with members on
both sides of the aisle to work to find a solution to move forward on
both ITFA and e-fairness legislation like the Marketplace Fairness Act
before the end of this year.
Ms. EDDIE BERNICE JOHNSON of Texas. Madam Speaker, I rise today in
support of H.R. 3086, the Permanent Internet Tax Freedom Act (ITFA). I
want to commend my colleagues on both sides of the aisle for bringing
this legislation to the floor today.
H.R. 3086 which permanently extends the moratorium on Internet access
taxes and prohibits discriminatory taxation of internet commerce has
228 bi-partisan cosponsors. Originally passed in 1998 and extended
three times since with broad bi-partisan support. H.R. 3086 encourages
the flow of commerce and information over the internet and improves our
nation's ability to compete in the global economy.
The original intent of this law was to protect and nurture what once
was a fledgling industry. Today, access to the internet has become the
engine of our 21st century global economy. The internet is one the
primary drivers of U.S. economic growth innovation and productivity and
it is indispensable for finding jobs and accessing education and health
care resources. Permanently extending the ITFA protects citizens from a
fee to access this indispensable tool while continuing to encourage the
growth of a key driver for American global competitiveness.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Virginia (Mr. Goodlatte) that the House suspend the
rules and pass the bill, H.R. 3086.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
[[Page H6235]]
____________________