[Congressional Record (Bound Edition), Volume 149 (2003), Part 20]
[Senate]
[Pages 28005-28021]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   INTERNET TAX NONDISCRIMINATION ACT

  Mr. McCAIN. Madam President, pursuant to the order of October 30, 
2003, I ask unanimous consent that the Senate proceed to the immediate 
consideration of S. 150, the Internet Tax Moratorium bill.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will state the bill by title.
  The legislative clerk read as follows:

       A 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, 
     which had been reported from the Committee on Commerce, 
     Science and Transportation and referred to the Committee on 
     Finance and discharged, with an amendment to strike all after 
     the enacting clause and inserting in lieu thereof the 
     following:

  (Strike the part shown in black brackets and insert the part shown in 
italic.)

                                 S. 150

       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 ``Internet Tax Non-
     discrimination Act of 2003''.

     [SEC. 2. AMENDMENT OF INTERNET TAX FREEDOM ACT.

       [Section 1101(a) of the Internet Tax Freedom Act (47 U.S.C. 
     151 nt.) is amended--
       [(1) by striking ``taxes during the period beginning on 
     October 1, 1998, and ending on November 1, 2003--'' and 
     inserting ``taxes:'';
       [(2) by striking paragraph (1) and inserting the following:
       [``(1) Taxes on Internet access.''; and
       [(3) by striking ``multiple'' in paragraph (2) and 
     inserting ``Multiple''.

     [SEC. 2. REPEAL OF EXCEPTION.

       [Section 1104 of the Internet Tax Freedom Act (47 U.S.C. 
     151 nt.) is amended by striking paragraph (10).

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Internet Tax 
     Nondiscrimination Act''.

     SEC. 2. PERMANENT EXTENSION OF INTERNET TAX FREEDOM ACT 
                   MORATORIUM.

       (a) In General.--Subsection (a) of section 1101 of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) is amended to 
     read as follows:
       ``(a) Moratorium.--No State or political subdivision 
     thereof may impose any of the following taxes:
       ``(1) Taxes on Internet access.
       ``(2) Multiple or discriminatory taxes on electronic 
     commerce.''.
       (b) Conforming Amendments.--
       (1) Section 1101 of the Internet Tax Freedom Act (47 U.S.C. 
     151 note) is amended by striking subsection (d) and 
     redesignating subsection (e) as subsection (d).
       (2) Section 1104(10) of the Internet Tax Freedom Act (47 
     U.S.C. 151 note) is amended by striking ``unless'' and all 
     that follows through ``1998''.
       (3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act 
     (47 U.S.C. 151 note) is amended by striking ``except with 
     respect to a tax (on Internet access) that was generally 
     imposed and actually enforced prior to October 1, 1998,''.
       (c) Clarification.--The second sentence of section 1104(5), 
     and the second sentence of section 1101(e)(3)(D) (as 
     redesignated by subsection (b)(1) of this Act), of the 
     Internet Tax Freedom Act (47 U.S.C. 151 note) are each 
     amended by inserting ``, except to the extent such services 
     are used to provide Internet access'' before the period.

     SEC. 3. 3-YEAR SUNSET FOR PRE-OCTOBER, 1998, TAX EXCEPTION.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by redesignating section 1104 as section 1105; and
       (2) by inserting after section 1103 the following:

     ``SEC. 1104. PRESERVATION OF PRE-OCTOBER, 1998, STATE AND 
                   LOCAL TAX AUTHORITY UNTIL 2006.

       ``(a) In General.--Section 1101(a) does not apply to a tax 
     on Internet access that was generally imposed and actually 
     enforced prior to October 1, 1998, if, before that date, the 
     tax was authorized by statute and either--
       ``(1) a provider of Internet access services had a 
     reasonable opportunity to know by virtue of a rule or other 
     public proclamation made by the appropriate administrative 
     agency of the State or political subdivision thereof, that 
     such agency has interpreted and applied such tax to Internet 
     access services; or
       ``(2) a State or political subdivision thereof generally 
     collected such tax on charges for Internet access.
       ``(b) Termination.--This section shall not apply after 
     October 1, 2006.
       ``(c) Tax on Internet Access.--Notwithstanding section 
     1105(10), in this section the term `tax on Internet access' 
     includes the enforcement or application of any preexisting 
     tax on the sale or use of Internet services if that tax was 
     generally imposed and actually enforced prior to October 1, 
     1998.''.

     SEC. 4. UNIVERSAL SERVICE.

       Nothing in the Internet Tax Freedom Act shall prevent the 
     imposition or collection of any fees or charges used to 
     preserve and advance Federal universal service or similar 
     State programs authorized by section 254 of the 
     Communications Act of 1934.
  Mr. McCAIN. Madam President, I ask unanimous consent that the bill as 
thus amended be treated as original text for the purpose of amendment; 
provided there be no point of order waived by virtue of this agreement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The reported amendment is agreed to. The bill will be considered as 
original text. No point of order will be waived.


                           Amendment No. 2136

  Mr. McCAIN. Madam President, I send a substitute to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Arizona [Mr. McCain], for Mr. Allen, for 
     himself, Mr. Wyden, Mr. Burns, Mr. Ensign, Mr. Sununu, Mr. 
     Warner, Mr. Smith, Mr. Leahy, Mr. Grassley, Mr. Hatch, Mr. 
     McCain, Mr. Baucus, Mrs. Boxer, Mr. Chambliss, and Mrs. 
     Lincoln, proposes an amendment numbered 2136.

  Mr. McCAIN. Madam President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       Strike out all after the enacting clause and insert the 
     following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Internet Tax 
     Nondiscrimination Act''.

     SEC. 2. PERMANENT EXTENSION OF INTERNET TAX FREEDOM ACT 
                   MORATORIUM.

       (a) In General.--Subsection (a) of section 1101 of the 
     Internet Tax Freedom Act (47

[[Page 28006]]

     U.S.C. 151 note) is amended to read as follows:
       ``(a) Moratorium.--No State or political subdivision 
     thereof may impose any of the following taxes:
       ``(1) Taxes on Internet access.
       ``(2) Multiple or discriminatory taxes on electronic 
     commerce.''.
       (b) Conforming Amendments.--
       (1) Section 1101 of the Internet Tax Freedom Act (47 U.S.C. 
     151 note) is amended by striking subsection (d) and 
     redesignating subsection (e) as subsection (d).
       (2) Section 1104(10) of the Internet Tax Freedom Act (47 
     U.S.C. 151 note) is amended to read as follows: .
       ``(10) Tax on internet access.
       ``(A) In general.--The term `tax on Internet access' means 
     a tax on Internet access, regardless of whether such tax is 
     imposed on a provider of Internet access or a buyer of 
     Internet access and regardless of the terminology used to 
     describe the tax.
       ``(B) General exception.--The term `tax on Internet access' 
     does not include a tax levied upon or measured by net income, 
     capital stock, net worth, or property value.''.
       (3) Section 1104(2)(B)(i) of the Internet Tax Freedom Act 
     (4.7 U.S.C. 151 note) is amended by striking ``except with 
     respect to a tax (on Internet access) that was generally 
     imposed and actually enforced prior to October 1, 1998,''.
       (c) Internet Access Service; Internet Access.--
       (1) Internet access service.--Paragraph (3)(D) of section 
     1101(d) (as redesignated by subsection (b)(1) of this 
     section) of the Internet Tax Freedom Act (47 U.S.C. 151 note) 
     is amended by striking the second sentence and inserting 
     ``The term `Internet access service' does not include 
     telecommunications services, except to the extent such 
     services are purchased, used, or sold by a provider of 
     Internet access to provide Internet access.''.
       (2) Internet access.--Section 1104(5) of that Act is 
     amended by striking the second sentence and inserting ``The 
     term `Internet access' does not include telecommunications 
     services, except to the extent such services are purchased, 
     used, or sold by a provider of Internet access to provide 
     Internet access.''.

     SEC. 3. 3-YEAR SUNSET FOR PRE-OCTOBER, 1998, TAX EXCEPTION.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended--
       (1) by redesignating section 1104 as section 1105; and
       (2) by inserting after section 1103 the following:

     ``SEC. 1104. PRESERVATION OF PRE-OCTOBER, 1998, STATE AND 
                   LOCAL TAX AUTHORITY UNTIL 2006.

       ``(a) In General.--Section 1101(a) does not apply to a tax 
     on Internet access that was generally imposed and actually 
     enforced prior to October 1, 1998, if, before that date, the 
     tax was authorized by statute and either--
       ``(1) a provider of Internet access services had a 
     reasonable opportunity to know by virtue of a rule or other 
     public proclamation made by the appropriate administrative 
     agency of the State or political subdivision thereof, that 
     such agency has interpreted and applied such tax to Internet 
     access services; or
       ``(2) a State or political subdivision thereof generally 
     collected such tax on charges for Internet access.
       ``(b) Termination.--This section shall not apply after 
     October 1, 2006.
       ``(c) Tax on Internet Access.--Notwithstanding section 
     1105(10), in this section the term `tax on Internet access' 
     includes the enforcement or application of any preexisting 
     tax on the sale or use of Internet services if that tax was 
     generally imposed and actually enforced prior to October 1, 
     1998.''.

     SEC. 4. ACCOUNTING RULE.

       The Internet Tax Freedom Act (47 U.S.C. 151 note) is 
     amended by adding at the end the following:

     ``SEC. 1106. ACCOUNTING RULE.

       ``(a) In General.--If charges for Internet access are 
     aggregated with and not separately stated from charges for 
     telecommunications services or other charges that are subject 
     to taxation, then the charges for Internet access may be 
     subject to taxation unless the Internet access provider can 
     reasonably identify the charges for Internet access from its 
     books and records kept in the regular course of business.
       ``(b) Definitions.--In this section:
       ``(1) Charges for internet access.--The term `charges for 
     Internet access' means all charges for Internet access as 
     defined in section 1105(5).
       ``(2) Charges for telecommunications services.--The term 
     `charges for telecommunications services' means all charges 
     for telecommunications services except to the extent such 
     services are purchased, used, or sold by a provider of 
     Internet access to provide Internet access.''.

     SEC. 5. EFFECT ON OTHER LAWS.

       The Internet Tax Freedom Act (47 U.S.C. 151 note), as 
     amended by section 4, is amended by adding at the end the 
     following:

     ``SEC. 1107. EFFECT ON OTHER LAWS.

       ``(a) Universal Service.--Nothing in this Act shall prevent 
     the imposition or collection of any fees or charges used to 
     preserve and advance Federal universal service or similar 
     State programs--
       ``(1) authorized by section 254 of the Communications Act 
     of 1934 (47 U.S.C. 254); or
       ``(2) in effect on February 8, 1996.
       ``(b) 911 and E-911 Services.--Nothing in this Act shall 
     prevent the imposition or collection, on a service used for 
     access to 911 or E-911 services, of any fee or charge 
     specifically designated or presented as dedicated by a State 
     or political subdivision thereof for the support of 911 or E-
     911 services if no portion of the revenue derived from such 
     fee or charge is obligated or expended for any purpose other 
     than support of 911 or E-911 services.
       ``(c) Non-Tax Regulatory Proceedings.--Nothing in this Act 
     shall be construed to affect any Federal or State regulatory 
     proceeding that is not related to taxation.''.

  Mr. McCAIN. I say to my friends on both sides of the issue, I think 
we now have the proper legislative agenda in preparation for 
amendments. Before I make an opening statement, I thank Senators Allen 
and Wyden for their hard work on this issue. I also pay my respects to 
the Senator from Ohio, Senator Voinovich, and the Senator from 
Tennessee, Senator Alexander, who have taken a deep and abiding 
interest in this issue and have a very real understanding of it. This 
is a complex and difficult set of issues associated with the Internet.
  I apologize for leaving out my dear friend from Delaware, Senator 
Carper, who probably knows more than the other two put together; at 
least, he believes so.
  Again, these are difficult and complex issues. They have been 
affected significantly by changes in technology over the years. When we 
first did this moratorium issue, it was much simpler than it is today. 
As the Internet has obtained dramatically new capabilities with 
dramatic changes in its nature, the issue has changed. The Senators 
from Ohio, Tennessee, and Delaware have raised significant and valid 
concerns. We believe we have tried to address those concerns.
  Definitions certainly are critical in addressing this issue. Words 
have meaning and importance when we are talking about this issue before 
us. I hope we can give fair consideration to the concerns and the 
proposals made by the opposition to this bill or those who would like 
to see it significantly modified.
  Again, I thank my friends from Virginia and Oregon who have worked 
tremendously for years in the committee on this issue. I think the 
Senator from Oregon can remind me how many hearings we have had on this 
particular issue, but it must be in double digits--more than 10--over 
the past 6 or 7 years. Those hearings have been certainly appropriate, 
because each time we have had them the technology changed and the 
issues changed.
  Madam President, this bill would ensure that consumers would never 
have to pay a toll when they access the Information Highway. Whether 
consumers log onto the Internet via cable modem, DSL, dial-up, or 
another technology that has yet to be invented, under S. 150 they will 
not see any State and local taxes on their monthly Internet bill. Now 
would their monthly Internet bills increase because of State and local 
taxes on Internet access that are passed down to consumers. Plainly and 
simply, this is a pro-consumer, pro-innovation, and pro-technology 
bill.
  S. 150, which was introduced in January by Senator Allen, would make 
permanent the current Federal prohibition on State and local taxes on 
Internet access contained in the Internet Tax Freedom Act of 1998 
(ITFA). It also would extend permanently the current moratorium in ITFA 
on multiple or discriminatory state and local taxes on e-commerce 
transactions.
  In addition, this bill would extend by 3 years the current 
grandfather clause contained in ITFA. This clause permits States that 
imposed or enforced a tax on Internet access prior to the passage of 
ITFA in 1998 to continue taxing Internet access. After 2006, this 
grandfathering protection would lapse.
  Five years ago, Congress took appropriate action when it passed the 
IFTA, legislation that encouraged the growth and the adoption of the 
Internet by exempting Internet access from State and local taxation, 
and by protecting e-commerce transactions from multiple or 
discriminatory taxation.
  As my colleagues know, over the past decade, the Internet has grown 
from a

[[Page 28007]]

tool used primarily by academics and scientists for research purposes 
to a broadly utilized communications, information, entertainment, and 
commercial medium, as well as an important vehicle for political 
participation. Indeed, the Internet has started to become a fixture and 
core component of modern American life that has created and continues 
to generate social and economic opportunities throughout the United 
States. This was our goal then and it continues to be our goal today.
  There is little doubt that the development and growth of the Internet 
was aided by the moratorium. For example, in the past 5 years and with 
the help of ITFA, household use of the Internet has doubled. At the 
time of the legislation's enactment in 1998, 26 percent of United 
States households had Internet access. By 2001--the year that the 
moratorium was extended for a 2 year period--just over 50 percent of 
U.S. households had Internet access. By the end of 2002, approximately 
64 percent of American households had Internet access. However, despite 
these significant growth rates, Internet access adoption rates remain 
low relative to other basic technologies. Broadband access in 
particular remain low. Indeed, in 2002, only 15 percent of American 
households had broadband Internet access. This means that a significant 
number of American consumers still have not gained the full benefits 
that Internet technologies promise.
  Today, we have the opportunity to extend permanently the Internet tax 
moratorium and thus fulfill our promise to consumers that Government 
taxes will not inhibit the offering of affordable Internet access. By 
supporting S. 150, we can continue to promote the adoption of the 
Internet by our citizens as well as encourage innovation relating to 
this technology. Just as Internet access evolved from basic dial-up 
service to broadband services since the enactment of ITFA, a permanent 
extension of the Internet tax moratorium is expected to encourage 
businesses to further evolve Internet technologies and consumers to 
continue adopting such technologies.
  I am fully aware that State and local government groups are concerned 
about certain aspects of this bill and, in particular, worry that this 
legislation will result in significant revenue losses to the States and 
localities. As many of you know, I have worked closely with the co-
sponsors of the legislation in an attempt to accommodate many of the 
concerns of the States and local governments. In fact, I am a co-
sponsor of the substitute amendment to S. 150 only because I was 
satisfied that the amendment's co-sponsors had compromised as much as 
they reasonably could with the States and localities. What we present 
today is a good-faith effort to address State and local worries while 
still keeping intact one of the key goals of S. 150: to keep Internet 
access tax free from taxation.
  I point in particular to our efforts to clarify that traditional 
telephone services would not become tax-exempt as a result of this 
legislation. Nor will this legislation prevent the States from imposing 
property, income, and other non-transactional taxes on Internet access 
providers. Nor would this bill make tax-free any service packaged with 
Internet access solely by virtue of such bundling. In addition, in 
order to give currently grandfathered States a reasonable amount of 
time to adjust their budgets, the bill extends the existing 
grandfathering provision by 3 years instead of terminating it 
immediately.
  I also am aware that some of my colleagues object to the Internet tax 
moratorium because they believe that Congress has no role in how States 
and localities tax Internet access. I respect the views of those 
Members, but I also respectfully disagree with them on this matter. 
Interstate communications--including the Internet--are part and parcel 
of interstate commerce, which Congress has the constitutional right to 
regulate. This means that Congress does indeed have the right to 
determine how the Federal Government, the States, and localities tax 
the Internet.
  There is also the argument that this extension is an unfunded 
mandate. On this point, it is important to note that this bill would 
not impose any additional responsibilities on State or local 
governments. Rather, S. 150 only says that States and localities may 
not impose taxes on Internet access. That's it. Furthermore, Congress 
made sure that ITFA held the Federal Government to the same standards 
as those imposed on the States. The act expresses the sense of Congress 
that no new Federal taxes on Internet access should be enacted. The 
Federal Government is in this with the States and localities because 
keeping Internet access tax-free is a core goal of our national 
economic policy.
  With respect to the question of whether it's wise to make Internet 
access tax free, this body has a long history of giving tax incentives 
to commercial activities that we believe help our society. The Internet 
is a technology that is a source of and vehicle for significant 
economic benefits. The proponents of this legislation strongly believe 
the Internet clearly merits the tax incentives provided by S. 150. But 
this debate is not just about economic benefits.
  During my presidential candidacy, one of the many rewarding 
experiences I had was seeing how the Internet served as a medium for 
political participation. Hundreds of thousands of people logged on to 
may campaign website where they were able to access information and 
organize. For me, keeping Internet access tax-free is about protecting 
consumers' wallets, but it also is about improving our political 
process and the right and ability of those citizens to participate 
fully in that process.
  I recognize that there are others who wish to continue to make the 
Internet tax moratorium temporary. Their premise is that Internet 
technologies continue to evolve and thus Internet access may develop 
into a service the States and localities would wish to tax. I would 
respond that this moratorium should be permanent to continue 
encouraging those very Internet-related innovations. By making this 
moratorium permanent, the businesses that invest in and provide 
Internet access technologies will be able to operate in a predictable 
tax environment. This will result in continued investment in this very 
important medium.
  I will be very candid on this point, though: If a permanent 
moratorium passes and 3, 4, 5 years down the road we find that the 
effects of this moratorium were other than what we intend today, I will 
join my colleagues in reviewing this issue and work to amend the 
legislation to correct any unforeseen problems with it. But that should 
only happen if and when there is a legitimate problem. That doesn't 
need to happen, and it shouldn't have to happen, on a predetermined 
schedule.
  Today, however, we are here to vote on a bill that enjoys strong bi-
partisan support--further evidence of the fact that this Senate 
believes in a permanent extension of the moratorium and the consumer 
and business benefits such an extension will bring. Likewise, H.R. 49, 
the Internet Tax Nondiscrimination Act, which is similar to S. 150, 
also enjoyed significant support in the House of Representatives. 
Indeed, the House passed H.R. 49 in September with strong bipartisan 
support, including support from the House leadership of both parties.
  S. 150 has been thoroughly vetted and considerably negotiated. It was 
approved by the Senate Committee on Commerce, Science, and 
Transportation in July after the committee held hearings on the bill. 
In October, the Senate Committee on Finance discharged S. 150 after 
that committee examined the bill. Throughout this legislative process, 
the various stakeholders have met several times to try to come as close 
to a middle ground as possible without sacrificing the basic goals of 
this legislation. I believe that this bill is a strong attempt to 
address the concerns and needs of all the relevant stakeholders.
  For all of the reasons stated, I urge my colleagues to support this 
bill and add it to the long line of pro-consumer legislation we have 
passed this year--including the Do Not Call Registry and

[[Page 28008]]

spam legislation. Let us again join together to give American consumers 
affordable access to the Internet, a crucial medium of communications, 
information, commerce, and political participation.
  I look forward to hearing the debate and discussion by my colleagues 
on both sides of the issue. We hope to have an amendment proposed by 
the Senators from Delaware, Ohio, and Tennessee, and we would like to 
debate that. Others would like to speak on that amendment, so we will 
not have a time certain set for that amendment. But we hope we can have 
it at a fairly early time in the morning. My understanding is we will 
be back in at 9:30.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon is recognized.
  Mr. WYDEN. Madam President, I thank the chairman of the Commerce 
Committee, Senator McCain, for beginning the discussion in the kind of 
tone I think we want to have for this debate. We have on the floor a 
number of Senators who have been the most interested in this issue. I 
tell them I think they represent the most thoughtful people not just in 
the Senate but in public life. We obviously have differences of 
opinion, but I think we are going to have an important debate, in a 
thoughtful fashion. The decibel level has certainly gotten pretty high 
in recent days on this issue.
  I am very appreciative to the Senate Democrats who are supportive of 
the position Senator Allen and I have put together, particularly 
Senators Leahy, Boxer, Lincoln, and Baucus, all of whom joined as 
original sponsors of the managers' effort.
  I wish to spend a few minutes tonight--I know other colleagues are 
anxious to talk--to describe how we got to this point and why I believe 
the approach Senator Allen and I are taking is a wise one.
  About 7 years ago, after I came to the Senate, I began to think about 
how the Senate could write the rules of electronic commerce so as to be 
fair to all sides while at the same time allowing this tremendously 
exciting medium, the Internet, to flourish.
  We were seeing early on problems with respect to how the Internet was 
regulated around the country. We saw discrimination. We saw in some 
jurisdictions, for example, if you bought the newspaper the traditional 
way, the snail-mail route, you would end up not paying a tax, but if 
you bought the online edition of that paper, you would pay a tax. That, 
it seemed to us, was a discrimination against technology. So about 7 
years ago, I said the bedrock of our effort ought to be technological 
neutrality. The Internet should not get a preference, nor should the 
Internet be discriminated against.
  I went to Senator McCain and Senator Leahy of Vermont, really known 
as the Senate's Mr. Internet. He was up on these issues when I think a 
lot of people thought a monitor was a television set. The two of them 
joined me in a bipartisan effort to pass this law that has now been on 
the books for more than 5 years.
  When Senator Allen came to the Senate, he and I teamed up for a 
number of years on this issue, and, of course, other Senators who have 
come to this body.
  I say in beginning the debate, many of those who now oppose the 
extension of the law we are proposing are using the very same arguments 
they made 5 years ago that have not been borne out. For example, we 
were told years ago that the States would not be able to collect 
various taxes--property taxes, corporate taxes, and other kinds of 
taxes. We were told that all across America, Main Streets would shrivel 
up and die because of Internet sales. We were told that States would 
lose an enormous amount of revenue. I want to respond to each one of 
those arguments tonight.
  First, with respect to loss of revenue, not one jurisdiction has come 
forward and given an example of how they are hurt by their inability to 
discriminate against electronic commerce. All the bill says is you 
cannot discriminate against electronic commerce, and not one State has 
come forward and given an example of how they have been hurt by their 
inability to discriminate against electronic commerce.
  Not one independent study has been done in the last 5 years 
indicating that the States would lose revenue as a result of this bill.
  Finally, with respect to this question of Main Street and the retail 
stores, what we have seen is during the period this law has been in 
effect, Internet sales have gone from 1 percent to 2 percent. I think 
it is fair to say our legislation has not exactly emptied the malls of 
America. In fact, in most of our malls, it is still pretty hard to find 
a parking spot.
  As we go at this issue, it is important to look at the record, and 
particularly it is interesting to note it in the context of what was 
discussed tonight.
  I have noted that a number of our colleagues, particularly from the 
rural areas--the Dakotas and other areas--have talked about the 
importance--and I share their view--of building the network out; of 
using funds, whether it be tax credits or Government moneys, to 
facilitate broadband to rural areas. Their effort is one that I 
support. But think about the consequences of our saying tonight on the 
floor of the Senate: Let's use Government dollars to help companies 
build out the network, promote broadband in rural areas. We will say 
that tonight, but tomorrow we will end up sticking it to consumers with 
new taxes with respect to Internet access.
  In effect, the policies we are talking about promoting tonight with 
Government dollars--and many Senators are on legislation to offer tax 
credits to promote broadband to rural areas which would, in effect, be 
negated by the effort some are offering to allow for these taxes on 
Internet access.
  Senator Allen and I have spent many months trying to work with the 
State and local governments to address their concerns. We have had 
months of negotiations, and those negotiations all went on before our 
distinguished colleagues--the Senators from Tennessee, Ohio, and 
Delaware--came into the debate.
  I note that in the effort to try to find common ground, Senator Allen 
and I agreed to a number of requests that were made by State and local 
officials. We agreed, for example, to the request from State and local 
officials for new statutory language further tightening the definition 
of ``Internet access.''
  We agreed to the request for new statutory language on what is called 
bundling, which is, in effect, where you have Internet access bundled 
with information technology services other than Internet access, and it 
is important to separate the two for taxable purposes.
  In addition, we agreed to the requests from State and local officials 
for new statutory language protecting a variety of other taxes, such as 
property and income taxes, that were never affected by the original 
legislation we authored, but we thought in the name of trying to find 
common ground, we would add that as well.
  We have agreed to a request for a savings clause on universal service 
and a variety of regulatory proceedings.
  Finally, we have agreed to allow States grandfathered so as to 
protect existing treatment under their State laws of these services 3 
more years of Internet access taxes.
  I say as we begin tonight, Senator Allen and I in 2 months of 
negotiations agreed to five requests from State and local officials to 
try to find common ground on this matter, and I ask tonight, what has 
been offered in return? What have been offered in return are 
essentially these projections that say vast sums are going to be lost 
to the States if this legislation that Senator Allen and I have 
proposed is extended.
  I just ask Senators to note the language associated with these 
projections. The language is always, this bill could cost such-and-
such; and the sum is, of course, a very large number. Never is it 
presented in terms of any kind of independent study that this law has, 
in fact, cost revenue or would cause revenue to be lost in the future.
  After Senator Allen and I made these five separate concessions in an 
effort to find common ground, we now have these various projections 
that, for

[[Page 28009]]

all practical purposes, we are trying to convince the Senate that 
Western civilization is going to end if we urge that this law be 
updated.
  I know colleagues are anxious to talk, and I certainly want to give 
them that opportunity. I close with one last point as we begin this 
discussion.
  I think colleagues know the technology sector has taken a real 
pounding in the last couple of years, but what we have seen in the last 
few months is that the technology sector is beginning to have a 
resurgence. We have begun to see, both with respect to the stock market 
and capital investment in the sector, the technology area is really 
beginning to come back.
  I say to my colleagues in the Senate, I think that if, in fact, the 
Senate unravels the law of the last 5 years, fails to allow us to 
update this law, the progress that has been seen in the technology 
sector in the last few months could well unravel.
  If, in fact, the more than 7,000 taxing jurisdictions in this country 
are allowed to take a bite out of the Internet, and we have the 
Internet access area broken down into its subparts and all of them are 
taxed, I think that could derail the very impressive progress we have 
seen in the technology sector in the last few months.
  Let us not put in place a regime of multiple and discriminatory taxes 
on electronic commerce, if for no other reason than it would send a 
horrendous message to this sector where finally in the last few months 
we are beginning to see some resurgence.
  I see my good friend from Virginia on his feet. I want to tell him 
how much I appreciate his cooperation. When I began this effort, he was 
a Governor and was supportive of our efforts then. I am pleased to have 
had a chance to team up with him as a member of the Commerce Committee.
  I also say, because we have Senators who do not share the view of 
Senator Allen and myself--Senator Voinovich, Senator Alexander, and 
Senator Carper--that my door continues to be open to all Senators, 
including Senators who do not share our view, in an effort to try to 
find common ground.
  Senator Allen and I thought the five concessions we made during 8 
weeks of negotiations were part of an effort to be sensitive to the 
concerns of State and local bodies. Obviously, we have not done that to 
the satisfaction of all and our door remains open to all Senators.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Chambliss). The Senator from Virginia.
  Mr. REID. Will the Senator from Virginia yield for a unanimous 
consent request? In fact, I have two of them.
  Mr. ALLEN. I yield.


                  Unanimous Consent Request--H.R. 2559

  Mr. REID. I appreciate it very much. It will just take a few minutes. 
I have two unanimous consent requests. I ask unanimous consent that the 
Senate proceed to the conference report to accompany H.R. 2559, the 
Military Construction appropriations bill; that the conference report 
be agreed to and the motion to reconsider be laid upon the table, with 
no intervening action or debate.
  The PRESIDING OFFICER. Is there objection?
  Mr. VOINOVICH. I object.
  The PRESIDING OFFICER. The objection is heard.
  Mr. REID. I would simply say that is unfortunate. This is a military 
construction conference report. I cannot believe there is any 
controversy on that. I appreciate my friend yielding to me.


                  Unanimous Consent Request--H.R. 1828

  I ask unanimous consent that the order entered with respect to H.R. 
1828, the Syria Accountability Act, be changed to reflect that the time 
for consideration of the measure be reduced to 60 minutes--the original 
time was 90 minutes--that the time be divided as follows: 30 minutes 
for Senator Specter and 15 minutes each under the control of Senators 
Lugar or Boxer or their designees; that at 9 a.m., Friday, November 7, 
the Senate then proceed to consider the measure under the limitations 
as provided under the previous order as modified above, with the 
remaining provisions remaining in effect.
  The PRESIDING OFFICER. Is there objection?
  Mr. VOINOVICH. I object.
  The PRESIDING OFFICER. The objection is heard.
  Mr. REID. I, again, extend my appreciation to the Senator from 
Virginia for yielding. I will speak at more length at a later time on 
why I think it was important that these unanimous consents be approved 
tonight.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. ALLEN. Mr. President, I rise this evening to ask my colleagues to 
support S. 150, the Internet Tax Nondiscrimination Act, and the 
substitute or managers' amendment that has recently been adopted.
  I thank our chairman of the Commerce Committee, John McCain, our 
commodore, on his great navigational skills as we worked through this 
measure. I also thank my colleague from Oregon, Senator Wyden, for his 
great leadership, assistance, and true partnership in trying to get 
this measure through for greater opportunity for Americans.
  I also thank others who are on this amendment, Senators Grassley, 
Hatch, Sununu, Leahy, Baucus, Boxer, Lincoln, Smith, the high-tech task 
force chairman, Senator John Ensign, Senator Warner of Virginia, 
Senator Burns, who is chairman of the Internet Caucus, and the Senator 
who is in the chair right now, Mr. Chambliss. All have helped work on 
this reasonable compromise.
  There have been a number of concerns to this measure raised by our 
opponents. We have had several months of negotiations. I am confident 
the bill as it is presented to us on the Senate floor strikes an 
appropriate balance between protecting every American from harmful 
regressive taxes on Internet access while ensuring that necessary 
protections are in place for State and local governments to maintain 
their existing revenue base.
  The fundamental principle driving this legislation is very simple and 
clear, and that is the Internet must remain as accessible as possible 
to all people in all parts of America forever. This was a principle 
established in the 1998 legislation when Congress passed the Internet 
Tax Freedom Act and it is the principle I ask all Senators to keep in 
mind as we consider this legislation this evening and tomorrow.
  My colleagues have heard me say on many occasions that I believe we 
ought to be promoting freedom and opportunities for all Americans. We 
need to be advancing ideas, concepts, and policies that help create 
more jobs and prosperity rather than more taxes and burdens.
  The Internet itself is one of our country's greatest tools and 
symbols of innovation and individual empowerment. In my view, the 
Internet is the greatest invention for the dissemination of ideas and 
thoughts since the Gutenberg press. When Martin Luther nailed his 95 
theses to the church at Wittenberg, if it were not for the Gutenberg 
press no one would have read those documents and those thoughts.
  So today, we have the Internet for the dissemination of ideas. It is 
an individualized empowerment zone where individuals are able to access 
information, communicate, get knowledge, information, as well as engage 
in commerce. It is a tool for education. It is a tool for information 
and commerce. And when we are looking at that, I ask, why would there 
be some who would want to burden that? I think we ought to be trusting 
free people and free enterprise. We ought to be on the side of freedom, 
because that is what has allowed the Internet to flourish, rather than 
the side of those who would want to make this advancement in technology 
easier to tax for tax collectors.
  Some people ask, why is the Federal Government involved in this? 
Well, heck, if there is anything that is in interstate commerce by its 
architecture, by its design, by its structure, it is the Internet. One 
of the great things about the Internet is that it is not confined to 
boundaries of States or even countries for that matter. For those of us 
who thought opening up to China was a question that we needed to 
broach, I thought the fact that the Internet was available and to the 
extent that the Chinese people could get

[[Page 28010]]

more ideas from outside of China and not filtered through their 
government, that was a reason to hopefully open up China for greater 
prosperity and freedom.
  This legislation provides and promotes equal access to the Internet 
for all Americans. It obviously is designed to protect Americans from 
harmful and regressive taxes on Internet access services, as well as 
preventing duplicative and predatory taxes on Internet transactions. 
Specifically, as this measure is before us now, it does several things.
  First, it extends permanently the current Federal prohibition of 
State and local taxation of Internet access service.
  Second, it makes permanent the ban on all multiple and discriminatory 
taxes relating to electronic commerce. It ensures that several 
jurisdictions, for example, cannot tax the same transaction simply 
because the transaction happens to occur over the Internet.
  Third, our legislation repeals the so-called grandfathering provision 
over a 3-year period.
  Fourth, we make clear the original intent of the Internet Tax Freedom 
Act by updating the definition of Internet access to ensure that the 
moratorium applies consistently to all consumers.
  If we are going to exempt Internet access services from taxation 
permanently, then I believe it makes sense to do so in a manner that 
applies to all methods of Internet access, regardless of how a consumer 
chooses to access the Internet, whether by digital subscriber line, 
otherwise known as DSL connections, by wireless connection, cable modem 
service, satellite, or dial-up service.
  Fifth, and lastly, this legislation makes very clear that nothing in 
this measure prevents the collection or remittance of State and Federal 
universal service fees. The Internet tax moratorium that has been in 
place for 5 years has contributed to the extending of Internet access 
to over 127 million citizens, about 45 percent of the population of 
America. Unfortunately, that did expire Friday. Every day that it 
lapses, there is the opportunity for consumers to be susceptible to 
pestering new taxes on Internet access services as well as taxes on e-
mail, instant messages, spam filters, and even Web searches. For every 
dollar in taxation added to the cost of Internet access, we can expect 
to see the loss of utilization of the Internet by thousands of American 
families, especially lower income families.
  According to the Pew Internet and American Life Project, 30 percent 
of non-internet users say cost is a major reason they remain offline. 
Additionally, another 43 percent of non-internet users agreed with the 
statement that the Internet is too expensive.
  So, for about half the country who are still not on line, keeping 
access affordable is vital, and that means keeping access free from 
State, local, and Federal taxation. The guiding principle is clear, of 
course: To keep it accessible to all people in all parts of the country 
forever. This is the position I have held since 1997, since my days as 
Governor in Virginia when I was one of only four Governors with this 
position.
  I cannot ever envision a time where we believe it desirable for any 
government, State, local, or Federal, to tax access to the Internet. I 
cannot envision any time in our future where it will make sense to have 
multiple taxes on the Internet. Nor can I imagine any time in the 
future where there ought to be discriminatory taxes or predatory taxes 
on the Internet.
  Yet if the Senate fails to take action or vote for this legislation, 
such Members of this body will be permitting and in effect advocating 
taxing the Internet.
  There are more people empowered by the Internet today because the 
Federal policy of the United States has consciously allowed Internet 
innovators, investors, entrepreneurs, and consumers to remain free from 
onerous taxation of access to the Internet.
  As many of you know, when this was first enacted there were dozens of 
States and local taxing commissars who were, back then, right in the 
beginning, imposing disparate taxes on a consumer's ability to surf the 
Internet. Since the last expiration of the Internet Tax Freedom Act in 
2001, some States have begun taxing the high-speed component of 
broadband Internet access services. They are asserting that certain 
portions of high-speed broadband Internet access are telecommunications 
services rather than Internet access and the States are thereby 
circumventing the original intentions of the law.
  Working with Chairman McCain and Senator Wyden and Senator Sununu in 
the Commerce Committee, we updated the definition of Internet access to 
assure that all access services, regardless of the technology used to 
deliver the service, are covered by the moratorium and therefore exempt 
from State and local taxation.
  There have been some misleading statements, some clever hyperbole, 
and some statements that are just flat-out wrong. I want to set the 
record straight.
  They have raised a number of concerns, the proponents of higher 
taxes, with this legislation, indicating that we have expanded the 
moratorium on Internet access to include all telecommunications 
services making tax free even traditional services like local and long 
distance telephone communications.
  They have also raised a question of whether or not this bill would 
prohibit States from imposing property taxes, income taxes, or 
corporate taxes on telecommunications carriers and Internet service 
providers.
  I want Members of this body to understand and be clear on the facts 
and the truth about this legislation. This bill does not affect 
traditional voice or long distance telephone services or any other 
communications service that is not directly used to provide Internet 
access. This bill, S. 150, does not affect a State's ability to collect 
income taxes, property taxes, or other corporate taxes, such as 
franchising fees, that are unrelated to Internet access.
  The facts are, S. 150 does not unnecessarily expand the moratorium on 
Internet access; rather, the legislation clarifies and updates the 
original intentions of the Internet Tax Freedom Act to include high-
speed Internet access services. Only because some States and localities 
have attempted, and in fact are circumventing the original law by 
taxing portions of high-speed Internet access, did the definition of 
Internet access need to be updated.
  The impact of broadband and efforts to stop broadband from being 
deployed by this taxing approach that is going on, that we are trying 
to cure, will have a very significant impact on small towns and rural 
areas. Our colleague, Conrad Burns of Montana, likes to talk about how 
you have to get broadband out in the country, and he would say there is 
a lot of dirt you have to dig through just to get from one light bulb 
to another. The same applies to getting broadband out into the 
communities and out into the country. If you have higher costs imposed 
on Internet access and then on top of it all you are putting higher 
costs on the investment for the transport, that means fewer people in a 
less populated area will be able to afford broadband, thereby denying 
them opportunities that one would have, whether it is for information, 
for education, for knowledge, or for commerce, for small businesses and 
people who live in rural areas.
  Another fact: In this bill it only makes permanent the tax moratorium 
on Internet access services, which is simply the ability to get access 
to the Internet. Once a consumer has accessed the Internet, the 
moratorium does not affect the services that are purchased, used, or 
sold over the Internet that would otherwise be taxable, even if such 
services are bundled together with Internet access services.
  So, in summary, the fact is, by allowing this moratorium to expire, 
the Senate has opened the door for States and localities to begin 
imposing regressive taxes on Internet access services. By taxing 
Internet access, States and localities are actually contributing, and 
would be contributing, to the economic digital divide. The more 
expensive we allow the State and local tax commissars to make Internet 
access,

[[Page 28011]]

the less likely people are going to be able to buy these advanced 
services, such as high-speed broadband connections, Internet protocol 
software, wireless or WiFi devices, and many other multimedia 
applications.
  At a time when technology, as my friend Senator Wyden has said, and 
the Internet are growing and improving almost every aspect of our daily 
lives, where access to the Internet is not a nicety but a necessity for 
Americans, imposing new taxes on access or levying taxes that 
discriminate against the Internet as a form of commerce will never be 
sound policy for America. As a tool, the Internet breaks down economic 
and educational barriers, leveling the playing field for millions of 
Americans.
  There are those who say it shouldn't be permanent; let's make it 
shorter. When you talk to business investors--and let's go back to 
rural and small town areas. When someone is making a business 
investment they want to have some credibility and stability and 
predictability as to making these millions of dollars of investment to 
get into a smaller market. What is going to be our rate of return? When 
are we going to recoup the tens of millions of dollars it takes to get 
into these areas?
  We just heard an argument on the Agriculture bill about loans to get 
broadband. It is a lifeline for folks out in the country, in rural 
areas. There are all sorts of incentives that people are for.
  Businesses making those investments have to figure out when are they 
going to get a return on the investment. If you tax a transport or make 
it for a short duration of time, they are going to say: Gosh, there are 
going to be taxes on it in a few years so there will be fewer 
customers. We just can't risk that investment to get out into those 
areas.
  So, more than ever, I really do believe we ought to listen to good, 
sound business reasoning, common sense and logic. In fact, most 
economists and technology experts agree that we need to be encouraging 
the deployment of the next generation broadband Internet connections 
and bring our communications infrastructure into the 21st century.
  Economists at the Brookings Institution estimate that widespread 
high-speed broadband access would increase our national gross domestic 
product by $500 billion annually by 2006.
  Failure to pass this legislation with a permanent moratorium and with 
an updated and clear definition of Internet access like the one this 
amendment provides, will leave broadband Internet access susceptible 
and open to harmful taxation. In many States and localities, those 
taxes could go up as high as 25 percent.
  Any additional tax burdens on the Internet will mean additional costs 
many Americans cannot afford, forcing the poor in our society to reduce 
or even forego their use of the Internet as a tool for exploration, 
information, education, and individual opportunity.
  More than ever before, when our economy is finally moving forward in 
the right direction, the people of this country need security with 
regard to their financial future. Businesses need certainty that prices 
for Internet access will remain affordable to consumers if they are 
expected to build out high-speed networks to rural and small-town 
communities. In a society, indeed a world, where the quality of life 
and economic power is directly proportionate to one's access to 
knowledge, we must close the economic digital divide rather than 
exacerbate it with State and local taxes.
  I call on my colleagues to join with the chairman, our commodore, 
Senator McCain, Senator Wyden, and all of us in supporting the Internet 
Tax Nondiscrimination Act and permanently extending the Internet 
moratorium on tax access and multiple and discriminatory taxes. As we 
vote on amendments to what would be this Internet access tax issue--and 
there will be amendments--I respectfully ask my colleagues as we look 
at these amendments to be leaders who stand strong for freedom and 
opportunity for all Americans.
  I thank the Chair.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. CARPER. Mr. President, like my friend from Virginia, I am a 
former Governor, as were Senator Alexander, Senator Graham, and Senator 
Voinovich. We served as chief executives of our States. I loved being 
Governor. I have never talked to anybody who didn't like the job. As a 
matter of fact, I enjoy being here and working with my friends John 
McCain, Ron Wyden, and others.
  When I was privileged to be Governor of Delaware, we actually cut 
taxes 7 out of 8 years. We also balanced our budget 8 years in a row. 
Among the things I didn't like as Governor was when the Federal 
Government came in and tried to tell us in Delaware we had to spend 
money for some purpose but never provided the revenues to pay for that 
expenditure. Similarly, I never liked it when the Federal Government 
came in and unilaterally reduced our revenue base for programs we 
needed in our State to educate our kids, to provide health care, child 
care, environmental protection, and transportation. I never liked it 
when the Federal Government came in and tried to undercut our ability 
to raise revenues for those purposes and never provided an offset to 
make up the difference in the revenue that was taken away by the 
Federal action.
  I remember as Governor coming here and testifying in the early to mid 
1990s. I believe Governor Voinovich did as well. We called on the 
Federal Government to stop placing unfunded mandates on State and local 
governments. The message is pretty simple. Don't tell us to spend money 
for things and expect us to use our revenues. Don't come in and 
restrict our ability to collect revenues without providing something to 
make up for it. Our voices were heard. In 1995, legislation was adopted 
to stop unfunded mandates and dictates by the Federal Government which 
had an adverse effect on my State and other States.
  I believe--correct me if I am wrong--that 91 Senators voted in 1995 
for the unfunded mandates bill. Sixty-three of the 91 Senators who 
voted for that bill in 1995 are still here in the Senate.
  In 1998, when Congress adopted an Internet tax moratorium, it was in 
essence on an unfunded mandate. The Congress agreed to restrict the 
ability of State and local governments to raise revenues in three 
areas. The moratorium which was adopted in 1998 said State and local 
governments could not tax access to the Internet. For the monthly bills 
we receive from AOL and other Internet providers, State and local 
governments cannot add a tax to that Internet access bill.
  Similarly, if there was an Internet transaction multiple States would 
like to tax or multiple counties within a State would like to tax, 
those multiple taxes were essentially stopped by the 1998 moratorium.
  Thirdly, discriminatory taxes against transactions over the Internet 
were banned as well. For example, we don't have a sales tax in our 
State, but in my State you could, of course, buy from a local merchant 
a good or a product and not pay a sales tax or tax of any kind. If any 
State were to pass a law that said if we were to make the purchase of 
the same good over the Internet we would have to pay a tax, that would 
be a discriminatory tax. That is not permitted under the 1998 Internet 
tax moratorium.
  The Internet tax moratorium which was adopted 5 years ago was adopted 
in order to give Internet commerce a chance to grow and to mature. 
States didn't like having their ability to raise revenues as they saw 
fit restricted by the Federal Government. But they excepted 11 States 
that were actually doing that kind of thing, and their ability to raise 
revenues was grandfathered in.
  For the last 5 years--initially the Internet tax moratorium was for, 
I think, 2 or maybe 3 years--when it was about to expire, the question 
was, should we renew it? I believe it was in 2001 when it was about to 
expire that Congress renewed it for an additional 2 years. It did not 
broaden the kind of three principal activities that were covered in the 
initial moratorium that said the same three applied. State and

[[Page 28012]]

local governments, unless they are grandfathered in, can't begin taxing 
access to the Internet. State and local governments could not have 
multiple taxes on the same transactions over the Internet. Further, 
this ban on discriminatory taxes was upheld for another 2 years. Last 
Friday that 5-year ban expired, as I think most of us know. Certainly 
Senators Voinovich and Alexander and I would like to see the 
moratorium, the ban, on the Internet tax access, multiple taxes, and 
the ban on discriminatory taxes extended.
  This is not an argument about taxes on access to the Internet. I 
think we actually agree on that. There should not be taxes imposed by 
State and local governments unless they are already grandfathered in on 
access to the Internet. That is not what this is all about. This is not 
about whether or not we are going to tax anybody's e-mail. We are not 
going to do that. We are not interested in that. One of our colleagues, 
Senator Voinovich, will have more to say about that later. He may offer 
a sense of the Senate to make it absolutely clear that nobody around 
here is interested in taxing access to the Internet.
  But as we look to nurture our economy and economic activity that is 
driven in part by commerce over the Internet, let us remember there is 
another set of voices that need to be heard. They are the voices of the 
people who are running our State governments, the folks who are running 
our cities and our counties and trying to do so in an environment where 
their revenue base continues to diminish. Their responsibilities to 
educate our kids don't diminish. In fact, those responsibilities are 
getting tougher as we impose academic standards and raise our 
expectations in our schools. We need to provide some kind of health 
care for people, young and old. Those needs are not diminishing. In 
fact, the burden through Medicaid on State and local governments, if 
anything, is increasing, not diminishing.
  I was Governor during good times. I don't know if it was easy to be 
Governor from 1992 to 2000, but it was a heck of a lot easier than 
today. Today, instead of dealing with budget surpluses and figuring out 
how to invest or use the budget surpluses or how to cut taxes in order 
to return a portion of the surpluses, State and local governments are 
scraping for every dime to try to meet the needs of their States.
  The question to consider today and tomorrow and perhaps next week is, 
What right do we have as a Federal legislature, as a Congress, to step 
in and mandate the reduction in the tax base, the revenue base, of 
State and local governments? What right do we have to do that? What 
right do we have to do that in the face of the Constitution? What right 
do we have to do that in light of the legislation adopted in 1995 
banning unfunded mandates? We have heard from Governors and mayors from 
every corner, county council men and women, commissioners, we heard 
from folks from every corner of this country saying, Abide by the law 
you voted for in 1995 banning unfunded mandates.
  I close with where I started. I have not talked to one Senator who 
says he or she is for taxing access to the Internet. We are not. I have 
not heard from any Senator, Democrat or Republican, from any part of 
this country, who says they are for taxing any person's e-mails. We are 
not. By the same token, my friends, I don't believe we should be for 
stepping in, beyond a very narrow moratorium on which we already spoke 
in those three areas, to broaden that moratorium to further undermine 
the revenue base of our State and local governments, during very 
difficult times for all of them, without giving that action in this 
proposal a whole lot more thought and debate and discussion. We will 
have that opportunity today and tomorrow.
  I say to Senator Voinovich, Senator Graham, Senator Alexander, and 
others who have joined and will join in offering an amendment tomorrow, 
including Senator Hollings, Senator Stevens, Senator Dorgan, Senator 
Feinstein, Senator Lautenberg, and others, I am proud to join in this 
initiative. It is possible in the end, I believe, to come up with a 
policy that is fair to State and local governments and is fair to those 
who would seek to expand our economy and to do so through Internet 
commerce.
  Tomorrow we will have the opportunity to vote on an amendment offered 
by Senator Alexander, Senator Graham, Senator Voinovich, and myself to 
do just that. I look forward to further debate on that amendment and 
the opportunity for an up-or-down vote on that amendment.
  I yield back the remainder of my time.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. VOINOVICH. Mr. President, I thank my colleague from Delaware, my 
colleague from the State of Tennessee, and my colleague from the State 
of Florida for standing up--all of us former Governors--to deal with a 
matter that will have great impact on our respective citizens for many 
years ahead. We want to make sure that whatever we do makes sense.
  Before I begin, I would like to set the record straight that this 
debate is about federalism, unfunded mandates, and protecting States' 
ability to collect taxes. It has nothing to do with taxing e-mail.
  I have made the issue of unfunded Federal mandates a top priority 
during my 36 years of public service. At every level of government--as 
a State representative, county auditor, county commissioner, lieutenant 
governor, mayor of the City of Cleveland, Governor of Ohio for 8 
years--I have seen firsthand how the relationship of the Federal 
Government with its State and local counterparts affects our citizens 
and the communities in which they live. My background has fueled my 
passion for the issue of federalism and the need to balance the Federal 
Government's power with powers that our Founding Fathers envisioned to 
the States.
  This very body was created, in part, to guarantee that States had 
adequate, equal means to assert their interest before the Federal 
Government. Our forefathers provided that each State has two Senators 
to protect States rights and federalism, and prior to 1913 those 
Senators were elected by their legislatures to guarantee that they 
would protect federalism. I believe strongly that the relationship 
between the Federal Government and State and local governments should 
be one of partnership. That is why I vowed when I was elected to the 
Senate, I would work to find ways in which the Federal Government can 
improve the way it works with these levels of government to serve the 
American people.
  I have also been concerned about the tendency of the Federal 
Government to preempt the functions of State and local governments and 
force on them new responsibilities, particularly without also providing 
the funding to pay for these new responsibilities.
  Seventeen years ago, in 1986, I spoke to the Volunteers of the 
National Archives regarding the relationship of the Constitution to 
America's cities and the revolution of federalism. I brought to the 
attention of the audience my observation, since my early days in 
government, regarding the course American government has been taking:

       We have seen the expansion of the federal government into 
     new, non-traditional domestic policy areas. We have 
     experienced a tremendous increase in the proclivity of 
     Washington both to preempt state and local authority and to 
     mandate actions on state and local governments. The 
     cumulative effect of a series of actions by the Congress, the 
     Executive Branch and the U.S. Supreme Court have caused some 
     legal scholars to observe that while constitutional 
     federalism is alive in scholarly treatises, it has expired as 
     a practical political reality.

  In 1991, I started a long crusade when I became a member of the 
National Governors Association, working with the State and Local 
Government Coalition to do something about unfunded mandates. In fact, 
as Governor of Ohio, I requested that a study be done to examine 
unfunded mandates. It was the first of its kind in any State. It 
captured just how bad the mandate problem was in real dollars. Between 
1992 and 1995, Ohio had unfunded mandates of almost $2 billion. These 
efforts were strongly supported by Senator Kempthorne, Senator Roth, 
Senator Glenn,

[[Page 28013]]

Congressmen Robert Portman, Tom Davis, and Bill Clinger and culminated 
with the passage of the unfunded mandates legislation in the Senate on 
March 15, 1995.
  As a matter of fact, for the first time in my life I set foot in the 
Senate when the Senate passed that Unfunded Mandate Relief Act. I was 
in the Rose Garden representing State and local government when 
President Clinton signed the legislation on March 22, 1995. In fact, I 
have that pen proudly displayed in my Senate office.
  This milestone concluded a lengthy and coordinated effort by State 
and local government officials and their congressional allies to reduce 
the economic burden of Federal unfunded mandates and the adverse impact 
they have on State and local services.
  By the way, this was the second plank in the Contract With America 
that was developed in 1994. I will never forget when we were in 
Williamsburg and committed ourselves to the Contract With America. The 
Senator from Virginia was present at that time in the capacity of 
Governor of Virginia.
  I believed then and I believe today that mandates forced us to cut 
vital services and cut taxes. Mandates also rob our citizens and 
elected officials of perhaps the most fundamental responsibility of 
government, prioritizing government services. The Unfunded Mandates 
Reform Act does not prohibit unfunded mandates, but it does slow down 
the process of enacting a mandate and forces each Senator and House 
Member to go on record that we want to mandate or prevent action by 
State or local governments without providing the resources with which 
to pay for it. It ensures that Congress is informed and accountable 
when considering an unfunded mandate for pending legislation. The law 
was designed specifically to ensure an up-or-down vote on whether to 
impose a mandate.
  The mandate we are debating is exactly what the Unfunded Mandates 
Reform Act was designed to address. This is the first time this Act has 
been used on the Senate floor since it was enacted in 1995. When this 
legislation passed the Senate in March of 1995, the vote was an 
overwhelming 91-to-9 vote. Of the 91 Senators supporting the bill, 50 
are still here today, and of the 9 nays, 7 Senators are still in 
office. In addition, 14 Members of the House--voting in favor of 
unfunded mandates reform--have moved over to the Senate. So we have 64 
Senators today who voted for this bill in 1995 in their respective 
Chambers.
  The bill currently under consideration, the Internet Tax 
Nondiscrimination Act of 2003, sponsored by my good friend from 
Virginia, Senator Allen, and Senator Wyden and Senator McCain, has 
included unfunded mandates by the Congressional Budget Office.
  In fact, I want to quote from the Commerce Committee's report dated 
September 29, 2003, in which CBO said:

       By extending and expanding the moratorium on certain types 
     of state and local taxes, S. 150 would impose an 
     intergovernmental mandate as defined in the Unfunded Mandates 
     Reform Act. CBO estimates that the mandate would cause state 
     and local governments to lose revenue beginning in October 
     2006; those losses would exceed the threshold established in 
     [the unfunded mandates relief legislation]. While there is 
     some uncertainty about the number of states affected, CBO 
     estimates that the direct costs to states and local 
     governments would probably total between $80 and $120 million 
     annually. . . .

  Furthermore, they went on to say:

       Depending on how the language altering the definition of 
     what telecommunications services are taxable is interpreted, 
     that language also could result in substantial revenue losses 
     for states and local governments. It is possible that states 
     could lose revenue if services that are currently taxed are 
     redefined as Internet access under the definition of S. 150.

  Finally, the report states that CBO cannot estimate the magnitude of 
these losses.
  Mr. President, let me reiterate, CBO said: Depending on how the 
definition is interpreted, the loss of revenue to the States and local 
governments could be substantial.
  If CBO cannot calculate the potential loss of revenue to the States, 
why in the world would we change the definition of Internet access? And 
why in the world would we make the new definition permanent?
  Even FCC Commissioner Michael Powell said the telecommunications 
industry is in flux and that few industry experts could agree on a 
definition in view of the rapid changes in technology.
  Senator Wyden, in his presentation earlier this evening, made the 
allegation that no State will lose money under this proposal. We asked 
the National Governors Association to contact the tax commissioners 
from various States and here are some of the findings: Kentucky will 
lose $265 million; Iowa, $45 to $50 million; Maine, $35 million; 
Michigan, $360 million; New Jersey, $600 million; Ohio, $55 million; 
Oklahoma, $159 million; Tennessee, $358 million; Utah, $92 million; 
Washington, $33 million.
  That is a lot of money--a lot of money--and States will lose tax 
revenue under this proposal.
  In my own State, I spent a lot of time with our Ohio Tax 
Commissioners Office and the Office of Budget and Management. According 
to the Department of Taxation in Ohio, we will be losing about $700 
million over our 2-year biannual budget period.
  Last week, my staff was on a conference call with SBC Communications, 
Bell South, Sprint, the Tennessee Revenue Director, and the Ohio Tax 
Commissioner's Office. The telecommunications companies did not dispute 
the Ohio Tax Department's estimates.
  So let's be honest about it. If this permanent moratorium goes 
through with the current definition, there is no question in the world 
that States are going to lose money.
  At the end of that conversation, by the way, the only thing we got 
out of it was that there was uncertainty, confusion, and speculation 
regarding what this all meant.
  In addition, we are going to be losing $350 million, at least, as a 
result of this proposal today.
  If we pass S. 150, Congress will, in effect, force States to raise 
taxes or cut services in order to make up the difference. In other 
words, all 50 States will be forced to debate whether to raise taxes, 
cut services, or come to Congress for more money. Mr. President, unlike 
Congress, by law all states must balance their budgets. They don't have 
the option of printing more money like the federal government.
  States have to balance their budgets and if they don't spend within 
their means, they are forced to make a choice to either cut services or 
raise taxes. Of course, that is something we have not done. And I 
mention, that some of my colleagues say States are not fiscally 
responsible. I would like to say that most of the States in the United 
States of America are much more fiscally responsible than this body, in 
which we have increased spending and added to our burgeoning deficit.
  Mr. President, the newspapers in Ohio get it. The Cincinnati 
Enquirer, one of the most conservative papers in Ohio, understands:

       One reason governors, mayors and county officials oppose 
     expanding the Internet tax ban is that telecom companies are 
     racing as fast as they can to convert most services to the 
     Internet. If just about everything gets tax-exempt under a 
     broader ``Internet access'' definition, states and localities 
     would take a huge tax revenue hit.
       The development of DSL, broadband and cable Internet 
     service were just the sort of new access technology that 
     Voinovich and others hoped would result from the tax 
     moratorium, but they don't want it expanded to kill existing 
     tax revenues.

  The Akron Beacon-Journal also understands:

       In short, critical programs would be put in jeopardy, from 
     mental health care to public schools.

  Even the Washington Post understands:

       What's driving this legislation is that telecommunications 
     companies and Internet service providers see an opportunity 
     not only to make the tax moratorium permanent--in itself a 
     bad idea--but to save what could amount to billions in 
     additional taxes. The law frees service providers from having 
     to pay taxes on telephone service they use to provide 
     Internet access. And as the Internet becomes a more effective 
     medium for providing phone service and delivering products

[[Page 28014]]

     such as downloaded movies, software and music, the 
     legislation could sweep such offerings within the ambit of 
     services that states are prohibited from taxing.
       The Internet shouldn't be subject to conflicting taxes, but 
     that's no reason to argue that it shouldn't be taxed at all. 
     There should be a level playing field for taxing Internet 
     access, whether it comes through ordinary dial-up, cable 
     modems or high-speed telephone lines.
       The last thing Congress should do now to cash-strapped 
     states is pass a law that would not only permanently put 
     Internet access off limits for taxation but also deprive them 
     of revenue that they now collect.

  And they go on--I will finish the quote--

       Proponents of the law are busy demagoguing the issue, 
     suggesting, as Senate sponsor Ron Wyden (D-OR) put it the 
     other day, that users ``could be taxed every time they read 
     their local newspaper online or check the score of a football 
     game.'' Congress should step back from the brink, temporarily 
     extend the moratorium and sort this all out in a way that 
     doesn't intrude on state prerogatives.

  Mr. President, I ask unanimous consent that these articles be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Cincinnati Enquirer, Oct. 31, 2003]

                    Halloween Scare: Internet Taxes

                             (By Tony Lang)

       Sen. George Voinovich of Ohio has been boiled in a witches' 
     cauldron this week by critics angered that he helped block an 
     expanded ban of taxes on Internet services. The current 
     Internet Tax Moratorium, which he supports, expires Saturday.
       Anti-tax groups making Voinovich out to be the devil 
     incarnate are roasting the wrong guy. Voinovich favors 
     keeping the tax moratorium on Internet access. He helped 
     negotiate the Internet Tax Freedom Act of 1997, supported its 
     renewal in 2001 and opposes new taxes on telecommunication 
     services. And yes, he strongly opposes a tax on e-mail.
       But he and other senators do object to new legislation 
     which would expand the definition of ``Internet access'' and 
     not only exempt some telecom services now taxed but also some 
     income, property and other business taxes. That legislative 
     change could cost state and local governments between $4 
     billion and $8.75 billion a year by 2006, the Multistate Tax 
     Commission estimates. The Congressional Budget Office agrees 
     losses would be substantial.
       Voinovich, a states-rights federalist, argues it would be 
     unconstitutional for the Federal government to abolish 
     existing State and local tax revenue streams. It also would 
     violate the 1995 Unfunded Mandates Relief Act, which then-
     Gov. Voinovich lobbied for and U.S. Rep. Rob Portman of 
     Terrace Park sponsored. That law attempts to bar Congress 
     from imposing a mandate on states without paying for it.
       One reason governors, mayors and county officials oppose 
     expanding the Internet tax ban is that telecom companies are 
     racing as fast as they can to convert most services to the 
     Internet. If just about everything gets tax-exempted under a 
     broader ``Internet access'' definition, States and localities 
     would take a huge tax revenue hit. The development of DSL 
     broadband and coaxial cable Internet service were just the 
     sort of new access technology that Voinovich and others hoped 
     would result from the tax moratorium, but they don't want it 
     expanded to kill existing tax revenues. The loss in Ohio 
     services is calculated at $450 million.
       The world won't end tomorrow if the tax moratorium expires. 
     It lapsed for a month in 2001 before Congress extended it. 
     The House already passed a bill (H.R. 49) on Sept. 17 making 
     the Internet tax ban permanent. This week, Sens. Voinovich, 
     Lamar Alexander of Tennessee, Ernest Hollings of South 
     Carolina, Frank Lautenberg of New Jersey and Maria Cantwell 
     of Washington State put a legislative ``hold'' on S. 150, and 
     according to Senate rules of ``unanimous consent,'' it will 
     take some cutting and pasting before all agree to bring it to 
     a floor vote.
       Ohio Gov. Bob Taft wrote to urge the Senate Finance 
     Committee to limit the tax ban to Internet access only. 
     Internet sales are a different matter. The Capitol Hill in-
     fighting over taxing e-commerce is even more bloodcurdling, 
     and as rife with falsehoods. The tax ban doesn't mean the 
     Internet is a tax-free zone. But Internet sales, according to 
     the Department of Commerce, accounted for only 1.3 percent of 
     all retail sales in 2002. Still it's no wonder Lamar 
     Alexander is leery of sales tax bans. Tennessee has no State 
     income tax. Someday, States may settle on some simple point-
     of-origin sales tax system for mail order, catalog and 
     Internet sales, but meantime Congress should keep its hands 
     off and limit itself to protecting interstate commerce and 
     lively tax competition between states.
                                  ____


                [From the Beacan Journal, Oct. 30, 2003]

                           Responsible George

       Sen. George Voinovich finds himself in a familiar position. 
     The Ohio Republican has angered many in his party. His 
     offense? He wants Congress to act responsibly. He has 
     correctly questioned aspects of legislation that would extend 
     the Internet Tax Freedom Act, the five-year-old moratorium on 
     State and local taxation of Internet services set to expire 
     on Saturday.
       Voinovich isn't alone. Sen. Lamar Alexander, a Tennessee 
     Republican, has echoed his concerns. So have many Republican 
     governors, including Bob Taft of Ohio. They do not oppose the 
     ban. (Voinovich helped to negotiate the original moratorium.) 
     They recognize the need to encourage Web businesses. What 
     they find troubling is the breadth of the extension.
       In September, the House approved legislation that would 
     make the ban permanent. The Senate is considering a similar 
     bill. Both would expand the definition of Internet services 
     to such an extent that State and local governments would risk 
     a substantial erosion of their tax base. Not surprisingly, 
     the revised definition was inserted in haste, more 
     ideologically driven that practical.
       No surprise, either, that Voinovich, a former governor, 
     would spot the difficulty ahead. States collect taxes on 
     local and long-distance telephone services. 
     Telecommunications companies are increasingly looking to 
     ``bundle'' products, offering a collection of services, 
     including Internet access. The proposed extension would 
     permit the bundled items to be viewed as one product. Thus, 
     products that currently are taxed, such as a local phone 
     service, would be exempt.
       The amount of revenue lost? Ohio would surrender an 
     estimated $350 million a year. The potential bleeding 
     explains why Bob Taft fired a letter to Charles Grassley of 
     Iowa, the chairman of the Senate Finance Committee. The 
     governor stressed the ``devastating'' impact on States.
       The Multistate Tax Commission (an association of State tax 
     directors) estimates the proposed extension would drain at 
     least $4 billion a year from all State treasuries and as much 
     as $8.75 billion by 2006. Again, these are funds States 
     already collect, and many States face a fiscal crunch as 
     severe as any in the past 50 years.
       In short, critical programs would be put in jeopardy, from 
     mental health care to public schools.
       George Voinovich certainly knows unfunded mandates. He has 
     long railed against the feds making demands and leaving 
     States to pick up the tab. In this instance, Congress would 
     tamper with established ways of States raising essential 
     revenue, leaving governors and State lawmakers to cover the 
     difference.
       Better, the responsible argument goes, to extend the 
     current ban on taxing Internet services for a period of time, 
     allowing lawmakers to think harder about their next step.
                                  ____


                [From the Washington Post, Nov. 4, 2003]

                             Tax and Click

       State and local governments have broad power to tax as they 
     see fit--everything from clothes and food to electricity and 
     telephone service. Nearly everything, that is, except the 
     Internet. Under a supposedly temporary law passed in 1998 and 
     already extended once, Congress prohibited States from taxing 
     Internet access fees, the monthly charges imposed by Internet 
     service providers. Proponents argued that the nascent engine 
     of the Internet shouldn't be slowed by taxing it and that it 
     would take time to devise a system to prevent duplicative or 
     discriminatory taxes. Now, with the tax moratorium having 
     expired on Saturday, Congress is poised to make the ban 
     permanent, broaden its reach and wipe out existing taxes that 
     had been grandfathered in under the previous law. With State 
     budgets under stress and the Internet thriving, this is an 
     unnecessary--and costly--incursion on States' rights.
       The argument for permanently barring taxes on Internet 
     services centers on two issues. One is the argument that 
     taxing Internet access, whether through phone lines or cable 
     modems, would amount to double taxation, because the phone 
     lines and cable service are already taxed. That's true, but 
     purchasing Internet access provides a separate--and 
     separately taxable--bundle of services. Terming this double 
     taxation is like saying that a shopper who pays tax on a pair 
     of slacks should then be exempt from being taxed on a shirt 
     bought with it.
       The other argument is that taxing Internet access would 
     worsen and prolong the digital divide, the computer gap 
     between rich and poor. This may be a problem, but prohibiting 
     taxation is not the answer. It's not the extra few cents on a 
     monthly bill that's stopping the less well-off from Googling 
     their way to the middle class. A policy to erase the digital 
     divide, however laudable, doesn't justify the no-tax 
     solution. The federal government wants to spur home ownership 
     for low-income families--surely a bigger problem than lack of 
     Internet access--but that doesn't lead it to tell local 
     governments that they can't impose property taxes.
       What's driving this legislation is that telecommunications 
     companies and Internet service providers see an opportunity 
     not only to make the tax moratorium permanent--in itself a 
     bad idea--but to save what could amount to billions in 
     additional taxes. The law frees service providers from having 
     to pay taxes on telephone service they use to

[[Page 28015]]

     provide Internet access. And as the Internet becomes a more 
     effective medium for providing phone service and delivering 
     products such as downloaded movies, software and music, the 
     legislation could sweep such offerings within the ambit of 
     services that states are prohibited from taxing.
       The Internet shouldn't be subject to conflicting taxes, but 
     that's no reason to argue that it shouldn't be taxed at all. 
     There should be a level playing field for taxing Internet 
     access, whether it comes through ordinary dial-up, cable 
     modems or high-speed telephone lines. The last thing Congress 
     should do now to cash-strapped States is pass a law that 
     would not only permanently put Internet access off limits for 
     taxation but also deprive them of revenue that they now 
     collect. Proponents of the law are busy demagoguing the 
     issue, suggesting, as Senate sponsor Ron Wyden (D-Ore.) put 
     it the other day, that users ``could be taxed every time they 
     send an e-mail, every time they read their local newspaper 
     online or check the score of a football game.'' Congress 
     should step back from the brink, temporarily extend the 
     moratorium and sort this all out in a way that doesn't 
     intrude on State prerogatives.

  Mr. VOINOVICH. Mr. President, I have made the point that I have 
strong concerns with the pending legislation because it is an unfunded 
mandate. At the same time, I think it would be wrong for Congress to do 
nothing and allow taxes on Internet access.
  As I have said emphatically, I am against taxes on e-mail and the 
Internet. It is no secret that my interest in the current moratorium 
dates back to my time as Governor. During my tenure as Governor, I was 
also chairman of the National Governors Association. As chairman, I 
asked Governor Mike Leavitt to be the lead Governor on the Internet 
economy and its effects on State government and federalism. The NGA 
efforts on this important topic led to the current moratorium on 
Internet taxes which was signed into law in 1998, and then again in 
2001.
  Our goal then is the same as my goal today: to encourage the growth 
of the Internet as a driving force in our economy.
  Let's look at the facts.
  Under the original 3-year moratorium from 1998 to 2001, the Internet 
rapidly expanded to all corners of our country. The point I am trying 
to make is that with the current moratorium that we have, we have seen 
unbelievable expansion in the Internet. That is what we wanted to have. 
That is why we put the moratorium in effect.
  In February 2002, the National Telecommunications and Information 
Administration at the Department of Commerce issued a report entitled 
``a Nation Online: How Americans Are Expanding Their Use of the 
Internet.'' It is just unbelievable what has happened during that 
period of time. My point is, the Internet flourished in all segments of 
society during the original moratorium, and I think it is safe to 
assume that Internet usage continues to increase every day.
  The question is, how do we continue to support the growth of the 
Internet and bring parity for all Internet service providers without 
causing undue harm to our State and local governments that have been 
experiencing serious budget shortfalls?
  S. 150 would, for the first time since 1998, change the definition of 
Internet access and, without a clear understanding of the definition's 
impact, rush to make it permanent.
  The fact is, Internet technologies are changing more rapidly than 
ever. Companies are moving quickly to provide multiple services over a 
single line, including Internet access, voice communication, data 
service, and entertainment service. It does not make sense to change 
and make permanent the definition of Internet access when the 
technologies and the different ways Internet services are being offered 
is changing so rapidly.
  My colleagues, Senators Alexander, Graham, and Carper, and I will 
introduce an amendment that simply keeps current law in place and 
offers language to level the playing field for DSL, wireless, cable, 
and satellite Internet services. Basically, what we are offering will 
be a 2-year moratorium. We will amend the current definition of the 
Internet tax moratorium to preclude the taxing of DSL.
  Many States today, under the grandfather clause of the tax 
moratorium, have been collecting taxes on DSL. Several other States, 
because of a loophole in the definition, have started collecting taxes 
on DSL connections. What we are proposing--and it is very fair--is that 
in consideration of this body extending this moratorium for only 2 
years, States such as Ohio and others that are now collecting Internet 
taxes will give them up at the end of a 2-year period. This gives them 
adequate time to prepare, in terms of their budget, for the loss of the 
revenues.
  Clearly, the States are willing to give up taxes that they are now 
collecting on the Internet in consideration of not going forward with a 
permanent moratorium with the definition that is now contained in the 
bill before us. In other words, the fear of what could happen under the 
definition of the bill that is before us today in the managers' 
amendment is so large that they are saying: We will give up that money 
just so it lasts for 2 years. During this time, we can work on a 
definition that will make sense.
  I believe that is a very fair proposal. It means we will be reducing 
taxes on the Internet in many of our States that are now collecting 
taxes.
  Last but not least, on October 29, the Wall Street Journal wrote an 
editorial entitled ``Taxing Your E-Mail.'' The Journal claimed that a 
few Republicans have decided to dress up as tax-and-spend Democrats for 
Halloween. The fact is, the Wall Street Journal article completely 
misstated what we are trying to do here tonight. The reference to 
taxing e-mail is nonsense.
  In fact the Cincinnati Enquirer followed up the Wall Street Journal 
by saying on October 31, quote:

       Anti-tax groups making Voinovich out to be the devil 
     incarnate are roasting the wrong guy. Voinovich favors 
     keeping the tax moratorium on Internet access. He helped 
     negotiate the Internet Tax Freedom Act of 1998, supported its 
     renewal in 2001 and opposes new taxes on telecommunication 
     services. And yes, he strongly opposes a tax on e-mail.

  In fact, I am going to be introducing an amendment tomorrow that is a 
Sense of the Senate to make it very clear that this is not about taxing 
e-mail. I think it is important my colleagues understand that. This is 
not what this legislation is about.
  I am hoping tomorrow we will have an opportunity to vote on this bill 
and this amendment. I hope my colleagues will be fair enough to 
understand how serious this matter is to the future of our States and 
to federalism. I hope we are successful tomorrow with our amendment.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. GRAHAM of Florida. Mr. President, there have been some comments 
by my colleagues that the people who are concerned about this issue and 
who are at risk are Governors, State legislators, mayors, county 
commissioners, and other officials at the State and local level. I beg 
to disagree. The people who are at risk include that child who is in an 
overcrowded classroom. The people who are at risk are those persons who 
have suffered a heart attack and are waiting for the emergency medical 
service to arrive. The people who are at risk include that woman whose 
car is broken down on a dark highway and who is waiting for the State 
trooper to come give assistance.
  Under this concept of federalism that our Government has followed 
since its beginning, those responsibilities--education, emergency 
response, law enforcement--have been placed in the hands of the States. 
It is their responsibility to provide for a governmental structure of 
State and local response that will fulfill those and literally 
thousands of other responsibilities.
  It has been said that federalism is the most significant governmental 
concept which has been developed by the United States. It is a 
philosophy which has always been in flux. We are looked down upon in 
this Chamber by two of the figures who represent the divisions within 
federalism: Our first Vice President, John Adams, who was a strong 
advocate of a central government; Thomas Jefferson, our second Vice 
President, who was an equally strong advocate of responsibility being 
placed as close as possible to where the people affected by that action 
of government live.
  Federalism depends upon certain fundamental principles. One, it 
depends

[[Page 28016]]

upon the principle of a respectful relationship between the central 
government and the States. It depends upon the ability to accept 
diversity.
  Most countries have a ministry of education which is responsible for 
education on a nationwide basis. We have gone a different course. We 
have 50 States which have the primary responsibility for education from 
prekindergarten to graduate school. We have the concept that the States 
should be given significant latitude so they can be the laboratories 
for experimentation in our Nation.
  We also believe under federalism that there should be, to the 
greatest degree possible, a matching of power and responsibility. If 
the States, for instance, have a certain set of responsibilities, they 
should have the commensurate power to organize to meet those 
responsibilities and to determine what level of revenues are going to 
be necessary to meet those responsibilities and from what source or 
sources those revenues should come.
  We recognize that under our Constitution, the Federal Government has 
ultimate authority. If there is a conflict between the States and the 
national government, the national government prevails. That concept was 
engrained in our Nation through the Civil War which settled the 
question of which level of government was supreme.
  The Federal Government should not use this power that it has in an 
arrogant manner but, rather, with discretion and respect. State 
governments have all power that is not delegated to the Federal 
Government. But they, too, should not use that residual power in an 
arrogant way but recognize that, while they are serving specifically 
the constituents of their State, they also are serving ends that 
benefit the Nation. Education is the most obvious example of a 
responsibility which has national service but which is directed at the 
State and local school district level.
  Mr. President, the term ``situational Federalist'' has come into 
vogue to describe people who will be Federalist, particularly in 
representing the role of State and local government when the ends to be 
met will be achieved through decentralization, and they are not 
Federalist when the ends they seek to achieve will be better 
accomplished through centralizing power.
  I reject the concept of ``situational Federalism.'' I believe, for 
this great, large, diverse, dynamic country to best function, we in 
Washington should be very respectful of the role of the States, even 
when the end result of that may be a policy position with which we do 
not necessarily agree.
  I think we have arrived at one of those moments tonight. In this 
case, almost everyone in this Chamber supports the principle that is in 
the national interest to have an expansion of access to this wonderful 
new world made possible by the Internet. But we believe we should carry 
out that objective with discretion. That is what we have done to date. 
We have incrementally, 2 years at a time, extended the moratorium on 
the ability of State and local governments to have taxation of access 
to the Internet; and we have been carefully defining just what the 
range of that moratorium on taxation would be. And outside of that 
definition, we have given the States and local governments significant 
authority. That authority has resulted in a not insignificant totality 
of the revenue of State governments.
  As an example, last year, on a nationwide basis, State governments 
collected between $4 billion and $9 billion of revenue from sources 
which this legislation would render immediately and permanently 
nontaxable. I believe that is not an example of the respectful way in 
which the Federal Government should deal with our Federal partners at 
the State level.
  As Senator Voinovich has said, and as Senator Carper and as Senator 
Alexander will say, we will make a proposal tomorrow that I think 
represents that appropriate respectful relationship. It does what we 
have done now twice before--provide for a 2-year moratorium on Internet 
access. It keeps, with one exception, the same definition of interstate 
access that we have had from the beginning of this series of 
moratoriums. It does not preemptorily eliminate the ability of those 
States that were grandfathered in to continue to collect those taxes. 
It will anticipate a gradual phaseout of that grandfather status, but 
not one that could have a shock effect on the ability of those 11 
States, which does not include my State, and which does not include the 
State of the Presiding Officer. We should not look at this parochially 
from our own interests but, rather, what best serves our 
responsibilities as Federalists.
  Mr. President, I intend to speak at somewhat greater length tomorrow 
as we get into the details of why we believe S. 150, as submitted, is 
not in our tradition of federalism, and to suggest an alternative, 
which will be offered by four of us who are now colleagues, but 
previously in our life did have the responsibility of the chief 
executive of one of our 50 States, and therefore know from personal 
experience the challenges that States have in educating its young 
people, providing critical law enforcement and emergency services to 
our people, and the necessity of having the capacity to fund those 
services, which is the equivalent of the responsibility itself. I 
believe the proposal that will be offered tomorrow is a reasoned 
proposal that assures that there will be no further encroachment on 
access to the Internet through increased taxation, while at the same 
time respecting the fact that taxation on telecommunications revenues 
represents a significant capability of the States to meet their 
obligations.
  Mr. President, with that somewhat philosophical introduction, I look 
forward to a debate on the specifics of this issue when we meet again 
tomorrow.
  The PRESIDING OFFICER (Mr. Voinovich). The Senator from Tennessee is 
recognized.
  Mr. ALEXANDER. Mr. President, I thank the Senator from Florida for 
his remarks and say to him and the Presiding Officer and Senator Carper 
how much I appreciate the opportunity to work with them on this issue. 
They have been leaders in our country, in our States, among the best 
Governors we have had over the last number of years, and I welcome the 
chance to work with them. I thank Senators Allen and Wyden for their 
hard work on this issue. They have been working at it for a long time. 
I respect that and appreciate it. I thank Senator McCain for his 
congeniality and his efforts to move things along. He and the majority 
leader, last week, agreed to give us an opportunity, as they have done 
tonight, and for tomorrow, to make our case, state our issues, have 
votes that we want to have, and I am grateful for that during a busy 
season. It would have been easier to just let this go by. There are a 
lot of issues before the Senate, but there are a bipartisan group of us 
who think this is very important as well. Each of you have stated 
tonight--and I don't need to restate it--why that is so.
  I think it is a part of the tradition of the Senate that it be the 
saucer in which the coffee cools. What we have found over the last 
several days is, as our colleagues on both sides of the aisle have 
looked at this unfunded Federal mandate that affects internet access, 
they have more questions about it. There are more people who are deeply 
concerned about the proposal of the distinguished Senators from 
Virginia and Oregon.
  So I am appealing tonight, and will be doing so tomorrow, especially 
to those Members of the Senate who have been mayors and Governors, who 
have been legislators, city council men and women, to look at this and 
the issues of Federalism. In sort of a reverse partisanship, I want to 
appeal to my colleagues on this side of the aisle, for whom the idea of 
unfunded Federal mandates has been a central part of our beliefs. It 
was the center of our Republican resurgence in 1994, the heart of the 
Contract With America. S. 1, the No. 1 Senate bill that the new 
Republican majority leader, Bob Dole, introduced in 1995, was the 
Unfunded Mandates Reform Act. So this is important stuff for the 
Republican Party.
  In listening, though, to the issues that are being discussed tonight, 
let

[[Page 28017]]

me see if I can summarize some of what I believe I have heard and 
discuss for a moment the amendment that I will be sending to the desk, 
or have already forwarded to the desk, on behalf of several of us.
  The question tonight is whether and to what extent we will allow 
State and local governments to tax Internet access. That is the issue. 
There are really two arguments among those of us who are arguing. The 
first one is--and I may be alone in this, but I don't think so--I don't 
like any unfunded Federal mandate. I supported the idea of a moratorium 
on State and local taxation of access to the Internet when it all 
began. Most of us did. That was in the mid-nineties. It is hard to 
think back that far. The Internet was an infant in a crib then and none 
of us wanted it to be squashed in its infancy.
  Then after 3 years, along came various advocates who said: Let's give 
it another 2 years. That very narrow ban on Internet access, which 
didn't cost very much money--probably so little money during that time 
it didn't qualify under the Unfunded Mandates Reform Act as an unfunded 
Federal mandate--so it was extended 2 years.
  Now the advocates of the other position are coming along and saying: 
We want to make this ban permanent, and we want to broaden the 
definition of what we mean by ``Internet access,'' so what we have here 
is not such a complex issue. We have really two questions: Do we want a 
permanent ban, or do we want a 2-year ban? The second is, Do we want to 
extend the same definition of ``Internet access'' we now have with a 
minor change, or do we want a broad definition of ``Internet access'' 
that might cost State and local governments billions of dollars? That 
is really the issue that will be presented when we vote most likely 
tomorrow.
  I send to the desk, but do not call up, an amendment on behalf of 
myself, Mr. Carper, Mr. Hollings, Mr. Stevens, Mr. Voinovich, Mr. 
Graham, Mr. Dorgan, Mrs. Feinstein, Mr. Lautenberg, and ask that it be 
filed.
  I wish to discuss three issues. One is the strange case of amnesia 
that seems to have set in, especially on my side of the aisle, about 
unfunded Federal mandates. The Presiding Officer made an eloquent 
discussion of that issue. So did other speakers.
  The second is, I would like to discuss specifically why this is an 
unfunded Federal mandate under the specific terms of the budget law 
which was amended in 1995.
  Finally, I want to say a word about the amendment which we will 
offer, which we believe is a better extension of the ban on Internet 
access than that proposed by Senator Allen and Senator Wyden.
  I very well remember 1994 and 1995. Senator Voinovich remembered he 
was in Williamsburg, VA, when the Governors met. I remember that 
Senator Voinovich, then a Governor, was the acknowledged leader of 
State and local forces who were deeply concerned about the practice of 
Washington politicians passing laws claiming credit and then sending 
the bills to mayors and Governors. Nothing really made us Governors 
much madder than that, people getting elected to Congress and presuming 
they had suddenly arrived here in Washington, that they had a great 
idea about children with disabilities, and they would order us to do it 
and then order us to pay for it, or at least pay for half of it.
  We cared about children with disabilities, too, and we felt as if we 
were elected to make those decisions. We found nothing in our laws and 
constitutions about how the Federal Government ought to define for us 
what our tax base ought to be or ought to be telling us all of these 
things.
  I vividly remember the new Republican majority leader of the Senate, 
Bob Dole, coming to Williamsburg that very meeting Senator Voinovich 
mentioned. Governor Allen, now Senator, was presiding. Thirty 
Republican Governors were there. Speaker Gingrich and Majority Leader 
Bob Dole came. Speaker Gingrich talked about the Contract With America. 
We Republicans can remember that--300 Republican candidates standing on 
the steps of this U.S. Capitol saying: Here is our 10-point plan; elect 
us, and if we break our promise, throw us out. That is what we said. 
That is what we Republicans said. What was our promise? The heart of 
that promise was no unfunded Federal mandates.
  Senator Dole knew that. It wasn't just a matter of the House of 
Representatives. He came to Williamsburg, VA. He pulled out a copy of 
the Constitution. He must have done it 100 times in the next year 
because I was with him 100 times in the next year when he did it. We 
were both campaigning in Presidential primaries, and he would read the 
tenth amendment. He would read:

       The powers not delegated to the United States by the 
     Constitution, nor prohibited by it to the States, are 
     reserved to the States respectively, or to the people.

  That was Bob Dole in 1994 and 1995. He was good to his word.
  We have a practice of the Senate. The majority leader will pick the 
most important bill and make it his bill and call it S. 1. S. 1 that 
year for Senator Dole, the new Republican majority leader, was the 
Unfunded Mandates Reform Act of 1995. As Senator Voinovich said 
earlier, it passed 91 to 9. Sixty-three of the Senators who voted for 
it then are serving in this body today. Twelve of them were House 
Members then.
  There was a lot of steam in that argument then. I would like to read 
just a paragraph from a backgrounder put out by the Heritage Foundation 
in December of 1994. This is just a little while after the Governors 
met. This paragraph says:

       Throughout much of American history, especially since the 
     New Deal--

  This is how they were looking at it--

     the Federal Government increasingly has encroached upon the 
     fiscal and constitutional prerogatives of State and local 
     government. Today this imbalance has reached a crisis point, 
     and the States are fighting back. Through a variety of 
     initiatives, they are demanding that Federal mandates be 
     funded and, in many cases, even are challenging the authority 
     of the Federal Government to impose these mandates, whether 
     funded or not. With the new more State friendly Congress--

  That is us, the Republican Congress--

     States and localities have a historic opportunity not only to 
     effect mandate relief, but also to restore balance in State-
     Federal relations.

  Then they begin to list in this Heritage Foundation document some of 
the ways States and localities that seemed to have reached their limit 
are fighting back. They are publicizing the costs of unfunded mandates. 
They are holding their Congressmen accountable. They are challenging 
Congress's authority to impose the mandates. They are suing the 
Government for the violation of the tenth amendment. They are lobbying 
Congress to pass mandate relief legislation--no-money, no-mandate 
constitutional amendments.
  They are considering a collective action to challenge the Federal 
Government's right to pass laws that impose duties on States without 
paying the bill.
  This was the mood in 1994 and 1995, and this was a major reason why 
the Republican majority was elected. I hope we don't forget that. I 
know at the time a great many of our colleagues remember it because 
they talked about it eloquently in their speeches when the Unfunded 
Mandates Reform Act was enacted in 1995.
  Senator Lott said:

       It is things like unfunded mandates that drive good people 
     out of office.

  Senator Thomas said: I served in the Wyoming Legislature and a good 
deal of our budget was committed, before we ever got to Cheyenne, to 
unfunded mandates.
  Senator Feinstein, a cosponsor of our amendment, said: I was 
president of the board of supervisors. I was mayor. I saw the 
development of these unfunded mandates firsthand and in doing so I 
probably speak for the mayors and local officials all across the 
Nation.
  Senator Nickles, chairman of the Budget Committee, said: I used to 
serve in the State legislature and we really resented the idea that the 
Federal Government would come in and mandate how we would spend our 
resources.
  I am reading speeches from the Congressional Record of Members of 
this

[[Page 28018]]

body in 1995, who voted to ban unfunded Federal mandates.
  Senator Hutchison of Texas said: Almost one-third of the increase in 
the Texas State budget over the past 3 years has been the result of 
unfunded Federal mandates--one-third, she underlined.
  Senator Burns talked about the impact of unfunded mandates.
  Senator Bennett told a beautiful story about encountering a mayor 
during a campaign in his State in Utah, and he ended up with the mayor 
saying, well, if I had a U.S. Senator in front of me with his undivided 
attention, the one thing I would say to him is stop the unfunded 
mandates.
  That is just a few of the things that were said. So the question now 
then is, is this really an unfunded Federal mandate? Well, that is not 
too hard to figure out. Some of my colleagues seemed surprised when I 
suggested this might be, so I have put a letter on every Senator's 
desk.
  I ask unanimous consent that the letter be printed in the Record.

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, November 5, 2003.
     Hon. Lamar Alexander,
     U.S. Senate, Washington, DC.
       Dear Senator: This letter responds to the three questions 
     you posed in your letter of November 4, 2003, regarding S. 
     150, the Internet Tax Nondiscrimination Act.
        1. How much revenue is being collected by state and local 
     governments from taxes on DSL?
        CBO estimates that state and local governments currently 
     collect at least $40 million per year in taxes on DSL service 
     (Digital Subscriber Line--a high-speed data transmission over 
     regular telephone wires). They are likely to collect revenues 
     totaling more than $80 million per year by 2008 due to growth 
     in the use of high-speed Internet access. These collections 
     are primarily sales and use taxes on DSL service.
        2. What would be the revenue loss to state and local 
     governments under the managers' amendment to S. 150?
        Based on the version of the proposed amendment CBO 
     received late this afternoon (S150MGR.6), CBO has determined 
     that the bill would create intergovernmental mandates as 
     defined in the Unfunded Mandates Reform Act. We estimate that 
     those mandates would impose costs on state and local 
     governments in at least one of the next five years that would 
     exceed the threshold established in that act ($60 million in 
     2004, increasing to $66 million in 2008). We have identified 
     three major impacts, each of which would, by itself, exceed 
     the threshold:
       Revenue losses of $80 million to $120 million per year, 
     starting in 2007, to state and local governments that are 
     already taxing Internet access and were covered by the 
     ``grandfather clause'' contained in the Internet Tax Freedom 
     Act. Some of these are taxes on DSL services. We have no 
     information to suggest that other states will impose taxes on 
     Internet access in the near term.
       Other states are currently imposing taxes on charges for 
     the portions of DSL services they do not consider Internet 
     access. Those states would lose at least $40 million in sales 
     and use taxes on DSL services in 2004, and at least $75 
     million by 2008. The preemption of DSL taxes would stem from 
     section 2(c) of the amendment, which defines ``Internet 
     access.''
       Substantial revenue losses that could result from:
       (a) The inability of state and local governments to collect 
     transactions taxes (including sales and use taxes and gross 
     receipts taxes) on certain types of telecommunications 
     services. For example, if technological change shifts 
     traditional telecommunications services to the Internet, 
     those services--for example local and long distance phone 
     calls--could be included, for free, when a customer purchases 
     Internet access;
       (b) The free inclusion of content (movies, music, and 
     written works) with Internet access in response to the tax 
     exemption provided by this bill. Such content is subject to 
     sales and use taxes under current law but might increasingly 
     be available at no charge as part of an Internet access 
     package.
       CBO does not have sufficient information to estimate these 
     revenue losses, but we believe they could grow to be large. 
     There is some question, however, as to what types of 
     transactions could not be taxed under the bill; under some 
     interpretations, these revenue losses could remain quite 
     small. The issue might ultimately have to be resolved in the 
     courts.
       3. How much tax revenues do state and local governments 
     collect on telecommunication services?
       Based on information from industry representatives, state 
     and local governments, and federal statistical sources, CBO 
     estimates that state and local governments currently collect 
     more than $20 billion annually from taxes on 
     telecommunications services. Such taxes generally fall into 
     two categories: transactions taxes and business taxes. 
     Transactions taxes (for example, gross receipts taxes, sales 
     taxes on consumers, and taxes on 911 service) account for 
     about two-thirds of the total.
       In arriving at this estimate, CBO took into account the 
     fact that some companies are challenging the applicability of 
     taxes to their services, and thus may not be collecting such 
     taxes, even though states and local governments feel they are 
     obligated to do so. Such potential liabilities are not 
     included in the estimate.
       If you would like further details on the information 
     provided in this letter, we would be pleased to provide it. 
     The staff contacts for this legislation are Sarah Puro and 
     Theresa Gullo.
           Sincerely,
                                                Robert A. Sunshine
                              (For Douglas-Holtz-Eakin, Director).

  Mr. ALEXANDER. There is a letter that I received yesterday from the 
Congressional Budget Office on every Senator's desk. It describes the 
three ways in which the proposed ban on State and local Internet access 
taxes by Senator Allen and Senator Wyden violate the Federal Budget 
Act--specifically, the amendments of the Unfunded Mandates Reform Act 
of 1995.
  These are the three ways: One, there is a revenue loss of $80 million 
to $120 million per year to State and local governments already taxing 
Internet access. There are 11 such States.
  Second, there are losses of $40 million to $75 million of taxes on 
DSL services that States now collect. That is the second violation of 
an unfunded mandate.
  Third, and this makes the point it is not only an unfunded mandate, 
it is potentially a great big unfunded mandate. The Congressional 
Budget Office says in its letter that the third way this proposal 
violates the Budget Act is ``substantial revenue losses that could 
occur'' when technological change shifts traditional communication 
services to the Internet--for example, local and long distance phone 
calls--or when content, music, movies, written works is provided free 
with Internet access.
  This may sound complicated but it is not so complicated. Basically, 
what this says is it already is happening, that your telephone company 
or your cable TV company will provide your Internet access. CBO says 
that State and local governments today now collect more than $20 
billion annually from transaction sales and use taxes on 
telecommunications services.
  What this letter further says is that the Allen-Wyden proposal will 
take an undetermined amount of this $20 billion and ban the ability of 
State and local governments to include that as part of their tax base. 
It is enough, according to the CBO letter, to define it as an unfunded 
Federal mandate. But they say they cannot tell the exact amount of the 
$20 billion that might be exempt from State and local taxation.
  The Multistate Tax Commission said it could tell. It estimated $4 
billion to $5 billion. That is an awful lot of money. The Senator from 
Ohio, the Presiding Officer, in his argument read a list of what State 
revenue officers have told him, and what they estimate it might take.
  The problem is the broader definition of Internet access, which is 
contained in the bill of the distinguished Senators from Virginia and 
Oregon, raises the likelihood that some--maybe a lot--of the $20 
billion that is now used by State and local governments to pay for 
schools, State parks and to keep other taxes down, would be taken away 
from their tax base.
  What do we then do about it? Well, we think we have a suggestion 
which we hope tomorrow our colleagues in the Senate, if we are able to 
vote on it, then will agree with us. Our suggestion is an extension of 
the current ban on Internet access for 2 years, with the same narrow 
definition that we now have, with the exception that we would make sure 
that in 23 States which do not now tax DSL, that is telephone service 
that delivers broadband, they would not be allowed to do that.
  So in taking the issues that I heard from the distinguished Senators 
from Virginia and Oregon, I would summarize them this way: They argue 
that the Internet is so valuable that we need to override this law we 
have against unfunded Federal mandates. I agree it is valuable but it 
is not an infant. It is a pretty big boy. It is out there in the world. 
We know what it is and it should stand on its own now.

[[Page 28019]]

  The telephone is also a magnificent invention. We do not exempt it 
from taxation. The television is a magnificent invention. We do not 
exempt it from taxation.
  If we really think in the Congress that the Internet deserves to be 
completely exempt from State and local taxation, then why do we not pay 
for it? Why do we not pass a law that we might call the Unfunded 
Federal Mandate Reimbursement Act and just let every mayor and every 
Governor send us a bill every year and we will send them a check. If it 
turns out to be $20 billion, we will send them $20 billion. If it turns 
out to be $4 billion, we will send them $4 billion because we will have 
said the Internet is so important that we in Congress think it ought to 
be subsidized, that there should be relief from taxation, and so we are 
going to pay for it. That would be the honest thing to do, rather than 
just to say we think it is important but you pay for it.
  That is what we said with how we helped disabled children. That is 
what we said with stormwater runoff. That is what we said with clean 
water. We think it is a great idea, you pay for it. That is why we are 
in Washington. We print money. You balance budgets. We think it is a 
good idea, you pay for it. That is what the fuss is about.
  The second thing I have heard is it is in interstate commerce and we 
could not touch it. Telephones are in interstate commerce. We do not 
keep States and local governments from taxing telephones. Televisions 
are in interstate commerce. Buses are in interstate commerce. Planes 
are in interstate commerce. Catalog sales are in interstate commerce. 
Severance taxes are in interstate commerce. A great big part of every 
State and local government's budget is made up of a tax base that 
included items that are in interstate commerce. So that argument does 
not wash at all.
  Taxing broadband, that is a good point. Broadband is coming fast. We 
do not want to interfere with that so our conclusion is, let us stop it 
in the 23 States that do not now tax broadband. Let us put DSL and 
cable--that is the broadband is delivered--on an equal playing field. 
In the States that do tax DSL, they can continue that for the 2 years 
of the ban.
  Multiple taxation, that was raised by the Senator from Virginia. 
Well, we are extending the current language and it bans multiple 
taxation. Discriminatory taxation, we propose to extend the current 
language, and that bans discriminatory taxation.
  State and local taxation on Internet access, we would propose to 
extend the ban on Internet access taxation for 2 years so we can think 
this through. So we have taken care of that as well. Tomorrow, when 
hopefully we will be voting on this, we will have this choice: Do you 
want a permanent ban on Internet access taxation, or do you want a 2-
year ban? Do you want a broad definition of what we mean by Internet 
access, a definition that could cost States a significant share of 
their State or local tax base, or do you want a narrow definition, 
virtually the same one we have today?
  I believe the prudent thing for us to do is to take the law that we 
have today, slightly modify it to put DSL and cable on an equal playing 
field, extend it for 2 years, and let us continue the debate we are 
having about how to define the two words ``Internet access.'' That is 
really the problem. I agree with the Senator from Oregon. He has worked 
long and hard on this. There have been many meetings. We just don't 
agree on what the definition of Internet access is.
  But until we can agree, we should not put this potentially huge 
unfunded Federal mandate into the law. So tomorrow I hope to bring up 
this amendment I have filed tonight. I hope our colleagues will compare 
it with the proposal of the Senator from Virginia and Oregon, and I 
hope they will adopt ours.
  I also have a point of order I could raise, which would cause the 
Senate to consider whether the Allen-Wyden amendment is an unfunded 
Federal mandate. If there is a motion to waive the point of order, 
which I believe would be sustained by the Chair, then Senators would 
have an opportunity to cast a vote for or against an unfunded Federal 
mandate. But I am going to reserve that option and hope that sometime 
tomorrow we can have a clear up-or-down vote on the amendment which I 
offer with a number of other Senators.
  I look forward to the debate tomorrow.
  Mr. WYDEN. Mr. President, very briefly, because Senator Lautenberg 
has not had a chance to speak and he has been gracious enough to just 
give me a couple of minutes to respond to our friend from Tennessee, I 
think he knows we have a difference of opinion on this issue, but I 
want him to know how much I appreciate the way he has worked with this 
Senator. I think he is going to be a great addition to the Senate. I 
look forward to the many issues where we are going to find common 
ground, even though this is not one of them.
  Just briefly on this unfunded mandate question, I think it is clear 
that, with the more than 7,000 taxing jurisdictions in our country, if 
ever there was something that was inherently interstate in nature, it 
is the Internet. I think we can just imagine the kind of chaos if even 
a small fraction of these 7,600 taxing jurisdictions took a bite out of 
the Internet. We would have a crazy quilt of laws with respect to the 
Internet.
  There are a whole host of activities where the Federal Government has 
essentially made it clear they were inherently interstate in nature and 
you do not hear the States expressing any grievances. You don't hear 
States complaining that they can't tax airline tickets or mail or a 
variety of other things because we are talking about something that is 
so crystal clear in terms of its very nature--in effect, the essence of 
article I, section 8, of the Constitution--that this has been an area 
where the Federal Government has said it is not appropriate to let 
thousands of local and State jurisdictions simply make a mishmash out 
of a regulatory regime that needs to be uniform in nature.
  I know we are going to talk more about that tomorrow. I am going to 
go through, tomorrow, the history of the Unfunded Mandates Act that 
supports the position Senator Allen and I have taken.
  Two other points very quickly and then I do want to let our friend 
from New Jersey have some time for which he has been patiently waiting. 
With respect to the telecommunications services issue which the Senator 
from Tennessee has discussed, I want to make it clear that Senator 
Allen and I have done everything but hire a sky writer to fly over the 
Capitol, to make it clear that telecommunications services, which can 
be taxed today, would and should be taxed in the future. It is 
absolutely clear with respect to all the work we have tried to do, both 
in the committee and working with various State and local officials, we 
feel very strongly about it. It is what the bundling issue has been all 
about in terms of separating out Internet access, which should not be 
taxed, and telecommunications services, which ought to be taxed.
  Senator Allen and I continue to be interested in working with 
colleagues to try to find common ground in this area, but the two of us 
have done everything except march down the street with a sandwich 
board, trying to argue that telecommunications services must be taxed 
and that it is Internet access about which we are concerned.
  Finally, the last point I would make is we need to have a discussion 
in the Senate with respect to what the competitive playing field will 
look like under the amendment at least as outlined tonight by the 
Senator from Tennessee. We have already seen a competitive disadvantage 
established, given the developments in the last few years between cable 
and telecommunications. It is the view of the Senator from Virginia and 
I, as two Members of the Commerce Committee who have focused on this 
issue for many months, that we think the competitive disadvantage, 
which has been established in the last few years between cable and 
telecommunications, will widen under

[[Page 28020]]

the proposal the Senate is going to be asked to look at tomorrow as an 
alternative. We are going to have a chance to discuss it.
  Again, I express my appreciation to the Senator from Tennessee with 
respect to how he has handled this issue. We have a difference of 
opinion on it, but I admire the Senator from Tennessee very much and I 
look forward to working closely with him.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.


                  Unanimous Consent Request--H.R. 2559

  Mr. REID. Mr. President, I direct the attention of my friend from 
Tennessee to Homeland Security and to Leave No Child Behind. If he 
wants to find some unfunded mandates, have him come to Nevada and find 
out what those two pieces of legislation have done--I should say that 
piece of legislation, Leave No Child Behind, and what we have done to 
the State of Nevada and every other State by not properly funding the 
Leave No Child Behind Act and what we have done with all of our demands 
on State and local government with our unfunded mandates relating to 
homeland security. That is the subject of another speech.
  Mr. President, I ask unanimous consent that the Senate proceed to the 
conference report to accompany H.R. 2559, the Military Construction 
appropriations bill.
  I do this because, in the State of Nevada, Nellis Air Force Base and 
the Fallon Naval Air Training Center are desperately in need of 
construction starts and completion of jobs that are already underway.
  So I hope my friends on the other side will allow this very important 
conference report to be agreed to and the motion to reconsider be laid 
upon the table, and that be done with no intervening action or debate.
  I so move.
  The PRESIDING OFFICER. Is there objection?
  Mr. ALEXANDER. I object.
  The PRESIDING OFFICER. Objection is heard.
  The PRESIDING OFFICER. The Senator from New Jersey.
  Mr. LAUTENBERG. Mr. President, first I thank my colleague from Oregon 
and my colleague from Virginia for the hard work they did to get us to 
this point where we have an opportunity to review some of the problems 
we have seen in the Internet tax area. I had an early opportunity to 
review and carefully consider S. 150, and I support the stated purpose 
of this legislation. I agree that the American consumer should be 
encouraged and not taxed to access the Internet.
  I also agree with the stated purpose of this legislation, that the 
Federal Government should ensure tax-free access to the Internet, 
irrespective of the technology the consumer uses, whether it is the 
regular dial-up modem, cable modem, DSL, wireless, or satellite.
  My concerns with this legislation don't stem from its stated 
purposes. My concerns are with the legislation's unstated purposes and 
unintended consequences which most State, county, and local tax experts 
believe would jeopardize important revenue streams, such as the gross 
receipts tax, that were permitted under the first two iterations of the 
Internet tax moratorium.
  The Internet tax moratorium bill was conceived in 1998 as a 
proconsumer legislative attempt aimed at increasing American access to 
the Internet. Now that the bill has been rewritten and greatly 
expanded, it has as a result become another corporate giveaway of 
potentially enormous and devastating proportions.
  According to the Commerce Committee report accompanying S. 150, the 
original enactment of this legislation in 1998 imposed a temporary 
moratorium on ``certain taxes that could have a detrimental effect on 
the continued expansion of Internet use in the United States.''
  In 1999, only 26 percent of United States households had Internet 
access, according to the Department of Commerce. In September 2001, 51 
percent of United States households had Internet access. In 2002, 
according to the Forrester Research firm, 64 percent--quite a jump in a 
year--of U.S. households had Internet.
  The number of households with Internet access has more than doubled 
in 4 years, from 26 percent in 1998 to 64 percent in 2002. I am sure 
the rate of Internet access today is even higher.
  Many households, however, only have basic dial-up access to the 
Internet and haven't moved to the faster broadband access services.
  Clearly, the supporters of this bill can't blame an access tax that 
isn't being imposed for the digital divide that exists between people 
who have Internet access and those who do not, or between households 
which can afford broadband or wireless Internet access service and 
those households which still use the narrowband dial-up.
  Nevertheless, I would support an extension of the moratorium on 
Internet access taxes. By temporary, I am talking about a couple of 
years. But to make the moratorium permanent, as this bill would do, in 
my view is an abdication of responsibility on our part.
  I cannot and will not support a permanent moratorium that is so 
poorly defined that it won't just apply to access taxes. I cannot and 
will not support a moratorium that will deprive the States of $4 
billion to $9 billion in revenues by the year 2006, according to the 
Multi-State Tax Commission and the National Governors Association. 
Based on the language in the bill reported out of the Commerce 
Committee, my home State of New Jersey by itself stands to lose $833 
million in annual revenues. Other States also stand to lose hundreds of 
millions of dollars as well. Maybe some Senators are willing to look 
the other way and not address the problems with this bill. So be it. 
But I cannot do that. Even under the managers' amendment, which is a 
modest improvement, the annual revenue loss for New Jersey is believed 
to be somewhere around $600 million. My question is: Why are we doing 
this to States when they are facing the biggest fiscal crisis they have 
seen since World War II or even the Depression years?
  A permanent, poorly crafted moratorium? No way. I cannot in good 
conscience support something so far reaching.
  That is why I support an amendment I believe will be offered by some 
of my colleagues, Senators Alexander, Carper, and Voinovich, to extend 
the existing moratorium for only 2 years, and to fix the discrepancy in 
the way DSL and cable modem are treated for tax purposes.
  I realize even if this amendment is offered and agreed to, States 
such as New Jersey will still lose much-needed revenue, but at least we 
can and must minimize the impact.
  I yield the floor.
  Mr. WYDEN. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. McCAIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. McCAIN. Mr. President, prior to wrap-up, this completes the 
debate and discussion for this evening. It is my understanding that 
Senators from Tennessee, Ohio, and Delaware have an amendment that has 
been filed and they will call it up when we begin our continued debate 
on this legislation tomorrow morning at 9:30. I hope we can limit our 
debate on that amendment and have a vote on it and then take up other 
amendments. It is still the intention of the majority leader to finish 
this legislation tomorrow. I hope we can achieve that goal.
  I know everybody would like to go home on Friday afternoon, but I 
have been assured by the majority leader we will remain until 
completion of the legislation.
  I think it has been a good debate tonight. I thank all of my 
colleagues. I look forward to disposing of the amendments tomorrow when 
we reconvene at 9:30.
  I yield the floor to the distinguished Senator from Nevada.

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