[Congressional Record (Bound Edition), Volume 150 (2004), Part 6]
[Senate]
[Pages 7542-7565]
[From the U.S. Government Publishing Office, www.gpo.gov]




         INTERNET TAX NONDISCRIMINATION ACT--MOTION TO PROCEED

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

       A motion to proceed to the bill ( S. 150), a bill to make 
     permanent the moratorium on taxes on Internet access and 
     multiple and discriminatory taxes on electronic commerce 
     imposed by the Internet Tax Freedom Act, and for other 
     purposes.

  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I would like to address my remarks 
for the next few minutes on the discussion that we have been having for 
the last 6 months in this body on the question of how to deal with the 
phenomenon of high-speed Internet access. It is the fastest growing new 
technology in America, according to a New York Times article last week. 
We have some differences of opinion about how to proceed in terms of 
the taxation and regulation of this phenomenon, not only what it should 
be but whether the Federal Government, the State government, or local 
government should do it.
  The leader has asked all of us who have different opinions to work 
together. We have tried that. We have worked hard. Senator McCain, 
chairman of the Commerce Committee, has been especially involved. I am 
grateful to him for that. Senator Allen and Senator Wyden, who have 
principled positions on this discussion, have worked hard to try to 
compromise on the issues, as have I and my colleagues, but we simply 
have a difference of opinion.
  Now, today, we begin debating a motion to proceed and to move down a 
track in the Senate that, I believe, is the wrong track. I welcome this 
opportunity and I thank the leader for giving us a chance to have a 
full debate, which we will be having this week. I am confident that by 
the time we are finished the Senators who have had a chance to spend 
more time on this, and that the citizens of the country who have had a 
chance to understand more clearly what we are talking about, and the 
State and local officials who will see exactly what we are doing which 
might affect the future of State and local governments in America will 
suddenly say there is a little more to this than meets the eye and that 
we will come to a good conclusion.
  I believe it was President Harry Truman who had on his desk a sign 
that said, ``The buck stops here.'' What we are about to do today and 
later this week with the consideration of S. 150 is to begin a series 
of votes about passing the buck. I looked on the Truman Presidential 
library Web site to see why Harry Truman, who was noted for plain 
speaking, liked the phrase ``The buck stops here.'' Here is what the 
Truman Web site says:

       The saying ``the buck stops here'' derives from the slang 
     expression ``pass the buck'' which means passing the 
     responsibility on to someone else. The latter expression is 
     said to have originated with the game of poker, in which a 
     marker or a counter, frequently in frontier days a knife with 
     a buckhorn handle, was used to indicate the person whose turn 
     it was to deal. If the player wishes to deal, he could pass 
     the responsibility by passing the buck, as the counter came 
     to be called, on to the next player.

  That would be my text today, if I were preaching a sermon, because we 
are about to vote about passing the buck. By passing the buck, if we 
were to do this, we would create permanent confusion about how to 
regulate and tax the fastest growing new technology in America--high-
speed Internet access. We would create a permanent tax loophole for the 
high-speed Internet access industry and the telecommunications 
industry, and the high-speed Internet access industry, so far as I can 
tell, must already be the most heavily subsidized in America by 
Federal, State, and local laws. We would be voting for higher taxes, 
not lower taxes, because if you order taxes to be lowered on 
telecommunications or high-speed Internet access, you are raising taxes 
on local property taxes or local sales taxes on food or local 
corporation taxes on manufacturing companies that might be struggling 
to keep from moving their jobs overseas.
  It is a big trick to say this is a bill that lowers taxes. It does 
create a tax loophole for one industry. But what cost does that mean? 
That just means everybody else pays higher taxes.
  Aren't a lot of people going to be surprised if this should be 
enacted and suddenly they find their mayor and their Governor raising 
local property taxes, raising local sales taxes on food and imposing a 
car tax again? That is what happens. You lower this tax and you raise 
that tax.
  Then the worst thing to me as a former Governor--and there are many 
in this body who have been Governors, who have been State tax 
commissioners, who have been mayors, who have been State treasurers, 
who have been local officials--the worst thing to me is we are breaking 
our promise about doing no harm to State and local governments, 
particularly on my side of the aisle, the Republican side of the aisle.
  We were elected promising to do no harm to State and local 
governments. I will be talking a lot about that this week because I 
believe in that. I heard it. It wasn't just from me.
  In 1994, the Republican revolution began to occur. In 1995 and 1996, 
we had Presidential elections. When the Republican Party gained control 
of Congress in 1995, the first thing it did in this body was pass S. 1.
  The Presiding Officer very well knows the distinguished Senator who 
was the majority leader at that time. His name was Senator Bob Dole of 
Kansas. He carried around in his pocket the tenth amendment. He said S. 
1 means no more unfunded mandates.
  If we vote to put into motion S. 150 and the companion measure that 
passed the House, we will be imposing a massive unfunded mandate on 
State and local governments. We will be breaking our promise.
  It is rare that the Senate has had an opportunity to do so much harm 
with one vote. It is very difficult to find a situation where you can 
cast one vote and create permanent confusion about the fastest growing 
technology and a permanent tax loophole for the most subsidized 
technology I can find. With that one vote, you could also impose higher 
taxes, local property taxes, car taxes, taxes on food, and sales taxes, 
and break your promise to State and local governments to do no harm.
  There is a better way to go about this. I believe that I and my 
colleagues have suggested that. Senator Carper and I and a group of 
nine other Senators of both parties have said: Wait a minute. Let us do 
this a different way. There is a way we can vote to ban new taxes on 
Internet access for 2 years. We can provide the Senate time to consider 
what to do about this phenomenon of high-speed Internet access growth, 
and we can keep our promise to State and local governments.
  Rarely has there been a chance to do so much good with one vote, and 
that would be to pass the Alexander-Carper compromise, or take the 
original moratorium of 1998 and enact it for 2 more years. That would 
be a vote for no taxes, it would be a vote for no unfunded mandates, 
and it would be a vote for time to study it. That would be the wise and 
prudent course. That will be the argument we will be making today.
  Today, we begin a series of procedural motions--that is the way the 
Senate works--designed to give us a full opportunity to consider and 
discuss these issues.
  Senators Allen and Wyden have offered S. 150 which will be coming up 
this afternoon. I am under no illusions about the fact we will be 
getting to it even though I think it is moving us in the wrong 
direction and along the

[[Page 7543]]

wrong track. Senator Carper and I, and nine others, have offered the 
compromise I just suggested. I believe that would be the best way to 
go--a 2-year extension of the current ban on State and local taxing of 
international access. We did it in 1998. Congress did it in 2000. 
Congress can do it again in 2004.
  By voting to extend the original moratorium on taxation for 2 more 
years, Members of Congress will be casting a vote against taxing 
Internet access--casting a vote for allowing time to consider what the 
best long-term solution is and casting a vote for doing no harm to 
State and local governments. I believe, if the House were to agree with 
us, we could get the legislative action we desire in this session.
  I am prepared to move ahead, as I have been all year, and I have 
suggested for 2 years ways we could move ahead. I am for banning 
taxation for the next 2 years. I am willing to support that. I am for 
no unfunded mandates and I am for time to study. Prospects for 
legislative action might have been different this year, if the House of 
Representatives had sent to the Senate a different piece of legislation 
to begin with instead of sending legislation to extend the current 
moratorium.
  Moratorium means a temporary timeout. That was the idea in 1998. 
Everybody said we have this new thing, the Internet. In 1998, when the 
moratorium was passed, I would wager that almost no one in the Congress 
had ever heard of high-speed Internet access. The only kind of Internet 
access we were using was AOL which hooks up to your dial telephone. But 
we said--and I agreed with this and I supported this--that we don't 
really understand what this is. This is new. Let us just put in a 
temporary timeout. Then we will decide what to do. The assumption, in 
my mind at least, was that as the Internet industry grew and became 
mature, it would pay the same taxes as everyone else. We don't say the 
Senator from North Carolina and the Senator from Tennessee will pay 
taxes which the Senator from Wyoming will not pay. We have to have an 
awfully good reason for that. We believe in the fair and equitable 
distribution of taxes.
  We are talking about whether the Internet industry should pay the 
same sales taxes and the same kind of business taxes that everybody 
else is paying or whether we should lower their taxes permanently and 
create a great big loophole for them, subsidize them some more, and 
then have higher taxes for everybody else.
  The House didn't send us another temporary timeout which would have 
been the third on State and local taxation of Internet access. The 
House sent over a permanent ban. But it was more than that. Instead of 
banning State and local taxation of Internet access--which would mean 
my relationship to the Internet service provider, the same as my 
relationship to a telephone company or a cable company or a satellite 
TV company--they broadened the definition of Internet access.
  Whether intentionally or unintentionally, this train got on the wrong 
track, running completely out of control. Maybe it was because this is 
a very complex subject, we have a lot going on here, and not many 
people were paying close attention, but it got out of control.
  Basically, what started out as a modest benefit to consumers, a 
temporary timeout while we could see what was happening, the House 
turned it into a permanent big tax loophole for the Internet access 
industry, the telecommunications industry. Then, on top of that, they 
turn around and send the bill to State and local governments. We do not 
do that much. We debate taxes all the time. We reduce taxes. Sometimes 
they go up, but we do it ourselves. I did not know you could do this.
  I ran for the Senate the same year as the Presiding Officer the 
Senator from North Carolina. If I knew the Senate could do this, I 
might have run for the Senate promising to make a Federal law 
abolishing local property taxes as my way of encouraging home 
ownership, or I might have run for the Senate promising to pass a 
Federal law to abolish State car taxes as a way of encouraging 
transportation to work, or I might have run for the Senate promising to 
pass a Federal law abolishing State taxes on food because there are a 
lot of hungry people. But that would have been a trick on the voters. 
The voters would have caught up with me and said, Wait a minute, Lamar, 
who are you trying to fool? You cut our sales taxes, and now we will 
have an income tax in Tennessee. Because if sales taxes go down, this 
must go up.
  I suppose one could say we will close a few schools, raise tuition, 
and cut the cost of Government. But it means lower taxes for one group 
of taxpayers and it means higher taxes for another. That is what we 
have over here.
  Sometimes it has been said these figures that have been used are not 
accurate, so I have some detailed information for the Congressional 
Record. For example, the bill sent to the Senate from the House of 
Representatives in the name of a simple, permanent ban on the little 
connection we make to the Internet access would do this: One, it would 
put at risk $10 billion collected annually in telephone transaction 
taxes in the State and local governments. State and local governments 
collect more than $10 billion annually in taxes on telephones. If we 
tell them they cannot do that, what do they do? Senator Feinstein has 
said, and I am sure she will say later this week, she has 125 cities 
and counties in California that say this might interrupt 5 to 10 
percent of their local budgets. We cut one tax and they raise the 
property tax. That is not what we are supposed to do. We promised not 
to do that in 1995.
  There are 62 Senators serving here today who in 1995 voted to pass 
the Unfunded Mandates Act which said no money, no mandate. If we break 
our promise, throw us out. I want to keep the promise.
  The first problem with the House bill is $10 billion in telephone 
taxes. The second problem is $7 billion annually in business taxes 
currently collected. I have a source from each one of these. The first 
is the Congressional Budget Office. The source for the $7 billion is in 
the Multistate Tax Commission memoranda and a letter from the 
Congressional Budget Office. The third unfunded mandate in the House 
bill, half a billion annually in business taxes currently collected on 
the Internet backbone. We will hear more about that this week. The 
backbone is the infrastructure of the Internet. The same kind of 
business taxes on the backbone is like business taxes on any other 
business. Nobody likes to pay taxes, but are we going to exempt them 
and make everybody else pay? Four, cost to State and local governments 
was $80 to $120 million. On grandfathered States--that means 11 States 
were permitted after the 1998 temporary timeout moratorium; there are 
about 16 States already taxing dial-up Internet service so they are 
permitted to keep doing that--that is $80 to $120 million out the 
window, and another $40 to $75 million in 27 States where they are 
taxing the part of the Internet access provided by the telephone 
companies, DSL.
  Finally, the language of H.R. 49, the bill that came over from the 
House, would hurt universal service fund fees and September 11 service 
fees. That is very important in Alaska, rural North Carolina, and 
Tennessee. If there is less money in the fund, there is less money for 
September 11 and universal service.
  This bill came to the Senate like a freight train. Nobody voted 
against it. It passed by consent order. What did it do? It came over 
wearing a dress that said, ``I am Ms. Internet Access Tax Ban.'' But it 
actually was $10 billion in telephone taxes, $7 billion more in 
business taxes, half a billion in business taxes, sales taxes of a 
couple hundred million a year, universal service fund fees, September 
11 fees, all of that which is the responsibility of State and local 
governments. We say, here, you cannot collect. That is an unfunded 
Federal mandate of the worst sort.
  Now after some discussion, the bill has gotten a little better. 
Senator Allard, to his great credit, has worked hard. There may be no 
better-humored Member of the Senate.
  He and I joined in a debate at the Heritage Foundation on a minority 
of principle. We had a good debate and discussed the issues. He 
improved the

[[Page 7544]]

bill some. There are fewer unfunded mandates.
  I will be asking unanimous consent at the end of my speech to have 
printed in the Congressional Record the unfunded Federal mandates in 
his bill, S. 150. Still, as far as I know, his bill threatens $3 to $10 
billion in telephone taxes currently collected. He and I have said to 
each other we do not intend to do that. However, that was several weeks 
ago and we have been working hard to write language we agreed on that 
expressed our mutual intention. We have failed so far.
  No. 2, his legislation continues to say to State and local 
governments, you cannot collect half a billion a year in business taxes 
that are currently collected on the Internet backbone.
  No. 3, his legislation would phase out the sales taxes State and 
local governments are currently collecting on Internet access. So S. 
150 continues down the wrong track. It continues to provide a big 
subsidy to the fastest growing technology already heavily subsidized.
  How much does it cost the Federal taxpayer? Not a penny. Not a penny. 
We will send the bill to Governors and mayors and local governments and 
let them raise property taxes, let them raise sales taxes on food, let 
them worry with all the other unfunded mandates and add this right on 
top of it. That is what we are doing. We are passing the buck.
  I ask unanimous consent at the end of my remarks I be allowed to have 
printed in the Record the unfunded Federal mandates on H.R. 49 first, 
and unfunded Federal mandates on S. 150 next.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. ALEXANDER. Madam President, there is no doubt this is an unfunded 
Federal mandate. We can talk about that more this week. Some of my 
colleagues on my side have come up and said that does not sound like an 
unfunded mandate. I thought an unfunded mandate was when we told you 
you had to do something and pay for it. But if I tell you you have to 
stop doing something, that you cannot collect that tax, that is a cost 
I have imposed on you. If I and the Congress say to Governor Alexander, 
in Tennessee, ``Stop collecting property taxes, stop collecting sales 
taxes,'' then I have to go think of some other tax--lower taxes here; 
higher taxes there. Nothing makes local officials madder than some 
Member of the U.S. Senate or Congress to come up here and have some big 
idea and pass a law, and take credit for it--lower taxes on the 
Internet--and then send the bill home to them and then that same Member 
of Congress or Senator is usually down to the district the next weekend 
making a big speech about local control. Nothing gets the blood up in a 
Senator or Governor or mayor or county commissioner more than that, and 
that is exactly what we are doing.
  If the Congress wants to create a big, additional tax break for high-
speed Internet access, then Congress should pay for it and not send the 
bill to State and local governments. I think we, as Members of 
Congress, ought to do as Paul Harvey says, and tell the rest of the 
story: If we lower your taxes on Internet access, we are going to raise 
your property taxes or your car taxes. Sure as the world, it is going 
to be our responsibility. We can call this the Raising the Local 
Property Tax Act of 2004 or the Car Tag Act of 2004 or the Sales Tax on 
Food Act of 2004 or the Raise the Corporate Tax on Manufacturing and 
Send the Jobs to China Act of 2004. That is what we will be doing.
  One of the other issues I hope we talk about this week is whether 
there needs to be an additional Government subsidy for high-speed 
Internet access on top of the billions already provided by Federal, 
State, and local governments.
  According to the Congressional Research Service, there is already at 
least $4 billion in Federal tax subsidies to encourage the use of high-
speed Internet access. I have a report from the Alliance for Public 
Technology. I will not inflict its length on the Congressional Record 
today, but it is filled with State and local programs to encourage the 
growth of high-speed Internet access--dozens and dozens of State and 
local subsidies, in addition to the Federal subsidy to encourage the 
spread of high-speed Internet access.
  Why is there a need for more subsidy at all when the New York Times 
reported, last week, that high-speed Internet access is the fastest 
growing new technology in America? It is growing at an astonishing 
rate. According to a Congressional Budget Office report in February, 
the United States has the highest number of broadband subscribers--
``broadband'' is another name for high-speed Internet access--at 19.8 
million. It is probably a lot higher today.
  An April 19 story from the Associated Press tells us that a new study 
by the Pew Internet and American Life Project has found that almost 
one-quarter of all Americans--more than 48 million people--have high-
speed Internet access at home. This is two out of every five Web users 
who have it at home. The same study showed that more than half of 
Americans have it at work. CBO told us, last December, that 88 percent 
of all ZIP codes have at least one high-speed subscriber, and 29 
percent have access to more than five.
  In September of 2002, the U.S. Department of Commerce told us 
consumers are adopting broadband technologies at a faster pace than CD 
players, cell phones, color TVs, and VCRs during the same period in 
their development. CBO, the Congressional Budget Office, reported, in 
December of last year, that cellular phones took 6 years from their 
introduction to reach 7.5 million subscribers; high-speed Internet 
access reached 7.5 million subscribers in half that time.
  Then, why do we need additional taxpayer subsidy? Why do we need to 
say to these folks: You pay less taxes and the rest of us will pay 
more? You can barley pick up a newspaper today without reading about 
some new initiative from the private sector offering high-speed 
Internet access.
  According to CBO, from 1996 to 2001, the four largest telephone 
companies increased their investment in broadband technologies by 64 
percent. Cable companies increased their investment by 68 percent in 
the same period.
  Now, sometimes this discussion makes my head hurt because high-speed 
Internet access is a subject that is unfamiliar to most of us, and you 
almost have to warm up in order to be able to talk about it and 
understand the complexities of what is going on. But, in effect, it is 
very simple: It is just faster access to the Internet. It can be 
provided in lots of different ways. Your cable company will sell it to 
you. Your telephone company will sell it to you. There is a nice young 
woman who comes on your direct satellite television and she will sell 
you high-speed Internet access.
  There is another way we might get it. There may be more. Things are 
changing. But your electric company may sell it to you over electric 
wires. There is a lot of talk about how we need to create more and more 
subsidy so we can reach more and more Americans, that we will have 
people left out. Well, thanks to the expansion of the rural 
electrification system in America during World War II, almost every 
American has an electric wire somewhere near them. Electric companies 
have begun to offer high-speed Internet access service.
  Madam President, I have an article from the Washington Times of April 
5, 2004. I ask unanimous consent that this article be printed in the 
Record, in the proper sequence, following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 2.)
  Mr. ALEXANDER. According to this article--and we will be talking 
about this more this week--according to the Federal Communications 
Office of Engineering and Technology, having another major player--the 
power companies--has helped to bridge the digital divide. The power 
companies have the infrastructure to make broadband available 
nationally.

       There are a lot of utilities out there that really, really 
     want to do this, [says the head of another firm].


[[Page 7545]]


  It is being offered today in Manassas, VA. The city of Manassas 
offers high-speed Internet access through their electric company for 
$26.95 a month.

       Customers typically pay $30 to $40 a month for DSL service 
     and $40 to $50 a month for Internet access over cable.

  If we are really talking about taxes on Internet access, we are only 
talking about $1 to $3 a month, for most Americans, that they would 
save if we Senators and our fellow Members of Congress go home and say: 
Look at us. We just banned State and local taxation of Internet access. 
Well, that will save you $1 to $3 a month. That is not what they are 
doing, though. They are exempting a whole industry from taxation that 
most industries pay. But for those who worry about whether high-speed 
Internet access is going to be available to every single American, it 
will be available from your electric company soon.
  Now, there is another phenomenon we should talk about in terms of 
whether we need to have a subsidy. All this growth is happening, just 
as it should. We have a promarket economy. Traditionally, we do not 
pick economic winners and losers. That is what they do in Japan. They 
do it a lot more than we do. Our economy is stronger and better than 
theirs because the Government does not do as good a job, we believe, at 
picking winners and losers as the free market does. That is, at least, 
what a great many of us over here on the Republican side traditionally 
say, that we do not like industrial policy. We do not like picking and 
choosing winners and losers.
  So we asked the Congressional Budget Office, Congress did, last year, 
about this. CBO reported to us, Congress:

       [T]he broadband market is booming. . . . [N]othing in the 
     performance of the residential broadband market suggests that 
     federal subsidies for it will produce any economic gains.

  Yet here we are, getting ready to spend a whole week sending billions 
of dollars more in subsidies to the high-speed Internet access market. 
Why are we doing this? To even encourage broader use of it? Well, I am 
not sure it will have that effect.
  This is an example from the Atlanta Constitution Journal of September 
of a couple years ago. It is a little old, but it is good information.
  In LaGrange, GA, they give away high-speed Internet access for free. 
So we can ban taxation. We can keep Gwinnett County from imposing a 
dollar tax on your high-speed Internet access in Georgia, but we won't 
be able to do that because they give it away for free. And what has 
happened? Despite the fact they give it away for free, only half the 
city has subscribed a year later. A lot of people didn't want it. This 
story tells why.
  I ask unanimous consent this article from the Atlanta Constitution be 
printed in the Record following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 3.)
  Mr. ALEXANDER. It is an interesting article. It is like a lot of 
other things. Just because we in Washington think everybody in America 
ought to have high-speed Internet access tomorrow doesn't mean they 
will take it, even if we give it to them. So then why should we give 
the telecommunications industry another big subsidy to offer high-speed 
Internet access to people who are already getting it free and won't 
take it?
  Finally, just in case Congress should, in its wisdom, decide to grant 
an additional subsidy to high-speed Internet access, the first thing we 
should do is make sure Congress pays for it and doesn't send the bill 
to State and local governments. The House bill and the Allen-Wyden 
bill, S. 150, which this motion to proceed is about, expressly violate 
the Budget Act which was amended in 1995 by the Republican majority, 
enthusiastically. And President Clinton signed it. Sixty-two Senators 
now serving in this body voted for it, and 300 Republicans stood on the 
Capitol steps in late September, early October, right before the 
election that produced the Contract with America and the first 
Republican Congress in a long time, and this is what we said: Our 
party, no money, no mandate. If we break our promise, throw us out.
  This is about the Congress keeping its promise. I have a great many 
speeches that say in words more effectively than I how important 
avoiding an unfunded Federal mandate is. Most of them were made by 
Members of this body. There will be an opportunity to hear those 
speeches again this week because they were good in 1995, and they are 
good in 2004.
  There is one way to provide a further subsidy to encourage the use of 
high-speed Internet access, if we think it is necessary, that would 
make a lot more sense than the various proposals that have been offered 
so far. That, interestingly, is the Texas plan. It was the plan 
authored by our President, George W. Bush, when he was Governor of 
Texas. It is very simple. It is aimed at consumers, not big companies. 
In 1999, Governor Bush signed a law exempting the Texas State sales tax 
on Internet access up to the $25 the consumer paid each month. In other 
words, there is no State tax in Texas on the first $25 you pay for 
Internet access.
  We just heard that in Manassas, VA, it doesn't cost you more than $25 
to get Internet access from your power company. So you don't pay any 
tax on Internet access in Texas. The Governor suggested to the Congress 
some time ago that if Congress were bound and determined to give 
another big subsidy to the telecommunications and high-speed Internet 
access industry, do it this way. Use Governor Bush's idea; use the 
Texas plan. Then I would say we ought to figure out what it cost State 
and local governments and reimburse them for it.
  It is ironic that last year we stood here and cried about the 
condition of State and local governments and sent a $20 billion welfare 
check to the States. This year we are taking credit for lowering taxes 
on Internet access $1 a month and sending the bill to State and local 
governments. I suggest if we really want to consider a Federal law that 
affects State and local taxation of Internet access over the long term, 
we ought to look at President Bush's idea when he was Governor of 
Texas. Then I would argue it is up to us to decide what tax we are 
going to raise to pay the bill, or are we going to increase the deficit 
or are we going to cut services, because that is precisely what the 
mayors are going to have to do. That is what the Governors are going to 
have to do, and the county commissioners are going to have to do.
  If everybody would go home 1 week and ask, How would you like one 
more unfunded mandate to deal with along with all the others, I think 
they would get an earful. At least I do when I go home.
  I look forward to this week. I hope this is the beginning of a 
constructive debate. I hope the end result is that we reject the 
proposal we are moving to proceed on this afternoon. Those are 
proposals that would create permanent confusion in this complex area of 
trying to deal with the growth of high-speed Internet access that would 
create an unwarranted additional tax loophole for one of the most 
heavily subsidized industries in America, the high-speed Internet 
access industry; that would create higher taxes because when you order 
taxes lowered on some people, they are going up on others; and that 
would break a promise this Congress made to State and local governments 
9 years ago that we would do no harm, that we would not pass any more 
unfunded Federal mandates.
  What we should be doing is what we are doing in other parts of the 
Congress and in the courts and in the Federal Communications 
Commission. The chairman of the Commerce Committee, Senator McCain, has 
already held a hearing about high-speed Internet access, its 
regulation, and its taxation, and tried to sort out what to do about it 
since it was not envisioned by the Telecommunications Act of 1996. The 
Senator from Alaska, Mr. Stevens, has said several times that he thinks 
we need to revisit the Telecommunications Act and do this in a 
comprehensive way.
  The Chairman of the Federal Communications Commission, Michael 
Powell, has talked about the importance of digital migration, high-
speed

[[Page 7546]]

Internet access. We will be able to carry to our homes movies, e-mail, 
all sorts of services. It is wonderful. But when it does that, it may 
have the effect of wiping out 5, 10, 15 percent of the State and local 
tax base. We should think about that before we do that.
  Among all of the principles we need to discuss, one of those is 
federalism, the improper relationship of strong State and local 
governments to the Federal Government. We should not slam through like 
a freight train a permanent tax loophole for this industry without 
carefully considering the long-term consequences to State and local 
governments and the parks and the schools and the universities and the 
health care and other services they are expected to provide.
  A vote for the legislation that came from the House and for S. 150 or 
anything like it is a vote for permanent confusion, a vote for 
unwarranted tax loopholes, a vote for higher taxes, and a vote to break 
a promise.
  A vote for the Alexander-Carper compromise is a vote to ban taxes for 
another 2 years, to extend the moratorium, extend the temporary 
timeout. It is a vote against taxes. It is a vote against unfunded 
mandates because it does no more harm to State and local governments. 
And it is a vote for a reasonable period of time, up to a couple of 
years, for us to thoughtfully consider what to do.
  Madam President, I am new to this body, but I have watched it for a 
long time. I had my first opportunity to work in it when the Senator 
from North Carolina and I both came to Washington a few years ago. I 
have great respect for the wisdom here and for the rules of this body. 
They offer us a chance to deliberate a little longer than our friends 
in the House are able to, and sometimes that is important to do. I 
believe it is on this issue.
  I am ready to move, ready to come to a conclusion. There are at least 
a couple of ideas out there that will get a legislative result this 
week if we would like to do it. But I am not ready to vote for 
permanent confusion, another big tax loophole, higher taxes, and I am 
not ready to break our promise to State and local governments about 
unfunded mandates.
  I ask unanimous consent to have printed in sequence following my 
remarks the following articles:
  One is a November 4, 2003, editorial from the Washington Post. The 
Senator from Ohio, Senator Voinovich, brought this to our attention at 
that time, saying this Congress should step back from the brink 
temporarily, extend the moratorium, and sort this all out in a way that 
doesn't intrude on State prerogatives.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 4.)
  Mr. ALEXANDER. Madam President, I ask unanimous consent to have 
printed in the Record an editorial from the Dallas Morning News. 
``Congress must get this right,'' it says in its last sentence, ``and a 
2-year moratorium with all new Internet access fees will give Congress 
enough time to sort through the issue.''
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 5.)
  Mr. ALEXANDER. Madam President, I ask unanimous consent to have 
printed in the Record a letter from Commissioner Loren Chumley from the 
Department of Revenue from the State of Tennessee. She points out 
Tennessee is now not taxing, not imposing a sales tax on Internet 
access because our State law doesn't permit it. In fact, the direction 
of things has been that States have repealed their taxes on Internet 
access. States do things like that. But this points out in very clear 
terms how important it is for our State, which doesn't have an income 
tax--how important it is for us here not to try to tell them what taxes 
to collect and what services to provide. Again, I ask unanimous consent 
that that be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 6.)
  Mr. ALEXANDER. Finally, there are two articles which are a little 
long, but they are important. I know Senators and staff members will 
bring their attention to this subject, and we know we will be debating 
it for the next several days, and that truly we will be considering it 
for the next couple of years as the Commerce Committee wades through 
all of the issues surrounding digital migration and, hopefully, come to 
a comprehensive approach toward how we approach taxation and 
regulation--I hope minimal taxation and regulation, but appropriate 
taxation and regulation of high-speed Internet access, and how we 
divide that among the various governments. These are the best two 
articles I have found that help explain the history behind the Internet 
access tax moratorium bill and the issue before us.
  The first is by the Center on Budget and Policy Priorities, dated 
March 15, 2004, entitled `` The Alexander-Carper Internet Access Tax 
Moratorium Bill, S. 2084: a True Compromise That Substantially Broadens 
the Original Moratorium.''
  I point out that the leader asked us who are opposed to this to 
compromise, and we have. The Alexander-Carper legislation is broader 
than the original moratorium, and it levels the playing field so all 
providers of high-speed Internet access are treated the same--at least 
so far as the Congress is concerned--on the last mile between the user 
of high-speed Internet access and the provider.
  I ask unanimous consent that the article's summary be printed in the 
Record in sequence following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 7.)
  Mr. ALEXANDER. Finally, I want to offer another recent article by 
Harley Duncan and Matt Tomalis, from the Multistate Tax Commission, 
entitled ``The Forgotten First Sentence.''
  The definition of Internet access is what is causing a lot of the 
problem here. We hear a lot about that from the Senator from Ohio and 
those on both sides of the issue. The problem is, the way the bill is 
written, it doesn't focus only on the consumer and provider of Internet 
access, it goes way back up the line and bans the State and local 
government from collecting taxes on the whole industry, and a whole 
variety of services that are now part of the State and local tax. 
Nobody wants to pay taxes on anything, but if we ban those taxes, we 
raise these taxes. This article helped us to clearly understand how the 
definition of Internet access is the problem here.
  I see the Senator from Ohio, a former chairman of the National 
Governors Association before he was a Senator. He can speak with 
authority about what happened in 1994 and 1995 because he was a 
national leader in the movement to persuade Congress to stop unfunded 
Federal mandates and to pass the Unfunded Mandate Reform Act, which 
amended our Budget Act. He is a principled man and I am delighted to be 
working with him on this issue and on others.
  Again, I thank the leader for setting in motion the series of 
procedural steps that will give us a chance to fully debate this issue 
this week. I thank Senator Allen and Senator Wyden for their courtesies 
and patience as we worked on an issue we disagree about. I look forward 
to a full discussion and, I hope, a temporary 2-year timeout to give us 
a chance to think about that which bans taxes for 2 more years, but 
keeps our promise and does no harm to State and local governments.
  I yield the floor.

                               Exhibit 1

              Unfunded Federal Mandates Created by H.R. 49

       1. $10 billion annually in telephone transactions taxes 
     currently collected--under H.R. 49, the telecommunications 
     industry could be exempted from the collection of state and 
     local taxes on gross receipts taxes, sales an use taxes, and 
     other telecommunications transactions taxes. As the 
     telecommunications industry offers more and more of its 
     services over the Internet, more and more of the industry's 
     revenues could be tax exempt. Cost to state and local 
     governments: $10 billion annually. Source: Letter from 
     Congressional Budget Office, February 13, 2004.
       2. $7 billion annually in business taxes currently 
     collected--The taxes preempted in H.R. 49 go beyond taxes on 
     access by customers to the Internet to include income, 
     property, and other business taxes levied on

[[Page 7547]]

     telecommunications companies. Cost to state and local 
     governments: $7 billion annually. Source: Multistate Tax 
     Commission Memorandum, September 24, 2003; Letter from 
     Congressional Budget Office, February 13, 2004.
       3. $500 million annually in business taxes currently 
     collected on the Internet ``backbone''--Under H.R. 49, states 
     could not continue to tax some business transactions such as 
     business-to-business transactions between Internet service 
     providers and telephone companies. Cost to state and local 
     governments: $500 million annually. Source: Federation of Tax 
     Administrators' Memorandum, November 10, 2003.
       4. Sales taxes on Internet access currently collected--
     Under H.R. 49, states that are now collecting taxes on 
     Internet access could not continue to do so immediately upon 
     the bill being signed into law. Cost to state and local 
     governments ``grandfathered'' by the original 1998 Act: $80-
     120 million per year. Cost to state and local governments (27 
     states) imposing taxes on charges for the portion of DSL 
     Internet access services that they do not consider to be 
     ``Internet access'': $40-75 million per year. Source: Letter 
     from Congressional Budget Office, November 5, 2003.
       5. Universal Service Fund fees and 911 service fees--The 
     language of H.R. 49 would prohibit the federal government 
     and/or states from imposing or collecting fees on 
     telecommunications offered over the Internet. As telephone 
     service migrates to the Internet, universal service funding 
     and funding for the provision of 911 and E911 service will be 
     reduced as traditional telephone sales revenue drops. Cost to 
     state and local governments: $3-4 billion. Source: 
     Congressional Research Service; Letter from Congressional 
     Budget Office, February 13, 2004.

              Unfunded Federal Mandates on States (S. 150)

        1. $3-$10 billion annually in telephone taxes currently 
     collected--Under the moratorium, states may not be able to 
     continue to tax telephone calls if they are made over the 
     Internet. Cost to state and local governments: within five 
     years losses in telecommunications revenues could rise to $3 
     billion per year; ultimately, state and local revenue loss 
     could be $10 billion per year. Source: Letter from 
     Congressional Budget Office, February 13, 2004.
        2. $500 million annually in business taxes currently 
     collected on the Internet ``backbone''--Under S. 150, states 
     could not continue to tax some business transactions such as 
     business-to-business transactions between Internet service 
     providers and telephone companies. Cost to state and local 
     governments: $500 million annually. Source: Federation of Tax 
     Administrator's Memorandum, November 10, 2003.
        3. Sales taxes on Internet access currently collected--
     Under S. 150, states could not continue to collect sales 
     taxes on Internet access after the three-year grandfather 
     period. Cost to state and local governments ``grandfathered'' 
     by the original 1998 Act; $80-120 million per year. Cost to 
     state and local governments imposing taxes on charges for the 
     portion of DSL Internet access services that they do not 
     consider to be ``Internet access'': $40 to $75 million per 
     year. Source: Letter from Congressional Budget Office, 
     November 5, 2003.

                               Exhibit 2

               [From the Washington Times, Apr. 5, 2004]

          Electric Companies Begin Offering Broadband Service

                           (By William Glanz)

       Sean Porter's high-speed Internet connection doesn't come 
     through a cable-television cord, a telephone line or from a 
     satellite.
       An electrical outlet powers the broadband connection at the 
     Manassas architect's firm.
       ``The greatest advantage is that we only need to have an 
     outlet to use it,'' Mr. Porter said.
       Manassas is the second city in the nation, where broadband 
     service over power lines became commercially available. City 
     officials there began marketing the service in February.
       Today, only about 300 U.S. consumers pay for high-speed 
     Internet access over power lines, but this new method of 
     delivering Web content could jolt the market for Internet 
     service.
       Allentown, Pa., and Cincinnati are the only other U.S. 
     cities where residents are paying for the new high-speed 
     Internet service, but electric companies from North Carolina 
     to Hawaii are testing the service or plan to begin a pilot 
     project. Federal regulators hope broadband access over power 
     lines becomes widely available, especially in rural areas.
       In Manassas, 60 homeowners and a handful of businesses have 
     Internet access through power lines. Another 1,200 homeowners 
     have asked to be hooked up. That's nearly 10 percent of the 
     city's 12,500 homes.
       By the end of the year, broadband over power lines could be 
     available to all Manassas residents. It would be the first 
     U.S. city where the new technology is available to all 
     residents.
       Internet access from power lines began to get attention 
     last year, when the Federal Communications Commission (FCC) 
     promoted it as a way to offer high-speed Internet services 
     for people in rural areas. The FCC also saw broadband access 
     from power lines as an alternative to high-speed access from 
     phone, cable and satellite companies that could lower 
     consumer prices.
       Since the power grid is ubiquitous, broadband over power 
     lines could be available to nearly every U.S. home.
       ``Having another major player--the power companies--has to 
     help bridge the digital divide. The power companies have the 
     infrastructure to make broadband available nationally,'' said 
     Ed Thomas, chief of the FCC's Office of Engineering and 
     Technology.
       The FCC in February proposed rules to govern broadband over 
     power lines. The rules aren't final, but a handful of cities, 
     utilities and technology companies are pushing forward.
       Current Communications Group in Germantown, Md., is working 
     with Ohio utility Cinergy Corp. to market broadband service 
     over power lines in Cincinnati.
       Current Communications also has a pilot project with Pepco 
     in Potomac to test the new Internet service.
       ``There are a lot of utilities out there that really, 
     really want to do this,'' said Jay Birnbaum, vice president 
     of Current Communications, a privately held firm founded four 
     years ago.
       Main.net Powerline Communications in Reston is working with 
     Manassas, which owns its electric plant, to deliver Internet 
     content over the power lines.
       Main.net and Current Communications are two of the primary 
     companies in a small cluster of firms that market technology 
     to send Internet data over power lines and make the modems 
     that subscribers plug into wall sockets.
       Experts long have known power lines could accommodate 
     Internet data. Electricity travels at a lower frequency than 
     an Internet signal, so the two can share a power line.
       Public works department employees in Manassas hook up new 
     Internet subscribers nearly every day.
       ``They're beating down our doors,'' said John Hewa, 
     assistant director of the city's electric utility.
       That's because few people there have high-speed Internet 
     access, Mr. Hewa said.
       ``A lot of people are telling us they can't get high-speed 
     services where they live. There are a lot of areas where it's 
     not available, and they're using dial-up service,'' he said.
       The FCC found in June 2003 that there were no high-speed 
     Internet subscribers in 9 percent of U.S. zip codes, where 
     about 1 percent of residents live. In another 16 percent of 
     U.S. zip codes, there was just one broadband provider.
       The American Public Power Association, which represents 
     utilities, says 75 percent of its members serve communities 
     with fewer than 10,000 people, many of whom don't have high-
     speed Internet access.
       About 24 million people subscribe to broadband service, 
     according to Washington research firm Precursor Group.
       But spokesmen for Verizon Communications Corp. and Comcast 
     Corp. both say they are equipped to deliver high-speed 
     service in Manassas.
       The new broadband service in Manassas also might be popular 
     because the city charges $26.95 a month, less than digital 
     subscriber lines (DSL) or cable Internet providers. Current 
     Communications charges a basic rate of $29.95 a month in 
     Cincinnati. Customers typically pay $30 to $40 a month for 
     DSL service and $40 to $50 a month for Internet access over 
     cable.
       Although the FCC is hopeful that broadband over power lines 
     helps lower prices and provides access to underserved areas, 
     Precursor Group analyst Pat Brogan isn't so sure the service 
     will take off because DSL and cable Internet services have 
     been around for years. Broadband over power lines simply 
     might be too late to catch up, he said.
       But electric companies want to make money off their power 
     lines, and consumers who have been relegated to using low-
     speed dial-up services are interested in subscribing to 
     broadband access over power lines, said Joseph Marsilii, 
     president and chief executive of Main.net.
       ``I firmly believe there is a huge market for this,'' he 
     said. ``I think we're on the cusp.''

                               Exhibit 3

         [From the Atlanta Journal-Constitution, Sept. 2, 2004]

 A Georgia City Decided To Provide Its Residents With; A Year of Free 
Internet Access. But Only Half Have Signed on. Why LaGrange Isn't More 
                               ``Wired''

                        (By Ernest Holsendolph)

       LaGrange.--A delegation of 11 Japanese legislators came 
     calling on the city of LaGrange recently to learn more about 
     its efforts to connect every household in the city to the 
     Internet free of charge for a year.
       The assemblymen for Gunma Prefecture were here ``to 
     understand the community strategy,'' said Kazuo Aikyama, 
     chairman of the delegation.

[[Page 7548]]

       They aren't the first to come on such a quest.
       A well-worn path to city hall on Ridley Street has seen 
     similar delegations from England, Canada and Bulgaria as well 
     as curious groups from cities and towns in the United States.
       At the urging of City Manager Tom Hall and others, LaGrange 
     set out to provide easy access for residents to create a 
     ``wired'' community able to interact with one another--and do 
     business more easily with City Hall, agencies and other 
     stopping points.
       They would do it by connecting the homes, for free at 
     first, hopefully showing people how valuable the service was 
     and later get them to pay for subscriptions.
       However, Dave McGee, a LaGrange native who is a glass 
     worker, was unaware of the program. ``I have heard things 
     about this Internet, but I don't know anything about it,'' 
     said McGee, 47, as he walked along a side street off 
     Lafayette Square.
       And Mable Abercrombie, who gave her age discreetly as 
     ``over 65,'' said she had heard of the LaGrange project but 
     was keeping her distance from it.
       ``I am too busy in my garden; need to spend more time 
     there,'' she said over the counter of the Merle Norman 
     cosmetics display where she works.
       McGee is an African-American, Abercrombie a senior citizen. 
     Each represents a group that has been a special challenge to 
     LaGrange's effort to bring all its residents online.
       ``We expected that with the service offered free of charge, 
     we would have big interest in communities where people had 
     been unable to afford Internet service,'' said Joe Maltese, 
     economic development director.
       Instead, he said, there was an overall acceptance of nearly 
     50 percent--with no high interest in the southern city 
     communities where the black population is heaviest.
       Interestingly, LaGrange recently was named one of the top 
     seven ``intelligent'' communities in the world by the 
     prestigious World Teleport Association.
       In addition, LaGrange, about 65 miles southwest of downtown 
     Atlanta, has been cited as ``Intelligent City of the Year'' 
     by the association. And so, while gaining recognition for its 
     technological push, the distinction seems lost on a major 
     share of its 26,000 citizens.
       Partly to keep plugging away with residents who remain 
     unexcited, city officials decided two weeks ago to extend the 
     free offer for another year.
       ``We have worked hard to make service relevant to people's 
     lives,'' said Hall, 40, the city manager of LaGrange since 
     1994.
       Under Hall and Maltese, the city has pushed to get interest 
     and response, working with school officials and holding 
     rallies in public housing communities with U.S. Sen. Max 
     Cleland (D-Ga.) as a speaker. They also have advertised in 
     papers and on television and have mailed letters directly to 
     residences.
       Subscribers can get the service either through cable modems 
     and personal computers, or they can access it via television 
     through the black set-top box.
       Residents can use wireless keyboards, as with WebTV, to 
     connect to the Internet, or to special city networks where 
     they can learn about community activities, church events, 
     shopping opportunities, the weather and other information.
       That's all the stuff tech-savvy people now take for granted 
     in the information age. But there's a problem, says Greg 
     Laudeman, a community information specialist with Georgia 
     Tech's economic development outreach program.
       There is a gap, he said, between segments of society who 
     embrace computers and digital information, and other people.
       ``Early adopters (of new ideas and technology) and the 
     group that comes right behind them have different needs, 
     desires and interests than others,'' he said.
       ``And in a curious way, the technology companies, early 
     adopters start coming up with more and more that suits their 
     interests at the same time that others ignore it because they 
     do not need it, or immediately see the usefulness of it.''
       Laudeman and others say the ``digital divide,'' when 
     examined this way may not be racial, or even economic 
     entirely, but more a different way people view developments.
       ``Many of us (early adopters) learn to value information 
     apart from what we do, or apart from the material or physical 
     things we own or use . . . we value it as a resource,'' 
     Laudeman said, ``while other people value information only as 
     it relates to what they are doing.''
       He added, ``It's like the world is divided between those 
     who enjoy talking and thinking about technology, and those 
     who simply use it.''
       Hall and Maltese grapple with that dichotomy between groups 
     nearly every day.
       ``Some people say the service has no relevance to their 
     lives,'' said Hall, ``and others are just against it because 
     . . . well, because it is new and something they're not 
     accustomed to.''
       Jabari Simama, who directed the establishment of community 
     technology centers in Atlanta, said his staff noticed also 
     that access alone is not enough to get response from 
     predominantly black, lower-income areas.
       ``Income may be a barrier, but it is not the only one,'' 
     Simama said. ``Other factors that keep people from getting 
     involved in Internet technology include lack of reading 
     ability, and an absence of information they want or need.
       ``It's one thing to say you'll put up information about the 
     city or city services, but you need to put up things about 
     the neighborhoods and communities where people live--and that 
     means you must use the same focus-group approach cable TV and 
     others have used to reach those audiences.''
       Simama's view is corroborated by a study of the Children's 
     Partnership, a Los Angeles-based nonprofit organization that 
     mostly focuses on the needs of young people. But it also 
     reached conclusions about reaching lower-income people.
       Among the barriers to strong Internet interest in the hard-
     to-reach communities, the study found, are literacy, 
     language, culture and lifestyle, and the ``lack of most 
     urgently needed local information.''
       How specific might that information be? One respondent 
     said:
       ``Many of the people in the housing project where I work 
     want to find out about jobs they can do in the neighborhood. 
     If the neighborhood was more connected and mapped online, 
     this kind of information would really make a difference to 
     residents.''
       The study projected that some 50 million Americans may be 
     inhibited by one or more of the barriers, with 41 million 
     specifically held back by lack of reading ability.
       These are the kinds of extended considerations the leaders 
     in LaGrange will have to confront in the second year of 
     effort to get more residents involved in Internet 
     communication.
       Among the barriers that must be scaled, are inertia among 
     people who see no ``need'' as well as others who are outright 
     suspicious.
       Abercrombie, the gardener, when asked why she would not try 
     something that is free of charge, replied: ``Well, yes, but 
     what happens after the year when it's free?''
       The LaGrange arrangement allows someone to try it, then to 
     decide what it's worth. ``But,'' she said, ``I am not sure I 
     want to be interested.''
       She was given a computer by her son, who wanted her to 
     trade e-mail, but she has not done that, despite prompting by 
     grandchildren and others.
       Patricia Graves, who works in the city cemetery office, has 
     been a subscriber to the Internet service for a year and 
     loves it.
       Graves, who is black, said she enjoys e-mail, learning 
     about places to vacation, and just gathering information.
       ``I have not made a purchase yet, but I am thinking about 
     it,'' she said.
       Asked why some of her friends had not shown the same 
     enthusiasm, she was candid. ``I just find many people are 
     just afraid of computers. And some people are suspicious of 
     the city and wonder why this interest in putting these 
     machines in their homes. Some even wonder if they are for 
     watching them.''
       State Rep. Carl von Epps, a south LaGrange merchant, said 
     he does not subscribe to the city service.
       ``Don't get me wrong,'' he said. ``It is fine, and it is a 
     great way for people to get their foot in the door and learn 
     about the Internet, but it is not as fast as my service that 
     I've had for some time.''
       Von Epps, who is black, said he was aware of some feelings 
     of suspicion and fear. ``But a lot of that will be overcome 
     by working more with churches and community organizations and 
     people the neighbors trust,'' he said. ``It's just a matter 
     of time.''

                               Exhibit 4

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

                             Tax and Click

       State and local governments have broad power to tax as they 
     see fit--everything from clothes and food to electricity and 
     telephone service. Nearly everything, that is, except the 
     Internet. Under a supposedly temporary law passed in 1998 and 
     already extended once, Congress prohibited states from taxing 
     Internet access fees, monthly charges imposed by Internet 
     service providers. Proponents argued that the nascent engine 
     of the Internet shouldn't be slowed by taxing it and that it 
     would take time to devise a system to prevent duplicative or 
     discriminatory taxes. Now, with the tax moratorium having 
     expired on Saturday, Congress is poised to make the ban 
     permanent, broaden its reach and wipe out existing taxes that 
     had been grandfathered in under the previous law. With state 
     budgets under stress and the Internet thriving, this is an 
     unnecesary--and costly--incursion on states' rights.
       The argument for permanently barring taxes on Internet 
     services centers on two issues. One is the argument that 
     taxing Internet access, whether through phone lines or cable 
     modems, would amount to double taxation, because the phone 
     lines and cable service are already taxed. That's true, but 
     purchasing Internet access provides a separate--and 
     separately taxable--bundle of services. Terming this double 
     taxation is like saying that a shopper who pays tax on a pair 
     of slacks should then be exempt from being taxed on a shirt 
     bought with it.
       The other argument is that taxing Internet access would 
     worsen and prolong the digital

[[Page 7549]]

     divide, the computer gap between rich and poor. This may be a 
     problem, but prohibiting taxation is not the answer. It's not 
     the extra few cents on a monthly bill that's stopping the 
     less well-off from Googling their way to the middle class. A 
     policy to erase the digital divide, however laudable, doesn't 
     justify the no-tax solution. The federal government wants to 
     spur home ownership for low-income familes--surely a bigger 
     problem than lack of Internet access--but that doesn't lead 
     it to tell local governments that they can't impose property 
     taxes.
       What's driving this legislation is that telecommunications 
     companies and Internet service providers see an opportunity 
     not only to make the tax moratorium permanent--in itself a 
     bad idea--but to save what could amount to billions in 
     additional taxes. The law frees service providers from having 
     to pay taxes on telephone service they use to provide 
     Internet access. And as the Internet becomes a more effective 
     medium for providing phone service and delivering products 
     such as downloaded movies, software and music, the 
     legislation could sweep such offerings within the ambit of 
     services that states are prohibited from taxing.
       The Internet shouldn't be subject to conflicting taxes, but 
     that's no reason to argue that it shouldn't be taxed at all. 
     There should be a level playing field for taxing Internet 
     access, whether it comes through ordinary dial-up, cable 
     modems or high-speed telephone lines. The last thing Congress 
     should do now to cash-strapped states is pass a law that 
     would not only permanently put Internet access off limits for 
     taxation but also deprive them of revenue that they now 
     collect. Proponents of the law are busy demagoguing the 
     issue, suggesting, as Senate sponsor Ron Wyden (D-Ore.) put 
     it the other day, that users ``could be taxed every time they 
     send an e-mail, every time they read their local newspaper 
     online or check the score of a football game.'' Congress 
     should step back from the brink, temporarily extend the 
     moratorium and sort this all out in a way that doesn't 
     intrude on state prerogatives.

                               Exhibit 5

                 [From Dallas News.com, Mar. 30, 2004]

    Internet Access Fees: Don't Let Removal Have Unintended Effects

       Getting rid of a bad tax isn't as easy as one might think.
       Late last year, a couple of bills that would have done away 
     with Internet access fees began winding their way through 
     Congress. (An Internet access fee is one of those mysterious 
     fees you find near the bottom of your monthly phone bill.)
       The bills had gained support until lawmakers discovered a 
     major problem. The bills also would have exempted virtually 
     all telecommunications activity from taxation. Cities and 
     states would have been left out on a precarious financial 
     limb, possibly unable to collect traditional right-of-way and 
     franchise fees that fund city and state operations.
       Welcome to the law of unintended consequences.
       For that reason, we urge Congress to go slowly in this area 
     and to extend a moratorium on new Internet access fees for 
     another two years.
       We aren't thrilled about leaving in place a bad tax that 
     encumbers an emerging technology--even one that provides $45 
     million annually in Texas. But it's the right decision and 
     one that buys time for a more thoughtful discussion of the 
     Internet and taxes. The moratorium has support from a growing 
     number of lawmakers, including Sen. Kay Bailey Hutchison, R-
     Texas.
       Technology breakthroughs are changing telecommunications 
     faster than legislation can keep pace. For years, Congress, 
     the Federal Communications Commission and state regulators 
     have wrestled with how much to regulate the Internet but have 
     had less-than-satisfying results.
       The Internet shouldn't become an easy target for revenue-
     hungry jurisdictions, but neither can it expect to be a tax-
     free haven for commerce. Congress has a responsibility to 
     find a satisfactory middle ground, recognizing the revenue 
     needs of cities and states while also not crippling the 
     telecommunications and information services industries.
       Congress must get this right, and a two-year moratorium on 
     all new Internet access fees will give it enough time to sort 
     through the issue.

                               Exhibit 6

                                               State of Tennessee,


                                        Department of Revenue,

                                   Nashville, TN, January 9, 2004.
     Re S. 150--the Internet Tax Moratorium.

     Senator Lamar Alexander,
     Hart Building,
     Washington, DC.
       Dear Senator Alexander: It was a pleasure to see you at the 
     recent meeting for the National League of Cities in 
     Nashville. Again I want to thank you for your courageous 
     assistance with regard to protecting the interests of the 
     State of Tennessee on the subject of the Internet Tax 
     Moratorium.
       I wanted to make you aware of a recent development in this 
     matter. Tennessee has taxed Internet access as a 
     ``telecommunications service'' under its sales and use tax 
     laws since 1996. In my presentations to Harrison Fox and Joe 
     Cwiklinski concerning the adverse impact S. 150 and the 
     Managers' Amendment would have on Tennessee's tax base, I 
     explained that Tennessee has been involved in lawsuits 
     concerning whether Internet access falls within Tennessee's 
     definition of ``telecommunications.'' The Court of Appeals 
     decision in Prodigy Services Corp., Inc. v. Johnson, 2003 WL 
     21918624 (Tenn. Ct. App., Aug. 12, 2003) has now become 
     final. In this case, the Court held that, under Tennessee 
     law, Internet access is not taxable as a telecommunication 
     service in Tennessee. Therefore, the Tennessee Department of 
     Revenue will issue a notice in the near future explaining 
     that Internet service providers should no longer collect 
     sales tax on sales of Internet access to consumers. I advised 
     your office that the sales tax on the true Internet access 
     component of the prior Internet Tax Freedom Act was 
     approximately $18 million annually for Tennessee.
       This Tennessee Court decision does not in any way impact 
     our stringent opposition to S. 150 and the Managers' 
     Amendment. Both S. 150 and the Managers' Amendment put 
     Tennessee's entire telecommunications sales tax base at risk 
     because the amendment sought by the telecommunications 
     companies incorporates the very broad definition of 
     ``Internet access'' under the original Internet Tax Freedom 
     Act. While certain constituencies have questioned the states' 
     estimates of the bills' fiscal impact, the critical problem 
     is about the language in the bill and about the policy. As 
     long as the amendment sought by the telecommunications 
     industry includes the phrase ``Internet access'' and as long 
     as the definition of ``Internet access'' remains as it was 
     under the federal law, then the fiscal problem identified by 
     the states and local governments remains.
       Tenness strongly supports the amendment that you proposed 
     to S. 150, the Alexander-Carper amendment. If there is 
     anything that I can do to assist on this matter or any other 
     matter concerning Tennessee taxes, please do not hesitate to 
     let me know. Thank you again for all of your help.
           Very truly yours,
                                                 Loren L. Chumley,
                                                     Commissioner.

                               Exhibit 7

 The Alexander-Carper Internet Access Tax Moratorium Bill, S. 2084: a 
  True Compromise That Substantially Broadens the Original Moratorium

                          (By Michael Mazerov)


                                Summary

       Senators Lamar Alexander and Thomas Carper, with nine 
     original cosponsors, have introduced S. 2084, the ``Internet 
     Tax Ban Extension and Improvement Act.'' This bill would 
     reinstate and broaden the ``moratorium'' on state and local 
     taxation of Internet access services originally imposed in 
     1998 by the Internet Tax Freedom Act (ITFA). S. 2084 would 
     bar state and local governments for two more years from 
     taxing the typical $10-$50 monthly charge that households and 
     businesses pay--to an Internet access provider like America 
     Online, or to the local phone or cable TV company--to be able 
     to access the World Wide Web and send and receive e-mail.
       S. 2084 would broaden the original ITFA moratorium 
     substantially by newly exempting from taxation all 
     telecommunications services ``purchased, used, or sold by an 
     Internet access provider to connect a purchaser of Internet 
     access to the Internet access provider.''
       This new language in S. 2084, which amends ITFA's 
     definition of Internet access, exempts from new state and 
     local taxes almost all communications services that an 
     Internet access subscriber can use to connect to her Internet 
     access provider--so-called ``last mile'' telecommunications. 
     S. 2084 would, however, grandfather existing state and local 
     taxes on ``last-mile'' telecommunications services. 
     Grandfathering currently-collected taxes is consistent with 
     the sponsors' position that Congress should not impose a new, 
     expensive, ``unfunded mandate'' on state and local 
     governments, especially at a time of severe fiscal stress.
       The new language to be added to ITFA's Internet access 
     definition by S. 2084 seeks to achieve ``technological 
     neutrality'' in the tax treatment of high-speed access by 
     exempting from tax all the forms in which the ``last mile'' 
     connection is made: cable modems, ``Digital Subscriber 
     Lines'' (DSL), dedicated ``T-1'' lines used by businesses, 
     wireless connections (e.g., Blackberry), and satellite 
     transmissions. The only exception to the tax exemption for 
     ``last mile'' telecommunications would be ordinary voice 
     telephone lines used for ``dial-up'' (conventional modem) 
     access to the Internet; taxes on such lines would still be 
     allowed under S. 2084.
       S. 2084 is a significant expansion of the moratorium. As 
     enacted in 1998 (and as renewed in 2001), the Internet Tax 
     Freedom Act had excluded (carved out) from the definition of 
     tax-exempt ``Internet access'' all telecommunications 
     services--as that term is defined by the Federal 
     Communications Commission. Thus all states and localities 
     were allowed to continue taxing all telecommunications 
     services, even those used to obtain or provide Internet 
     access on the ``last mile.''

[[Page 7550]]

       The authorization of state and local governments to 
     continue taxing telecommunications was consciously and 
     intentionally included in ITFA in order to preserve state and 
     local taxes and fees imposed on all forms of 
     telecommunications services used at any point along the 
     Internet. While some have claimed that S. 2084's grandfather 
     provision condones ``illegal'' taxes on Internet-related 
     telecommunications imposed by states and localities 
     attempting an ``end run'' around ITFA, the legislative 
     history of ITFA clearly refutes those claims.
       Renewing ITFA in its original form would preserve state and 
     local taxes on all Internet-related telecommunications. The 
     proposed S. 150 would prohibit all state and local taxation 
     of both ``last mile'' telecommunications services and the 
     ``upstream'' telecommunications services that constitute the 
     underlying infrastructure and ``backbone'' of the Internet. 
     (According to the Federation of Tax Administrators, states 
     and localities would lose approximately $500 million annually 
     if ``upstream'' telecommunications services were no longer 
     taxable.) In prohibiting new taxes on ``last mile'' 
     telecommunications, S. 2084 represents a true compromise 
     between these two alternatives.

  The PRESIDING OFFICER. The Senator from Ohio is recognized.
  Mr. VOINOVICH. Madam President, first of all, I want to thank the 
Senator from Tennessee for the tremendous amount of time and effort he 
has put into this issue. We all got into this together last year when 
we saw the train moving very fast and we wanted to do what we could to 
slow it down. We were able to accomplish that. Since that time, the 
Senator from Tennessee and the Senator from Delaware have been working 
on a bipartisan basis to try to spend a great deal of time with the 
folks who have a different point of view, trying to reconcile the 
differences.
  Unfortunately, those differences have not been reconciled. But it 
certainly is not based on a lack of trying. The Senator from Tennessee 
now has become the expert on this. Madam President, I wish you had been 
at a meeting I had with him last week, where he was teaching the 
teachers on this legislation. I thank him so very much for all of his 
hard work and dedication to this issue. I hope our colleagues will 
listen to us today and perhaps come up with another compromise that 
will allow us to spend more time to deal with this subject. This is a 
very complicated issue and we need to be careful how we proceed.
  Today we are going to consider a motion to proceed on S. 150, the 
Internet Tax Nondiscrimination Act of 2003. When the Senate first 
considered this legislation last November, I argued the debate on S. 
150 was not about taxing e-mail or increasing taxes on Internet access. 
It was suggested by some members of this legislative body that we were 
in favor of taxing the Internet or e-mail. In fact, I stand here today 
in opposition to taxes on Internet access and firmly opposed to any and 
all taxes on e-mail by any level of government--Federal, State, or 
local. But that is not what today's debate is about.
  Rather, the debate on S. 150 is about federalism, unfunded mandates, 
and protecting the States' ability to collect revenue at a time when 
State and local governments are struggling to make ends meet.
  As a former State representative, counter auditor, counter 
commissioner, Lieutenant Governor, mayor of Cleveland, and Governor of 
Ohio, I have seen firsthand how the relationship between the Federal 
Government and our State and local counterparts affect our citizens and 
the communities in which they live.
  My experience has fueled my passion for federalism and the need to 
balance the Federal Government's power with the powers our Founding 
Fathers envisioned for the States. This very body was created in part 
to guarantee that States have adequate and equal means to assert their 
interests before the Federal Government, and I can assure you that if 
we Senators were still elected State legislators, this issue would not 
be before us today.
  The relationship between the Federal Government and State and local 
governments should be one of partnership. However, that is not always 
the case. I am concerned about the tendency of the Federal Government 
to preempt the functions of State and local governments and force on 
them new responsibilities, particularly without also providing funding 
to pay for these new responsibilities. Madam President, that is why I 
fought for the passage of unfunded mandates reform.
  As a matter of fact, I will never forget the first time in my life I 
set foot on the floor of the U.S. Senate was when the unfunded mandates 
reform legislation passed. Then, later at the Rose Garden, I was there 
representing State and local governments when President Clinton signed 
UMRA in 1995. As I said, I was representing State and local 
governments, and, Madam President, your husband a former Senator from 
Kansas, Mr. Dole, was representing the national interests. It is a day 
I will never forget. In fact, I have the pen that was used to sign the 
legislation proudly displayed in my office in the Senate.
  As I will explain in a moment, S. 150 violates the principles of 
federalism. When S. 150 was pulled from the Senate floor last November, 
advocates on both sides of the issue agreed to resolve our differences. 
For the past 6 months, we have been engaged in meaningful dialog, but 
we just cannot reach an agreement. At this point in time, I am 
concerned that the philosophical differences between the two sides may 
be too deep to bridge.
  Madam President, I have three problems with the definition of 
Internet access:
  First, it is so broad that it prevents State and local governments 
from collecting taxes on all telecommunications services used to 
provide Internet access over the entire broad band network. We are 
talking about the entire network, last mile, middle mile, and backbone. 
States are currently collecting between $3 billion and $10 billion 
annually in telephone taxes. I am concerned that this tax base may 
erode as traditional phone service migrates to cutting edge technology 
called voice over Internet protocol, VOIP. In fact, the migration is 
happening at a rapid pace. For example, on April 9, 2004, Newsday 
reported that AT&T expects to add 1 million VOIP customers by the end 
of 2005 and there are many other companies rolling out this service as 
well. This will have a tremendous change in the way telephone service 
is provided in the United States.
  As a part of our good-faith negotiations on S. 150, Senators Allen 
and Alexander were working on language to preserve the States' ability 
to collect taxes on VOIP, but they have not yet reached an agreement. 
In addition, the Federation of Tax Administrators noted that S. 150 
would prohibit States from continuing to tax some transactions such as 
business-to-business transactions between Internet service providers 
and telephone companies, and they estimate this could cost State and 
local governments $500 million annually in lost revenues.
  Second, S. 150 violates the spirit of the original moratorium by 
making a brand new definition of Internet access permanent. The 
original 1998 moratorium was 3 years in duration, and in 2001, Congress 
extended it for 2 more years. With technology changing so rapidly, we 
must be cautious when trying to define Internet access.
  Third, according to the CBO, S. 150 imposes an intergovernmental 
mandate under the Unfunded Mandates Reform Act. Let me repeat, CBO says 
it is an unfunded mandate. On page 6 of the September 29, 2003, 
Commerce Committee's report on S. 150, CBO said:

       By extending and expanding the moratorium on certain types 
     of State and local taxes, S. 150 would impose an 
     intergovernmental mandate as defined in the Unfunded Mandates 
     Reform Act. CBO estimates that the mandate would cause State 
     and local governments to lose revenue beginning in October 
     2006; those losses would exceed the threshold established in 
     the Unfunded Mandates Reform Act . . . by 2007. While there 
     is some uncertainty as to the number of States affected, CBO 
     estimates that the direct costs to State and local 
     governments would probably total between $80 million and $120 
     million annually, beginning in 2007.

  There is no question, this is an unfunded mandate.
  Furthermore--and this is the part to which we really need to pay 
attention:

       Depending on how the language altering the definition of 
     what telecommunications are taxable is interpreted, that 
     language also

[[Page 7551]]

     could result in substantial revenue losses for States and 
     local governments. It is possible that States could lose 
     revenue if services that are currently taxed are redefined as 
     Internet access under the definition of S. 150 . . . However, 
     CBO cannot estimate the magnitude of these losses.

  In other words, at this stage of the game, they have no idea how 
large these losses will be to State and local governments if the 
definition of Internet access in S. 150 is passed.
  To follow up on CBO's assessment, I went to my own State and said: 
Can you examine the proposals and let me know what they would cost our 
state?
  Under S. 150, as reported, it would cost the State of Ohio $350 
million a year at a time when they are trying to balance their budget. 
They are making cuts in services right now to try to balance the State 
budget. The Allen-Wyden managers' amendment we discussed in November 
would cost about $150 million for 2 years, and the Alexander-Carper-
Voinovich amendment would cost my State about $40 million a year. So 
any proposal under consideration would cost my State money.
  Logic tells me that if CBO cannot calculate the potential loss in 
revenue to the States, and my State projects large revenue losses, why 
would we make dramatic and permanent changes to the Internet tax 
moratorium? Why would we do that to our friends in State and local 
government?
  Last month, Senator Collins, chairman of the Governmental Affairs 
Committee, confirmed in a letter to me that the Allen-Wyden managers' 
amendment to S. 150 also contained unfunded mandates as defined by 
UMRA. The CBO says it and the Governmental Affairs Committee says it is 
an unfunded mandate.
  Unlike Congress, by law States must balance their budgets. They do 
not have the option of printing money like we do. Therefore, if the 
Senate passes S. 150 or the managers' amendment, Congress will, in 
effect, force States to raise taxes or cut services in order to make up 
the difference, which is why each State and local government and 
organizations are opposed to this legislation with the exception of the 
NCSL.
  However, NCSL did send a strong message earlier this year. In fact, 
they were in favor of this bill last November but have since removed 
their support and are now neutral on the legislation. They are giving 
more consideration to this issue.
  The financial impact of S. 150 would be devastating to our State and 
local governments, but there are other problems with the legislation 
that are beyond our control. The Federal Communications Commission 
classifies DSL as both an information service and telecommunications 
service. I just wonder how many of our colleagues really understand 
what this is all about. This is a very complex issue and we really need 
to pay attention to both the language in the proposals and, now to the 
courts as well. Under the 1998 moratorium, State and local governments 
are able to collect taxes on the telecommunications portion of DSL 
service.
  The problem that supporters of S. 150 point out is that cable modem 
Internet service has been classified by the FCC as an information 
service and, therefore, it is not subject to State and local 
telecommunications taxes. My colleagues argue that we need to bring 
parity to the industry by enacting an expanded definition of Internet 
access. I agree with them in principle. However, earlier this month the 
Ninth Circuit overruled the Federal Communications Commission decision 
that cable modem broadband service was a single information service. 
The court ruling means that cable modem service now can be classified 
as part information service and part telecommunications service, just 
like DSL. So under the Ninth Circuit, there is now parity between DSL 
and cable modem.
  The Ninth Circuit case may be appealed to the Supreme Court. This 
whole area still is in flux. But it does not end there.
  As I mentioned, we think it will go to the Supreme Court, and, if so, 
they may not render a decision until June of 2005. The case, obviously, 
has significant impact on the debate today.
  When we have so much uncertainty, Congress should proceed very 
cautiously and not run out and do something that will have a tremendous 
impact on all the future decisions that are made on this issue.
  I am one of 11 Members joining Senators Alexander and Carper on S. 
2084, the Internet Tax Ban Extension and Improvement Act. The bill 
provides a 2-year solution that expands the definition of Internet 
access to the level playing field for all Internet providers: DSL, 
cable, modem, wireless, and satellite. In other words, our bill would 
put them all in an equal position and would resolve the issue with the 
Ninth Circuit Court because it would basically say we agree with the 
court.
  Our legislation would make the last mile of Internet service from the 
Internet provider to the customer tax free. In addition, our 
legislation retains the existing grandfather clause in effect for 2 
years, that is 11 States; expands the grandfather clause by allowing 
States that are now collecting taxes on DSL service to continue to do 
so for 2 more years, currently 16 States; and prohibits States that are 
not collecting taxes on DSL from doing so.
  It would also prevent them from collecting taxes on cable and other 
services on the Internet. Unfortunately, our legislation was not 
acceptable to the sponsors. We thought it was very reasonable because 
they believed we needed a broader policy to promote the growth of the 
Internet. However, recent trends on the growth of broadband services 
may suggest otherwise.
  When I was chairman of the National Governors Association back in 
1998, I helped negotiate the first Internet tax moratorium because 
there was a big concern about what it would do to the Internet. Our 
goal then and our goal today is the same: to encourage the growth of 
the Internet as a driving force in our economy. We want that to happen. 
I believe we have been successful.
  In fact, I will highlight how much Internet technology has grown over 
the past years. It is unbelievable. According to a study released by 
the Pew Internet and American Life Project last week, 55 percent of 
American Internet users have access to broadband either at home or at 
the workplace. The report also noted that home broadband usage is up 60 
percent since March of 2003, with half of that growth since November of 
2003. DSL technology now has a 42-percent share of the home broadband 
market. This figure is up from 28 percent in March of 2003. What I 
would like to point out is that it all happened since the moratorium 
ended.
  I think the Chair will recall that our opponents were concerned that 
if the moratorium expired, States would rush out and tax the Internet. 
That has not happened. In fact, we have just seen an exponential growth 
in the use of the Internet. Additionally, on April 21, a major 
telecommunications company, SBC released their 2004 first quarter 
earnings.
  I will read the first two sentences from the company's press release 
because it illustrates how fast this technology is growing.

       SBC Communications, Inc., today reported first-quarter 2004 
     earnings of $1.9 billion as it delivered strong progress in 
     key growth products. In the quarter, SBC added 446,000 DSL 
     lines, the best ever by a U.S. telecom provider . . .

  I congratulate this company for fostering the growth of DSL service 
in our country and for building a solid business plan that allowed them 
to have such a positive impact on their bottom line. Their financial 
outlook proves that Congress should not subsidize a growing industry at 
the expense of our State and local governments.
  As I mentioned earlier, not one State has passed legislation to tax 
Internet access in the absence of a Federal moratorium. In fact, we 
have reports that a couple of States have even backed off from what 
they were doing before. Therefore, the sky that was predicted to fall 
has not.
  That is not to say that I am opposed to an Internet tax moratorium. 
Nothing could be further from the truth. There is still more room to 
compromise, and I think it is fair to say that some of my colleagues 
agree with my assessment.

[[Page 7552]]

  The inability of both sides to reach an agreement prompted Senator 
McCain to offer a new proposal. I commend my good friend from Arizona 
for trying to reach a middle ground on this complex issue and, for that 
matter, I congratulate him on trying to bring us together.
  I do not know whether the Senator from Tennessee is going to opine on 
that proposal, but the four principles are: Establishes a 4-year 
moratorium; allows States to collect taxes on telephone calls made over 
the Internet; extends the original grandfather clause for 3 years; 
initiates the 2-year grandfather clause for States that are currently 
collecting taxes on DSL services.
  I am very concerned because the term of the moratorium is longer than 
the two grandfather clauses, which may trigger the unfunded mandate 
that I have been talking about in the point of order.
  I appreciate the attempt of the Senator from Arizona to offer a 
solution. But here we are here again at the last minute trying to get 
something done, and now we have a new proposal. We have no idea of what 
impact it is going to have. I for one, would like my state to review 
the proposal.
  It seems to me that at this stage the best thing we can do is to 
understand that we have unresolved issues, and that S. 150 was passed 
out of the Commerce Committee by voice vote. That is the way it came 
out of the committee. If one examines S. 150 and they examine the 
Alexander-Carper-Voinovich, et al., bill they will find both bills have 
11 cosponsors. There are 11 for our bill and 11 for the legislation of 
the Senator from Virginia. Six cosponsors of each bill are from the 
Commerce Committee.
  So it is evident that even within the Commerce Committee there are 
genuine differences of opinion on the best way to proceed. I think we 
understand that given the longstanding impasse on negotiations and the 
possible Supreme Court action, there has to be an easier way to get 
this done.
  I understand Senator Enzi will introduce a 15-month extension of the 
original moratorium, and perhaps that is the most reasonable solution 
because it will provide all stakeholders, including the Commerce 
Committee, the FCC, the State and local government groups, and the 
industry time to draft a reasonable bill.
  If the motion to proceed to S. 150 passes this afternoon, I believe 
the Senate will not be able to reach an agreement on the underlying 
bill, which may signal the end of the Internet tax moratorium. If we 
cannot agree, that is the end of it. I do not want that to happen. 
Therefore, I implore my colleagues to continue negotiations on the 
Internet tax moratorium.
  Our goal should be to reach a sensible solution with two simple 
principles in mind: First and foremost, do no harm to the States. 
Second, foster the growth of high-speed Internet access by leveling the 
playing field for all Internet service providers.
  So a way out of the thicket may be to extend the moratorium for 
another 2 years or for 15 months, give the Commerce Committee more of 
an opportunity to work on the issue, give the FCC more time to be 
involved, see which way the court cases are going, and come back with 
something where all of us can agree that makes sense. We need a 
proposal that respects the State and local governments, does not 
violate unfunded mandates, and at the same time make sure we can move 
forward with the Internet and achieve the phenomenal success that it 
already has achieved.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I have already spoken, so if the 
Senators from Virginia or Delaware want to speak, I will certainly 
yield to them.
  But I certainly congratulate the Senator from Ohio. He knows what he 
is talking about when it comes to State and local government. He has 
been a mayor. He rescued a major American city from bankruptcy. He 
chaired the National Governors Association. The people of Ohio know he 
works in a very principled way. He understands, as I believe I do, that 
this train is on the wrong track.
  I say this to the Senators from Ohio and Delaware and then I will 
stop and yield to the Senator from Delaware: How much subsidy is enough 
subsidy? I notice, in this thick list of subsidies that States give 
high-speed Internet access, Texas is generating $1.5 billion of subsidy 
just to encourage the growth of high-speed Internet access. Then, in 
addition, it has already made exempt from taxation the first $25 you 
pay for high-speed Internet access. Now we are talking about giving 
further subsidies to the companies that provide that access. I don't 
see the sense of that.
  I congratulate the Senator from Ohio, look forward to working with 
him, and now that I see the Senator from Delaware with whom I have 
enjoyed working, I yield the floor.
  The PRESIDING OFFICER. The Senator from Delaware.
  Mr. CARPER. Madam President, I am delighted to be on the floor with 
you and particularly pleased to be with Senators Voinovich and 
Alexander.
  I wish to ask a question of Senator Voinovich, if I could--I know, 
before he was the Senator from Ohio, he was the Governor of Ohio. We 
served together at that time--to what other elective positions Senator 
Voinovich has been elected by the people of Ohio? As I recall----
  Mr. VOINOVICH. I have already listed them in my formal presentation 
on the floor. There are so many it is hard to remember.
  But I did mention the fact that we all worked together as members of 
the National Governors Association. In fact, the Senator from Delaware 
was vice chairman of the National Governors Association when I was 
president of the National Governors Association, and we worked together 
and collaborated on a lot of issues.
  I have been concerned about this issue since I was president of the 
National League of Cities back in 1985. As the Presiding Officer knows, 
one of the biggest issues we had in 1995 and 1996 was unfunded 
mandates. We went right across the country pointing out how devastating 
these mandates coming out of Washington were for State and local 
governments. We thought we had done something very significant about 
it.
  But to answer the question of the Senator from Delaware, from my 
perspective, the passage of this bill would be the most egregious 
unfunded mandate we have seen since 1995, when the unfunded mandates 
relief legislation was passed. It seems to me we still have Members of 
this body who were around when unfunded mandates relief legislation was 
passed and there was great support for it. It seems to me those who 
supported it at that time should give some real consideration to the 
fact that we are about, if this were to pass, to have the biggest 
unfunded mandate, as I said, since that bill passed.
  Mr. CARPER. I would say, Madam President, Senator Voinovich is not a 
Johnny-come-lately on this subject. I recall, early in my time as 
Governor, working through the National Governors Association, the kind 
of leadership he provided, encouraging the Congress, the House and 
Senate, and then President Clinton, to pass and enact an unfunded 
mandates law. He played a major role in getting that done.
  It is kind of ironic that a decade or so later, we are back again and 
the issue is very much the same. I am pleased to see we stand today 
where we stood then. I am honored to be involved in this battle on the 
same side with Senator Voinovich and Senator Alexander.
  We have been joined on the floor by the former mayor of San 
Francisco, Senator Feinstein, and I see we have been joined on the 
floor by another former Governor, Governor Allen, who in this instance 
is our adversary but remains our very good friend.
  That having been said, I do have some other comments I would like to 
make. Let me observe we have gotten into some very bad habits here in 
Washington. We all know we are living beyond our means. We all know 
about our growing budget shortfall and our

[[Page 7553]]

escalating level of indebtedness. We all know the most popular way to 
pay for things around here is simply to issue more and more debt on our 
Nation's credit card and on our taxpayers' dime.
  Moreover, we all know that our budget shortfall is actually bigger 
than we report it to be. We all know we are using Social Security funds 
to mask the actual size of our Federal budget deficit.
  We are using the payroll tax contributions that working Americans pay 
into Social Security, and employers pay, to pay for other Government 
spending and to partially offset corporate tax breaks and reductions in 
taxes on inherited estates.
  What we do not talk about very often is that piling up more debt and 
drawing on Social Security are not the only means we are resorting to 
these days to continue to spend more than we take in. The other way we 
found to spend without constraint or accountability was to pass the 
buck to our friends in State and local government.
  If you think about it, it is a sweetheart deal. We order up a feast 
here in Washington of more spending or more special interest tax breaks 
and more corporate subsidies. Then we stick the Governors, mayors, and 
State and local taxpayers with the tab. It is not surprising that we do 
this. In doing so, we get to take credit for helping an array of 
different groups and businesses represented here in Washington. Yet we 
don't have to raise a single tax or cut a single program to pay for it.
  In government as in business, however, there is no such thing as a 
free lunch. This policy of passing unfunded mandates has not been 
nearly as convenient for our Governors, for our mayors, and State and 
local taxpayers as it has been for us here in our Nation's Capital. I 
don't have to tell my colleagues their States and localities are 
struggling to cope today with the worst fiscal crisis--some say since 
World War II. Classrooms are becoming even more crowded as school 
budgets are cut. Prisoners in a number of States are being released 
from jail as corrections budgets are cut. Governors and mayors are 
pushing through unpopular and frequently regressive tax increases 
because they have a constitutional mandate to balance their budget.
  We all know this. Yet when it comes right down to it, we proceed to 
act here in Washington as if we are oblivious to what is going on all 
around us. We continue to treat State and local budgets almost as piggy 
banks that we can break in order to pay for our own priorities.
  Just about everyone in this body supports a moratorium on State and 
local taxes on Internet access. In 1998, the Congress passed such a 
moratorium. In 2001, we extended that moratorium. In fact, I believe we 
did so just about unanimously.
  Last year the Internet tax moratorium expired. There was no reason 
why that should have happened. If the bill had been brought to the 
floor of the Senate simply to extend that moratorium once again, it 
would have passed once again by acclamation. The American people 
support the moratorium. I support the moratorium. All of us want to see 
it extended.
  However, as was the case last year, the bill we are debating this 
week does not simply extend the expired Internet tax moratorium. I wish 
that it did. Instead, what this bill does is to take advantage of the 
need to extend that moratorium to attach billions of dollars in new 
subsidies for the telecommunications industry.
  Such a bill would not normally stand much of a chance of passage in 
the Senate.
  The simple truth of the matter is we don't have the money at this 
time of budget deficits at home and war abroad to pay for billions of 
dollars in new subsidies for what is already a highly profitable 
industry. But the proponents of this legislation have discovered an 
easy solution to their problem. Why pay when we can send the bill back 
home to our Governors and to our mayors? Just think of it as political 
welfare. We spend and they pay.
  Passing the buck in this way is bad enough, but it gets worse. 
Believe it or not, we can't actually say what this legislation will 
cost our friends in State and local governments. We know it will not 
cost us a dime here in Washington, but the truth is we do not know how 
much it will cost in Dover, DE, in Raleigh, NC, in Richmond, VA, in 
Columbus, OH, in Nashville, TN, or in Sacramento, CA.
  The Congressional Budget Office tells us this legislation is written 
in a way that is extremely broad and vague. In fact, the Congressional 
Budget Office cannot even give us a rough estimate of what the effect 
will be on State and local budgets except to say this:

       We believe it could grow to be large.

  Here is what we are saying in effect to our Governors and to our 
mayors: We are extending to you the great honor of picking up our 
dinner tab tonight. We can't tell you exactly how much we have ordered 
or what the final bill will be, but we believe it could grow to be 
large.
  At times like these when property taxes are being raised, when sales 
taxes are being raised, when school budgets are being cut, when 
prisoners are being released prematurely, our first responsibility in 
dealing with our partners in State and local government should be to do 
as Senator Voinovich has already said--no harm. Indeed, that is the 
pledge our Senate majority leader, Senator Frist, made to our Nation's 
Governors when he spoke to them back in February, a couple of months 
ago, when they were here in town. As a doctor--and a good one--the 
majority leader said his approach to legislation would be, ``First, do 
no harm.'' This, it seems to me, at least is a sensible approach. My 
hope is that rather than wasting time with an unproductive fight here 
on the floor, we will return to the negotiating table and work out a 
compromise that keeps faith with this Hippocratic pledge to do no harm.
  Unfortunately, the way it stands, we are choosing the way of lawyers 
around here rather than the way of the doctors. The Congressional 
Budget Office says the language of the legislation we are proceeding to 
here in the Senate is so confusing lawyers will ultimately have to get 
involved and we will not know what the implications for State and local 
budgets will be until it all gets sorted out in the courts.
  If we had to choose between extending the Internet tax moratorium and 
keeping faith with our pledge to do no harm, we would truly be faced 
with a difficult decision. But in reality, that is not the decision 
with which we are faced. We can extend the Internet tax moratorium. 
Nobody I have talked to is opposed to that. States and localities have 
been living under the Internet tax moratorium for more than 5 years 
now. None of them are counting on revenues from taxes prohibited under 
the Internet tax moratorium.
  Extending the Internet tax moratorium is not what creates a large, 
new, unfunded mandate. What creates a large, new, unfunded mandate is 
using the occasion of the Internet tax moratorium renewal to create new 
industry subsidies and then emptying State and local treasuries to pay 
for those subsidies.
  This bill departs from the original intent of the previous moratorium 
which was to ensure the monthly bills our constituents receive from 
their Internet service providers remain tax free. Instead, this 
legislation picks the pockets of State and local taxpayers who have 
already suffered their fair share of tax increases over the past 3 
years.
  Senator Alexander and I are Senators. Like all of our colleagues, we 
have constituents who use the Internet and who want the Internet tax 
moratorium to remain in place. Like most others in this body, we want 
to extend the Internet tax moratorium. But Senator Alexander and I are 
also former Governors. We know what it is like to be on the receiving 
end of unfunded Federal mandates, as do my colleagues Senator 
Feinstein, former mayor of San Francisco, and Senator Hutchison, a 
former State treasurer from Texas.
  Senator Alexander and I, together with Senator Voinovich, Senator 
Graham, Senator Hutchison, Senator Feinstein and others, have offered 
what we believe is a straightforward, commonsense alternative. As we 
did in 2001, let us examine the Internet tax

[[Page 7554]]

moratorium for another 2 years. If we need to expand the moratorium 
slightly to ensure all consumers can access the Internet tax free, 
regardless of whether they choose cable or DSL, then let us do that. 
But beyond that, let us do no harm.
  Let us do no harm because doing harm is not necessary to ensure 
consumers can access the Internet tax free. Doing harm is only 
necessary if we believe the telecommunications industry needs billions 
of dollars in new subsidies. Beyond that, doing harm is only necessary 
if we believe Congress cannot or should not pay for such subsidies it 
decides to create.
  Senator Alexander and I, together with Senators Voinovich, Feinstein, 
Hutchison, Graham and others, have been working in good faith with our 
colleagues on the other side of this issue. We are committed to 
reaching a reasonable compromise. We are willing to meet every day if 
necessary to work out such a compromise. However, what we are not going 
to do is turn our backs on our former colleagues in our Nation's State 
houses and our Nation's city halls. We are not going to stand by as yet 
another unfunded mandate gets passed down and wreaks havoc on the 
operations of State and local governments.
  We don't think it is constructive to try to write this bill on the 
floor. Furthermore, we believe we should only proceed to consideration 
of a bill that adheres to the principles of doing no harm.
  If our colleagues want to attach industry subsidies to an Internet 
tax moratorium, they should offer an amendment to do so, and that 
amendment should be debated openly here on the floor of the Senate.
  If the majority leader wants to try to write this bill on the floor 
despite our reservations, then we are prepared to go through that 
exercise.
  We have many specific concerns with the bill that has been called up. 
We have a number of amendments we will offer for our colleagues' 
consideration, including amendments to return to the original intent of 
the moratorium and to require any new subsidies be directly passed on 
to consumers in the form of reduced rates.
  We will also offer our colleagues an opportunity to pay for the 
billions of dollars of subsidies that have been added to this bill.
  If this body does not believe the resources exist at the Federal 
level to pay for these subsidies, we will raise a point of order 
against the bill.
  As the Congressional Budget Office has already indicated, this bill 
violates the promise Congress made in 1995 that we would not continue 
to pass large, unfunded mandates. The Senate has the power to waive the 
point of order that is supposed to prevent Congress from passing large, 
unfunded Federal mandates. If we are going to do so, however, Senator 
Alexander and I believe the Senate ought to be put on record as 
acknowledging our continued reliance on unfunded mandates as a chosen 
means to avoid our fiscal responsibility, and it should not have to 
come to that. Our hope is it will not come to that.
  We believe the negotiations we have had with our friends on the other 
side, though they have been limited, have been productive, and we have 
tried as fully as we can consistent with our principles to address 
industries' demands.
  We believe we have come a long way since this debate began early last 
year. We are committed to continuing that process. If that process is 
short circuited, however, as it seems it will be, at least for now, we 
will insist upon a serious and informed debate in the Senate this week.
  This is the body that our Founding Fathers created to represent the 
interest of States. This is the body that must defend our Federal 
system of government and stand against the trend of passing more and 
more unfunded Federal mandates.
  Win or lose, Senator Alexander and I are committed to ensuring that 
this is one unfunded mandate that will not be passed silently in the 
dead of night.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia.
  Mr. ALLEN. Madam President, I rise this afternoon to urge my 
colleagues to support the motion for cloture to proceed to S. 150, the 
Internet Tax Nondiscrimination Act. This bill does have strong 
bipartisan support.
  Let me say a few things in response to my good friend, the junior 
Senator from Delaware, Mr. Carper. If those who oppose this measure 
want to extend the moratorium, why are we having this debate tonight? 
Why are we going to have to have a motion for cloture on moving to 
proceed on the bill?
  I agree that we should do no harm. Those who are for this measure 
want to prevent harm to consumers so that they are not loaded up with 
taxes from State and local governments. I will get into the details of 
that in my remarks.
  The cost, the so-called unfunded mandate aspect of this is a very 
small amount in the scheme of things, $80 to $120 million, then another 
$40 million for the taxing of DSL. Updates in the new technologies need 
to be made in the definition of Internet access to make sure DSL and 
digital subscriber lines using telephone lines get high-speed Internet 
access or broadband. We need to have that changed to make sure the 
folks at the State and local level recognize that there has been an 
update and upgrade, there have been advancements in technology in the 
transport of the Internet, particularly broadband, but DSL lines should 
not be subject to taxation.
  The intent of the first Internet tax moratorium was to make sure the 
Internet was free of taxation. The Internet is a freeway. If you want 
access to information, you click on. Now that transport is being taxed. 
Who pays? The consumer pays.
  I will use an analogy. Now we have a freeway. You are going to 
Charlotte, NC, from Washington, DC, you get on Interstate 95 and switch 
over to Interstate 85. It is a freeway. Then you get off on an exit to 
wherever you want to get in the city of Charlotte, NC.
  The advocates of taxing the Internet and those who oppose S. 150 
would like to turn that freeway into the New Jersey Turnpike, a toll 
road.
  Clearly, the consumer getting that information on the backbone of the 
Internet is going to have to pay for it, increasing their costs.
  Companion legislation was passed by the House 8 months ago. My 
colleagues have heard me say on many occasions, I believe what we ought 
to be advocating in the Senate, in the Congress, at the Federal level, 
and every level of government in the United States of America, are 
policies that allow people to compete and succeed. That means tax 
policy, regulatory policies that promote freedom and opportunity for 
all Americans. We ought to, as leaders, be advancing ideas that help 
create more investment, creating, thereby, more jobs and more 
prosperity rather than more burdens of taxation and regulation.
  Senator Wyden from Oregon and I joined together early last year with 
this bill. We want to make sure there is equal access to the Internet 
for all consumers and also protect e-commerce transactions from 
discriminatory taxes or multiple taxes. The Internet is one of the 
greatest tools invented by this country. It is a symbol and an actual 
tool of innovation and individual empowerment. Accordingly, I would 
think everyone in the Senate would want to help the Internet continue 
to grow and flourish as a valuable tool for commerce, for information, 
for education.
  However, as of November 1 of last year, the Federal moratorium, which 
was originally enacted in 1998--and Senator Wyden was a key sponsor of 
that measure--expired, leaving consumers vulnerable to harmful 
regressive and discriminatory taxes for the first time in 6 years.
  If the Senate does not act now and move to consider S. 150, it is 
unlikely we will get another chance in this election year. If we do not 
invoke cloture, the Senate will be known as a Senate that favors new 
taxes on the Internet; the Senate that turned a blind eye; and a Senate 
that limited individual opportunity while enabling harmful, regressive 
taxation of access to the Internet.
  When Senator Wyden and I introduced this legislation over a year ago, 
it was consistent with the founding

[[Page 7555]]

principles of the original moratorium that the Internet ought to remain 
as accessible as possible to all people in all parts of the country 
forever. Unfortunately, in the last year of debate, the focus has 
shifted away from that principle, causing unnecessary confusion and 
delay.
  Let me be clear, this legislation is not about tax breaks for 
telecommunications companies. It is not about mayors and Governors. It 
is certainly not about the 1994 Republican revolution that has 
absolutely nothing to do with traditional telephone calls migrating to 
the Internet. Rather, our legislation has everything to do with 
consumers and the impact of taxation on real people and our American 
economy.
  All of the protax arguments and misleading accusations presented by 
the opposition are unrelated distractions aimed at confusing Senators 
and stalling consideration of this very important measure. In fact, the 
issue is not about telephone services migrating to the Internet. 
Rather, it is the ongoing campaign by State and local tax lobbyists to 
make sure telephone taxes, which average 15 to 18 percent, migrate to 
the Internet.
  I ask my colleagues and anyone else who might be listening to think 
of their telephone bill. Think of the bill you receive each month with 
all sorts of taxes included--usually multiple local taxes, State taxes, 
as well as Federal taxes.
  In effect, the opponents of our measure would have our monthly 
Internet service provider bill be loaded down with all those taxes, as 
on our telephone bill.
  Mr. WYDEN. Would the distinguished Senator from Virginia yield for a 
question?
  Mr. ALLEN. I yield.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. I thank my colleague for an excellent presentation.
  Is it not correct that in the late 1990s we heard the same kind of 
arguments we are hearing today, that the States and localities would be 
bereft of revenue, and there would be financial calamity? Is it not 
correct in 1997, 1998, the National Governors Association said the 
State and local revenue system would collapse, and that very next year 
revenue went up something like $7 billion? Was that not the history all 
through this debate over the last 6 or 7 years, that we have had the 
projections from State and local officials that there would be 
disastrous financial consequences, and then you and I and Senator 
Sununu would look a short time later, and every single time revenue 
went up; is that correct?
  Mr. ALLEN. I say to my friend, the Senator from Oregon, he is exactly 
correct.
  I recollect back in 1997, I was Governor of the Commonwealth of 
Virginia when Senator Wyden and Congressman Chris Cox of California 
introduced this measure. I was one of four Governors who believed this 
was clearly interstate commerce. If there is anything that is 
interstate in nature by its architecture, design, and engineering, it 
is the Internet. I thought we ought to have a national policy, that it 
be more ubiquitous or more available, understanding that taxation harms 
it.
  I believed, as did the Senator from Oregon and Senator Sununu, this 
would be a great engine for innovation, growth, investment, and jobs. 
That is exactly what happened.
  The amount of revenues lost by those first, most avaricious, those 
desiring to go in and start taxing at the local and State level, is 
very small.
  But if you look at the economic growth led by the Internet, and the 
revenues that came after it--and it does not have to be a technology 
business; it could be a mom-and-pop startup business; it could be a 
major corporation; it could be somebody working from their home on 
eBay--you see the revenue growth, you see more jobs and, therefore, 
more revenue for the Government.
  So when you look at the effect of the localities and States not being 
able to tax this interstate commerce, you find that it actually has 
been beneficial for the economy. The lost revenues are very small. In 
fact, there were about 10 States, I believe it was, that were 
grandfathered in that had already started taxing prior to 1998. About 
three-quarters of those States are still taxing Internet access.
  Six years later, you would figure they would wean themselves off of 
it. But there were about a quarter of these States--South Carolina, 
Connecticut, Iowa and the District of Columbia, and others--that have 
said: Gosh, this is harmful. This makes our jurisdiction, our State 
less attractive for investment and jobs, and it is bad for our 
citizens, and they voluntarily stopped taxing the Internet.
  The reality is, all of these fiscal impacts that we hear of are so 
farfetched. In fact, the CBO confirmed that our opponents and the State 
tax agencies have overstated the revenue impact of this clarification 
to make sure that DSL and broadband is not taxed. They overstated it by 
100 times. The fiscal impact, if you throw them all together, at best, 
would be $200 million. Across the whole country, our opponents are 
saying it is going to cost $20 billion.
  Mr. SUNUNU. Madam President, will the Senator from Virginia yield for 
a question?
  Mr. ALLEN. I am happy to yield to my friend from New Hampshire.
  Mr. SUNUNU. The Senator from Virginia has mentioned those 10 or 12 
States that were grandfathered under the original Internet tax 
moratorium. I think it is important to understand--because the 
opponents have claimed there is an unfunded mandate--isn't the only 
reason the Congressional Budget Office will score an unfunded mandate 
because those 10 or 12 States were grandfathered in the first place? In 
other words, if we had not made any effort to allow those States to 
continue to collect some taxes on Internet access, there would be no 
unfunded mandate because those taxes would have been eliminated, as one 
might argue they should have been in the first place? But isn't that 
the only reason there is a so-called unfunded mandate in the first 
place?
  Mr. ALLEN. I say to my friend, the Senator from New Hampshire, he is 
exactly correct. The unfunded mandate aspect of this is a kind of 
perverse reasoning because the States that were grandfathered back in 
1998 have yet to wean themselves off of this tax on Internet access. We 
are actually giving them, in our measure, 3 more years, and that is a 
loss of revenue to them? Then there are those in the last couple years 
that have made rulings that are taxing the backbone or the transport, 
more importantly, the high speed transport or broadband. That is about 
$40 million. So the point is, they have had plenty of time to wean 
themselves off of this tax, and we are actually going to give them even 
more time.
  Also, it is not unprecedented for Congress to recognize the 
importance of a coherent national policy regarding matters of 
interstate commerce. In 1973, States were prohibited from imposing a 
tax, a fee, or a head charge on all air commerce. In 1985, Senator Bob 
Dole led a measure affecting food stamp purchases. States were putting 
sales taxes on food stamp purchases, and Senator Dole introduced a 
bill, and it passed in 1985, prohibiting States from imposing sales 
taxes on food stamp purchases.
  Most recently as we were passing the Medicare drug bill this last 
winter, just a few months ago, Congress prohibited States from imposing 
insurance premium taxes on drug insurance policies. The fiscal impact 
of that was approximately $60 million.
  Now, in the last 10 years, of course, the Internet has grown, with 
the policy of our country that we would not tax it. We wanted it to 
flourish, to grow, and provide opportunities for individuals. What our 
opponents will have us do, though, is--again, remember, they want to 
have unelected tax administrators or local and State governments to tax 
the Internet backbone or, for that matter, high-speed or broadband 
telephone service.
  Let me speak about everyone's telephone bill. Look at all those taxes 
on it. This is why the moratorium is so essential, that we stop them 
from taxing anymore than they are now, and wean them off.
  Realize it is nearly impossible to repeal taxes because--do you know

[[Page 7556]]

what?--on your telephone bill, for every single citizen, every single 
person in America who has telephone service, part of those taxes that 
you are paying is a luxury tax that was put on 105 years ago as a 
luxury tax on telephone service to finance the Spanish American War. 
Guess what? We are still paying it. That war has been over for over 100 
years and we won. Yet we are still paying that tax.
  That is why it is important, number one, to wean the few States and 
localities off of this negative, burdensome tax on opportunity and 
freedom but also to stop it from happening in the future.
  The President of the United States, on numerous occasions--recently, 
in New Mexico, in Michigan, in Minnesota--has stated a goal for this 
country, in the year 2007--which is also the 400th anniversary of the 
founding of Jamestown by the Virginia Company--he wants to have 
everyone in this country having access to broadband.
  Broadband is essential for rural areas. I know in southwestern 
Virginia, in Southside Virginia, in any rural areas in this country, 
they look at having broadband, high-speed Internet access as key to 
their young people having opportunities--whether it is educational 
opportunities or health care with telemedicine, or for small businesses 
to be able to be competing internationally, as opposed to young people 
having to leave their home and their roots and their heritage to find 
jobs elsewhere.
  It is the President's view that we are falling behind--and we are 
falling behind--other countries as far as broadband and high-speed 
access. You see a disparity, one based on income. Every study and 
anybody with a scintilla of common sense will understand, if you tax 
something, fewer people can afford it. Those who are lower income or 
lower middle income cannot afford it. Every study--by Pew and others--
shows that the cost of Internet access is the reason for them not being 
online. For broadband, if you want to get broadband deployed and 
available in rural areas, and have competition and choice for 
customers, clearly DSL will be an approach, wireless will be an 
approach, maybe satellites. Most cannot use a cable modem because there 
is just a lot of dirt to dig to get to many rural areas that are 
sparsely populated.
  The fact is, the most recent studies show there is a disparity not 
only in the economic digital divide, which manifests itself with 
Hispanic Americans and African Americans, but also rural versus city 
areas. City areas have almost three times as much utilization and use 
of broadband in their homes than out in the country in rural areas. 
Broadband deployment is only 10 percent in rural areas while it is over 
28 percent in city or suburban-city areas.
  For rural areas to be able to compete, and for the vitality of their 
future, adding a 15- to 18-percent tax--these are the 
telecommunications taxes that our opponents would impose--will diminish 
the availability of the Internet. That 15- to 18-percent tax means it 
is going to take more money to get broadband access to those people, 
and fewer people will be able to access it. Therefore, the investors 
will not invest the money to get into that community.
  Mr. SUNUNU. Madam President, will the Senator from Virginia yield for 
one additional question?
  Mr. ALLEN. I am happy to yield to my friend from New Hampshire.
  Mr. SUNUNU. Madam President, the Senator from Virginia is talking 
about the kind of Internet access-specific taxes that the opponents of 
this bill would like to apply. There are a number of States that are 
taxing Internet access today. There are a handful of others that have 
begun to tax DSL and other forms of broadband. These are all taxes that 
are unique to Internet access. Yet the opponents continue to suggest 
that there is a subsidy involved here.
  I want to ask the Senator from Virginia to clarify this point because 
I can't think of any taxes that are applied broadly from which this 
bill would exempt Internet access providers. Isn't it true that if you 
are an Internet access provider, you would still have to have pay State 
payroll taxes?
  Mr. ALLEN. Yes, you would still have to pay corporate taxes, State 
payroll taxes.
  Mr. SUNUNU. Would they be subject to capital gains taxes in those 
States where it was applicable?
  Mr. ALLEN. Yes, they would.
  Mr. SUNUNU. Would they have to pay property taxes in those States 
where they owned property and operated facilities?
  Mr. ALLEN. Absolutely, they would have to pay those taxes.
  Mr. SUNUNU. If there were an Internet transaction that was selling a 
good within a State that had a sales tax, just like a mail order 
product, wouldn't they be responsible for the applicable sales taxes in 
those States?
  Mr. ALLEN. Sales and use taxes, if they have a physical presence in 
that State, yes, they would have to collect and remit those taxes.
  Mr. SUNUNU. Would the Senator agree that there are no taxes that are 
being applied uniformly or broadly in States that these Internet access 
providers would be exempted from? This is a bill that simply avoids 
discriminatory taxes that single out Internet access or multiple 
taxation where you can have taxes levied at the State level and the 
county level and the city level; isn't that the ultimate goal of the 
bill?
  Mr. ALLEN. I would say to the Senator from New Hampshire, he has it 
exactly correct, as well as protecting consumers from access taxes. The 
Senator from New Hampshire understands this issue very well. Maybe the 
opponents would like to stop these delay-of-game tactics so we can 
actually get to protecting the people.
  I find it interesting--and as I said, this has nothing to do with 
subsidies of telecommunications companies--that virtually every Senator 
will say, let's figure out subsidies; let's figure out tax breaks to 
get broadband to rural areas. Why would you want to have subsidies and 
expenditures and then on the other hand say, let's tax it, when you are 
trying to get more people utilizing and having access to broadband for 
a variety of reasons?
  I see the chairman of the Commerce Committee has arrived. I will 
simply say, the United States has been a leader for freedom. We are 
falling behind other countries in broadband, its deployment, and its 
use to Asian and European countries. Simply put, taxes on access to the 
Internet reduce the number of consumers who can afford to purchase this 
service, thereby limiting opportunities for millions of Americans. 
Reduction of demand will stifle investment in rural and underserved 
areas. It will slow the deployment of the next-generation broadband 
technologies.
  I urge, most respectfully, my colleagues to stand on the side of 
freedom, embrace innovation and improvement, and not tax this tool for 
individual empowerment and opportunity. I urge my colleagues to support 
cloture on the motion to proceed. It is a motion to proceed for 
opportunity and for freedom.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Cornyn). The Senator from Arizona.
  Mr. McCAIN. Mr. President, may I ask the Senator from California if 
she would like to take 5 minutes. I know she has been patiently 
waiting.
  Mrs. FEINSTEIN. I would be happy to speak after the vote.
  Mr. McCAIN. I thank the Senator from California. I appreciate her 
patience and hope she is able to speak, as I know she has strong 
beliefs on this issue.
  Over 5 years ago, Congress took appropriate action to pass the 
Internet Tax Freedom Act which encouraged the growth and adoption of 
the Internet by exempting Internet access from State and local taxation 
and by protecting e-commerce transactions from multiple or 
discriminatory taxes. As my colleagues know, since then the Internet 
has grown from a tool used by a relatively small percentage of our 
population to a broadly utilized communications, information, 
entertainment, and commercial medium as well as an important vehicle 
for political participation.
  To keep promoting the growth of the Internet, many of my colleagues 
have made efforts to extend the Internet tax

[[Page 7557]]

moratorium. Regrettably these efforts have stalled. Six months ago, we 
left unfinished business before the Senate. At the time, many of us 
were prepared to vote to extend the Internet tax moratorium. 
Unfortunately, a vote never took place because of disagreement over 
what components of Internet access should be free from taxation and how 
long the moratorium should last. As a result, the moratorium expired 
and State and local governments are now free to impose new taxes on the 
Internet.
  Today, we return to the consideration of S. 150, the Internet Tax 
Nondiscrimination Act, which would permanently extend the moratorium on 
the taxation of Internet access. After 10 months of negotiations, there 
is still no clear consensus in the Senate over what types of Internet 
access services should be tax free, nor is there any clear consensus 
over how long the moratorium should last. One thing is clear, though: 
There is broad agreement that the Internet tax moratorium should be 
reinstated. It is also clear that the Members who have been involved in 
this long negotiation process have listened closely to the concerns of 
State and local governments.
  For example, to address issues raised by opponents of S. 150, 
Senators Allen, Wyden, Sununu, Ensign, Warner, Smith, Leahy, Grassley, 
Baucus, Hatch, Boxer, Chambliss, Lincoln and I--a strongly bipartisan 
effort--offered a substitute amendment that would have narrowed the 
scope of the moratorium and clarified its effects on State and local 
revenues. This time around, we will go a significant step further by 
offering a compromise amendment written to address the core concerns 
expressed by State and local governments over the extension of the 
Internet tax moratorium.
  Before I get into the details of the amendment, let me be crystal 
clear about one thing: This compromise will not make everyone 100 
percent happy. There are several aspects that will accommodate State 
and local governments, but the legislation also contains components 
that are favored by industry and ultimately benefit consumers. So there 
continue to be disagreements.
  The Members who sit on the edges of this debate bell curve will 
continue to oppose anything that falls short of their desired outcome. 
However, any practical person who reads the amendment objectively will 
have to agree. What we are offering constitutes a reasonable middle 
ground in the debate between those who want to make the Internet tax 
moratorium permanent and broad and those who want to make the 
moratorium brief and narrow.
  Throughout the negotiation process, State and local groups asked for 
a temporary extension to the Internet tax moratorium. Specifically, 
they have asked for a 2-year extension of the moratorium. The 
substitute amendment would extend the moratorium for 4 years from 
November 1, 2003. This alone is an extraordinary concession, especially 
considering the fact that the House of Representatives, in a strongly 
bipartisan effort, passed a permanent extension of the moratorium last 
year, and there remains significant support in the Senate for such a 
measure.
  President Bush has expressed his strong support for a permanent 
extension of the moratorium. Nevertheless, I hope my colleagues who 
favor a permanent moratorium will support this proposal in an effort to 
reach an acceptable compromise between industry and consumers and State 
and local governments.
  Another concern we have heard from State and local governments is 
that extending the Internet tax moratorium would somehow impact 
traditional telephone services. That certainly was never the intent of 
the original legislation, as has been made clear by the Commerce 
Committee's report accompanying the bill.
  The report reads:

       The modified definition [of Internet access] would not 
     affect the taxability of voice telephony over the public 
     switched telephone network (so-called ``plain old telephone 
     service'' or ``POTS'').

  The matter is further clarified in this amendment. Simply put, this 
legislation would not impact in any way, shape, or form the revenue 
generated by State and local governments from traditional phone 
services. Again, a concern of State and local governments was 
accommodated to the full satisfaction of State and local authorities.
  State and local governments have also expressed worry that this bill 
would hamper their ability to tax voice services and other services 
that run over the Internet.
  For example, the National Governors Association has stated that one 
of its main concerns is that this legislation will prohibit states and 
localities from taxing telephone services as they migrate to the 
Internet. The Senators from Tennessee and Ohio today have also 
emphasized that this is one of their three core concerns in this 
debate. In an attempt to respond to the concern about the migration of 
telephone services to the Internet, Senators Allen and Alexander agreed 
in principle to carve voice over Internet Protocol, VOIP, telephon 
services out of the scope of the Internet tax moratorium. 
Unfortunately, their negotiations over the precise definition of VOIP 
telephone services were not successful.
  The amendment that I offer bridges the gap in this matter by setting 
forth a broad definition of services--including voice services--that 
are provided over the Internet that would not be considered Internet 
access and would therefore not be subject to the Internet tax 
moratorium. My compromise would further narrow the definition of 
Internet access, while ensuring that services incidental to Internet 
access--such as e-mail and instant messaging--would remain tax-free. 
Once again, this provision fully addresses the concerns of state and 
local governments.
  Mr. President, the list of compromises goes on and on. For example, 
my amendment would clarify that the Internet tax moratorium does not 
apply to nontransactional taxes such as taxes on net income, net worth, 
or property value.
  My amendment would clarify that otherwise taxable services would not 
become tax-free solely because they are offered as a package with 
Internet access.
  The amendment would grandfather for three years from November 1, 
2003, the States that were taxing Internet access in October 1998.
  My amendment would grandfather for two years from November 1, 2003, 
the States that began to tax--according to many, improperly--Internet 
access after October 1998.
  The amendment would ensure that universal service would not be 
affected by the moratorium.
  And finally, my amendment would ensure that 911 and E-911 services 
would not be affected by the moratorium.
  Each of the compromise provisions is included in direct response to 
State and local government concerns about S. 150. And so my amendment 
will ensure that the $20 billion in telecommunications taxes that is 
collected annually by State and local governments will largely remain 
protected. Any statement to the contrary would be patently false.
  Mr. President, my amendment goes a long way to meeting the concerns 
of the States and localities. However, before those on the other side 
of this debate start to protest, I would remind them that what I am 
proposing is truly a compromise between the interests of State and 
local governments on the one side and industry and consumers on the 
other. This legislation therefore doesn't--and, as a compromise, 
can't--adopt the State and local governments' position wholesale.
  For that reason, the legislation would make Internet access 100 
percent tax-free for all States in its fourth year.
  Some question whether it's wise for Congress to make Internet access 
tax free, but this body has a long history of giving tax incentives and 
other economic support to industries and commercial activities that we 
believe help our society. The Internet is clearly a technology that 
also merits strongly the support of Government, as it is a source of 
and vehicle for significant economic benefits to our country.

[[Page 7558]]

  Contrary to statements that have been made on the floor, yes, the 
railroads were assisted; yes, highways are assisted; yes, our airlines 
continue to be subsidized; and yes, we need to assist this new 
incredible technology that is changing America and the world.
  In the case of the Internet tax moratorium, however, we are not 
talking about subsidies. We are merely talking about a national policy 
of taking a hands-off approach to the continued growth of the Internet. 
The Internet is now accessed at home by 75 percent of the population--
an estimated 204 million people in the U.S.--up from 64 percent in 
2002, and 26 percent in 1998 when Congress rightly decided to implement 
the ban on taxes on Internet access. That's an impressive 3 times what 
the Internet use rate was just over 5 years ago. And though the 
Internet tax moratorium has obviously had its intended effect of 
contributing to the growth of the Internet, our job is not yet done.
  Today, the Internet offers the promise of broadband access services, 
which provide higher bandwidth connections that permit faster data 
transmissions and thus facilitate and enhance services such as 
streaming audio and video. Nevertheless, many of the households with 
Internet access have only basic dial-up access, and have not migrated 
to broadband services. In fact, the Pew Internet Project estimates that 
only 24 percent of American households have broadband access, while 
most homes still connect through dial-up modem connections. In fact, 
the United States is falling behind many other developed countries such 
as Japan, South Korea, and Canada in our deployment of broadband 
services--and many experts even call the broadband services that we 
have ``broadband on training wheels'' because they do not provide the 
speeds provided by the broadband networks of other nations.
  Clearly, there remains a strong need to ensure that taxes on Internet 
access will not pose a hurdle to the continued adoption of basic dial-
up access or to the migration from basic Internet access to broadband 
Internet access. Keeping the Internet tax-free translates into lower 
costs for consumers, and lower costs give our citizens freer access to 
important online services like telemedicine and e-learning.
  Mr. LOTT. Will the Senator yield briefly?
  Mr. McCAIN. I am glad to.
  Mr. LOTT. Mr. President, I want to commend the Senator for his 
tenacity. Typically, he wants to work to find a compromise that can 
satisfy both sides. I think he has done that. I am sure there are those 
on both sides of the issue and the aisle who may not feel this is 
perfect, but they will have an opportunity, when we get on the 
legislation--the substance of it, as this is a vote on the motion to 
invoke cloture on the motion to proceed--they will be able to offer 
amendments.
  I thank the Senator from Arizona for what he has done. I urge my 
colleagues to certainly support this motion on cloture and allow us to 
get to the substance of the bill and to be able to reach conclusion on 
this important issue. So I recognize the Senator's efforts.
  Mr. McCAIN. Mr. President, I thank the Senator from Mississippi. I 
thank him for his involvement in this issue. As everyone knows, he is a 
genius at working his way through difficult and thorny issues. I 
appreciate his involvement in seeking to try to resolve differences 
between the two sides--at least to a point where we can move forward. I 
look forward to his continued assistance as we address this issue.
  Mr. LOTT. I thank the Senator for yielding.
   Mr. McCAIN. Wider adoption of broadband services could also 
translate into economic growth and greater job creation for our 
country. I would suggest then that, as States and localities are 
shoring up their budgets and increasing their tax revenues after a few 
years of budget shortfalls, we should not move to stifle economic 
growth by taxing the Internet.
   But this debate isn't just about the economic benefits of affordable 
Internet access. During my presidential candidacy, one of the many 
rewarding experiences I had was seeing how the Internet served as a 
medium for political participation. Hundreds of thousands of people 
logged on to my campaign Web site where they were able to access 
information and organize. For me, keeping Internet access tax-free is 
about protecting consumers' wallets and about helping our Nation's 
economy, but it also is about improving our political process and the 
right and ability of our citizens to participate fully in that process.
   Because my amendment is not one-sided, I know that a few of my 
colleagues who have been firmly on one side of this debate or the other 
will not join us in this compromise. Some of my colleagues, for 
example, believe that Internet access should receive little--if any--
protection from taxation. We have heard statements from some on that 
side that my amendment is not a true compromise, which both boggles the 
mind and indicates that for some in this debate the attitude is ``my 
way or the highway.'' Others I'm sure continue to believe that all data 
transmissions over the Internet--including VoIP services--should be 
tax-free. But I ask those Members who see merits to both sides of this 
debate to join me in this effort to break the deadlock that has delayed 
action on this matter for far too long. Doing so will not only strike a 
fair balance in this debate, but it will also clarify the confusion 
that has been hanging over the tax treatment of Internet access for 
several months.
   Mr. President, for all of the reasons stated, I urge my colleagues 
to vote in support of cloture on the motion to proceed to S. 150 and in 
favor of the Internet tax compromise that I will offer. I trust that we 
will add this measure to the long line of pro-consumer legislation we 
have passed during this Congress--including the Do-Not-Call registry 
legislation. I hope that we will again join together to give American 
consumers affordable access to the Internet, which we all agree is a 
crucial medium of communications, education, commerce, and political 
participation in America.
  Again, I will summarize. This proposal is a temporary 4-year 
moratorium, which makes the Internet access 100 percent tax free, but 
narrows the definition of ``Internet access'' by excluding traditional 
telephone service, and it further narrows the definition of Internet 
access by carving out voice and other services provided over the 
Internet, while ensuring that services incidental to Internet access, 
such as e-mail and instant messaging, remain free.
  My amendment grandfathers States that were taxing Internet access in 
1998 for a 3-year period. It grandfathers States that currently tax 
Internet access, including those that tax the last mile that were not 
protected by the 1998 grandfather clause, for a 2-year period, and it 
incorporates all other components of the substitute amendment to S. 150 
and the Alexander Internet tax bill, the accounting rule to address 
bundling, and the explicit inclusion of nontransitional taxes from the 
Internet tax moratorium and savings clauses addressing the regulation 
of Internet access, universal service, and e-911.
  Mr. President, I yield the floor.


                             Cloture Motion

  The PRESIDING OFFICER. The hour of 5:30 p.m. having arrived, under 
the previous order, pursuant to rule XXII, the Chair lays before the 
Senate the pending cloture motion, which the clerk will report.
  The legislative clerk read as follows:

                             Cloture Motion

       We the undersigned Senators, in accordance with the 
     provisions of Rule XXII of the Standing Rules of the Senate, 
     do hereby move to bring to a close debate on the motion to 
     proceed to Calendar No. 353, S. 150, a bill to make permanent 
     the moratorium on taxes on Internet access and multiple and 
     discriminatory taxes on electronic commerce imposed by the 
     Internet Tax Freedom Act.
         Bill Frist, George Allen, Jon Kyl, Orrin Hatch, James 
           Inhofe, Elizabeth Dole, Larry Craig, John Ensign, 
           Gordon Smith, Mitch McConnell, Norm Coleman, Sam 
           Brownback, Trent Lott, Conrad Burns, Jim Talent, John 
           E. Sununu, Mike Crapo.

  The PRESIDING OFFICER. By unanimous consent, the mandatory quorum 
call has been waived.

[[Page 7559]]

  The question is, Is it the sense of the Senate that debate on the 
motion to proceed to S. 150, the Internet Tax Nondiscrimination Act, 
shall be brought to a close? The yeas and nays are mandatory under the 
rule. The clerk will call the roll.
  The legislative clerk called the roll.
   Mr. McCONNELL. I announce that the Senator from Rhode Island (Mr. 
Chafee), the Senator from Wyoming (Mr. Enzi), the Senator from Illinois 
(Mr. Fitzgerald), the Senator from Nebraska (Mr. Hagel), and the 
Senator from Pennsylvania (Mr. Specter) are necessarily absent.
  Mr. REID. I announce that the Senator from Delaware (Mr. Biden), the 
Senator from North Carolina (Mr. Edwards), the Senator from Hawaii (Mr. 
Inouye), the Senator from Massachusetts (Mr. Kerry), the Senator from 
Wisconsin (Mr. Kohl), the Senator from Louisiana (Ms. Landrieu), the 
Senator from New Jersey (Mr. Lautenberg), the Senator from Maryland 
(Ms. Mikulski), the Senator from Georgia (Mr. Miller), the Senator from 
Maryland (Mr. Sarbanes), are necessarily absent.
  The PRESIDING OFFICER (Ms. Murkowski). Are there any other Senators 
in the Chamber desiring to vote?
  The yeas and nays resulted--yeas 74, nays 11, as follows:

                      [Rollcall Vote No. 71 Leg.]

                                YEAS--74

     Allard
     Allen
     Baucus
     Bayh
     Bennett
     Bingaman
     Bond
     Boxer
     Breaux
     Brownback
     Bunning
     Burns
     Byrd
     Campbell
     Cantwell
     Chambliss
     Cochran
     Coleman
     Collins
     Conrad
     Cornyn
     Corzine
     Craig
     Crapo
     Daschle
     Dayton
     DeWine
     Dodd
     Dole
     Domenici
     Dorgan
     Ensign
     Feingold
     Frist
     Graham (SC)
     Grassley
     Gregg
     Harkin
     Hatch
     Hutchison
     Inhofe
     Johnson
     Kennedy
     Kyl
     Leahy
     Levin
     Lieberman
     Lincoln
     Lott
     Lugar
     McCain
     McConnell
     Murkowski
     Murray
     Nelson (FL)
     Nelson (NE)
     Nickles
     Pryor
     Reed
     Reid
     Roberts
     Santorum
     Schumer
     Sessions
     Shelby
     Smith
     Snowe
     Stabenow
     Stevens
     Sununu
     Talent
     Thomas
     Warner
     Wyden

                                NAYS--11

     Akaka
     Alexander
     Carper
     Clinton
     Durbin
     Feinstein
     Graham (FL)
     Hollings
     Jeffords
     Rockefeller
     Voinovich

                             NOT VOTING--15

     Biden
     Chafee
     Edwards
     Enzi
     Fitzgerald
     Hagel
     Inouye
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Mikulski
     Miller
     Sarbanes
     Specter
  The PRESIDING OFFICER. (Ms. Murkowski.) On this vote, the yeas are 
74, the nays are 11. Three-fifths of the Senators duly chosen and sworn 
having voted in the affirmative, the motion is agreed to.
  Mr. McCAIN. Madam President, I thank all of my colleagues for their 
vote. It is certainly a signal that a majority of Senators want to move 
forward and address this issue. I believe many believe they would like 
to get involved as well.
  If the opponents are going to talk for a while, after that is over, 
since we are in 30 hours of postcloture debate, if it is sought to be 
used, it is my intention to propose tomorrow the amendment which I 
described earlier. I hope we can then move forward with amendments and 
debate and votes.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Florida.
  Mr. NELSON of Florida. Madam President, I defer to the leadership. I 
have some remarks to make on another subject as in morning business, to 
come out of my hour with regard to the motion to proceed.
  Mr. REID. I know the Senators who are concerned about this 
legislation are trying to make a decision as to what is going to happen 
next, what they are going to do next. It would be to everyone's best 
interests if we had some time when we could go to the bill tomorrow.
  I direct this question through the Chair to the Senator from 
Tennessee: When do you think you will be in a position to decide 
whether we can have a time certain to go to the bill or whether we will 
work off the 30 hours postcloture?
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I thank the assistant Democratic 
leader. I thank Senator McCain for his efforts over the weekend to 
develop a substitute amendment which we received this afternoon and 
which we are studying.
  My hope is we have a constructive movement toward a result this week 
that does no harm to States, that bans State and local taxes for a 
short period of time, and that gives Congress time through the Commerce 
Committee to create a comprehensive approach.
  The leadership has asked us to try to do this in an orderly way. I 
want to do that. I have two or three Senators to discuss that with in 
the next 30 minutes or hour. The Senator from California has remarks 
she would like to make, so I say to the assistant Democratic leader, 
within the next 30 minutes or hour I will have a response to him and 
the majority leader about how we would like to proceed.
  The PRESIDING OFFICER. The Senator from Florida still has the floor.
  Mr. NELSON of Florida. I yield to the Senator from North Dakota.
  The PRESIDING OFFICER. The Senator from North Dakota.
  Mr. DORGAN. Madam President, I was simply going to observe now that 
we have had the cloture vote on a motion to proceed, there is a 30-hour 
period postcloture. My expectation is we would go on this bill at some 
point tomorrow. My hope is it would be at 2:15, for example, following 
the caucus meetings tomorrow. However, that is a decision those who 
oppose the cloture motion will want to address.
  The bill we are going to be considering in the Senate is a piece of 
legislation that came out of the Commerce Committee. When it came out 
of the Commerce Committee, it had one area that was not resolved. We 
understood when we voted it out it was not resolved. It could have some 
very significant ramifications on State and local revenue base and 
other issues. We decided to try to resolve it on the way to the floor. 
It is not yet resolved. As a result, it will require substantial work--
amendments, debate, some compromise here and there--to see if we cannot 
get a piece of legislation that does what all of us want it to do; that 
is, to have a moratorium on the taxation of access to the Internet but 
done in a way with respect to definitions that is not going to have 
loopholes big enough to drive trucks through.
  There have been circumstances in which if you have a definition that 
is not appropriate and not carefully crafted, the moratorium on taxing 
the Internet itself could be a moratorium on taxing a wide range of 
products that are already taxed. We are going to have to work through 
this in the coming days.
  I would like to see us work in a cooperative way and get on the bill 
and find a way to find some middle ground that accomplishes the 
objectives we all have. Speaking for myself, I supported the moratorium 
previously. I support a moratorium now. But it must be done in a manner 
that is consistent with definitions we all understand and one that 
accomplishes the objectives we all set when we wanted to pass this 
legislation in the first instance.
  I appreciate very much the Senator from Florida yielding.
  Mrs. FEINSTEIN. Madam President, we are not on the bill, is that 
correct?
  The PRESIDING OFFICER. We are on the motion to proceed.
  The Senator from Florida.


                               Venezuela

  Mr. NELSON of Florida. Madam President, while we are getting all of 
our ducks in order with regard to the procedure and there is this 
momentary lull in the consideration of the instant legislation, I rise 
to discuss conditions facing the United States with regard to an 
important neighbor of ours in this hemisphere; that is, Venezuela.
  Venezuela is a country in deep crisis. I worry, as has been the case 
with so many of our neighbors to the south, that it is not getting 
enough attention in relation to this crisis. We all should know the 
President of Venezuela, President Chavez, is right now the subject of a 
petition drive aimed at holding a referendum on a recall of his

[[Page 7560]]

Presidency. That is provided for under section 72 of the Venezuelan 
Constitution. What is also well known is President Chavez and his 
allies have done everything in their power to make it impossible to 
hold a legitimate referendum.
  A week ago I was in Venezuela. I spoke to numerous officials of the 
Chavez government, including the Foreign Minister, the Energy Minister, 
the Vice President of the National Assembly. I also spoke to leaders of 
the opposition who have been leading the drive to hold a recall 
referendum under the provisions of the Venezuela Constitution. This is 
a recall on whether the President will continue in office.
  In addition, I met with numerous business leaders from American 
companies, many in the energy sector, to hear their views on what is 
likely to happen to Venezuela, what is going to happen to Venezuela-
United States relations, and what our policy should be there.
  Everyone I spoke with recommended the United States must strongly 
support a negotiation led by the OAS and the Carter Center aimed at 
resolving disputes related to holding the referendum. Typically, this 
would not be a dispute. They have many more signatures than is required 
for the referendum. However, an objection has been raised that 
signatures are not accurate as to the people. That is easy to check.
  I met with one of the mediators at the Carter Center who described to 
me the proposals his team and the OAS team had made to try to bridge 
the gap between the Chavez government and the opposition. When I asked 
if anyone outside of the government, any of the opposition in the 
business leaders actually think the Chavez government, and specifically 
President Chavez, will allow the continuation of this referendum to go 
forward, I got the same answer from all quarters. It was, ``No.''
  Because of the way President Chavez has governed, because of the way 
he has tried to silence opponents, it is widely believed he will never 
allow the recall referendum to go forward. I hope he will hear this 
chorus of concern being expressed now from the Senate that under 
section 72 of the Venezuelan Constitution he should allow the process 
of democracy to work.
  Just last week, the Venezuelan National Election Commission announced 
procedures for conducting the reparos--the verification of over 1 
million disputed signatures on the original recall petitions. For a few 
days at the end of May, those who signed the petitions will have the 
opportunity to come forward and present evidence that verifies their 
signature.
  It is a cumbersome process. Even if it works perfectly, and even if 
the signatures are legitimate, there may not be enough time to verify 
them all. That is another concern, that the process is being drug out 
purposely, so as to avoid the timeframes involved. But even worse, 
there is so little trust being expressed that the Chavez government is 
going to conduct the process fairly that the effort may be doomed even 
before it starts.
  This political crisis, which has been going on in one form or another 
in Venezuela for 3 or 4 years, leaves me deeply concerned about the 
direction of Venezuela and the prospects for its democracy. It is a 
tragedy that a country of such enormous promise, with vast natural 
resources, and a vibrant entrepreneurial population and well-
modernized, could find itself in such a dire circumstance.
  I am afraid that the United States is not doing enough to make clear 
how much we have at stake in the protection of democracy in Venezuela. 
With a recent United Nations report indicating that a majority of the 
people in Latin America have their doubts about the value of democracy, 
we cannot afford to leave any doubt about where we, the United States, 
stand and what our policy is. I think we also have reason to worry 
about the impact on the economy in our hemisphere of a major oil 
supplier to the United States, the fourth largest supplier to the 
United States; we have to be concerned. What about the interests of the 
United States if suddenly Venezuela were destabilized?
  That is why I was so impressed with the impact that a statement by 
Senator John Kerry had on both the Government and the opposition in 
Venezuela. Senator Kerry's call for strong U.S. support for the 
Organization of American States and the Carter Center process genuinely 
shook up the Chavez government, and it gave renewed hope to the 
opposition.
  Without a sustained push by the United States at its highest levels, 
I have grave doubts that President Chavez will ever permit the 
referendum. Senator Kerry made this statement, much to the delight of 
the opposition in Venezuela, on March 19 of this year. It is a very 
strong statement on reform that is needed, and how the Chavez 
government needs to get behind democracy and stop the kind of direct 
attacks on the United States in which it is engaging.
  Now, other nations to which the United States should be reaching out, 
to use their influence as well: Brazil, Chile, Spain, and France, are 
all, in some respects, better positioned than the United States to try 
to influence the Venezuelan Government. But those states need to see 
sustained leadership from the United States.
  The threat to democracy in Venezuela is not, by any means, the only 
reason for our concern. President Chavez has caused us a number of 
other headaches recently. He struck up a close alliance with Fidel 
Castro. He has started to strike up an alliance with a gentleman named 
Morales in Bolivia who is trying to expand the drug trade in Bolivia. 
And there is extensive evidence of cooperation between Cuban and 
Venezuelan intelligence services. There is also the employment of a 
great number of Cuban nationals in Venezuela.
  Venezuela has provided assistance or, at a minimum, safe haven to 
even those who are drug runners, such as the FARC, a group that 
basically is involved in the drug trade, fighting the legitimate 
Government of Colombia. And the FARC continues to conduct a terrorist 
campaign against the Government and the people of Colombia. At a time 
when Colombia is making slow but steady gains in its long struggle 
against the FARC, the last thing it needs is to have a neighboring 
power; namely, Venezuela, give assistance to this brutal adversary, as 
they would go across the line into Venezuela.
  President Chavez has also made some truly outrageous statements, such 
as praising Iraqi insurgents who attack American soldiers. He has also 
tried to use his oil supply relationship to have a lever on the small 
nations in the Caribbean to get them to oppose U.S. policies. And 
President Chavez has threatened to cut off oil exports to the United 
States.
  Venezuela also suffers from a potent market in false documentation, 
such as passports and other identity cards. I am becoming increasingly 
concerned at the ease, by paying $800 or $900, of getting full 
documentation of everything from a passport to a driver's license, all 
of which is legitimate, simply by buying off officials. I am certainly 
concerned that international terrorist groups will discover their 
ability to acquire and make use of forged Venezuela documents to 
conduct terrorist attacks.
  We may have a net set up to try to protect people from coming into 
our borders, but Venezuelans can travel on their documents to European 
countries. And that begins to start the process of mischief. The 
Venezuelan Government is not doing nearly enough to put a stop to this 
practice.
  I had a friendly meeting with the Foreign Minister, and I raised all 
of these concerns with him. He said, with regard to the forged 
documents that are legion in Venezuela, that he was not aware of the 
problem. But 3 days after I left, the Government announced the arrest 
of nine people for trafficking in forged documents. I hope that is the 
beginning of a crackdown. If that is the case, I thank the Foreign 
Minister of Venezuela for taking my comments to heart.
  You can see that the whole picture adds up to a very disturbing 
conclusion. If things do not improve soon, I worry that we may 
eventually reach

[[Page 7561]]

the point where we have to treat this Venezuelan Government as an 
unfriendly government that is hostile to U.S. interests. That is not 
what I want. And I do not think that is what the U.S. Government wants. 
In the interest of fostering free and fair elections and democracy in 
all of Latin America, that certainly is not what we want, that is not 
what the Organization of American States wants, but that seams the 
direction in which we are headed. That is one of the reasons for me 
making this statement to my colleagues in the Senate.
  If those deteriorating relations between our governments continue, 
that would be a tragedy for a longtime ally, and it would represent a 
reversal of the longstanding good relationship the United States and 
Venezuela have had.
  At this stage we cannot be anything but clear with the Venezuelan 
Government about the direction this relationship is headed. If 
Venezuela's democracy continues to be undermined by its Government, if 
President Chavez continues to side with those who are trying to be 
adversaries to the United States, and if Venezuela does not prove 
itself to be a reliable ally in the war on terrorism, if Venezuela does 
not continue to abide by its own constitution, then we will scarcely be 
able to draw any other conclusion from these actions.
  For this reason, I commend Senator Kerry for making crystal clear, in 
his statement of March 19 of this year, what the stakes are. He has 
made certain that no Venezuelan official can doubt that if the present 
course continues, things will get no easier for them in a future Kerry 
administration.
  My hope is this knowledge will cause the current American 
administration to make clear to President Chavez that our Government 
places a high priority on democracy, the rule of law, and responsible 
conduct in international relations, and that the Government of the 
United States will come down hard on the words and the deeds of the 
Chavez government and that Chavez' failure in these areas--it will be 
made clear--will have consequences, not only in his relations with us 
but in his relations around the world.
  This is a matter of grave importance when you consider how dependent 
we are on foreign oil. That is one reason. We have always relied on 
that oil coming out of Venezuela. So many of our refineries on the gulf 
coast of the United States are established to handle the kind of oil 
with its content to be able to refine it into American fuel. Many other 
refineries in the world don't have that capability. So it is clearly in 
Venezuela's interest that they continue that commerce and continue good 
relations with the United States.
  I hope and pray our relations will improve and that we will get back 
into the longstanding friendship we have had for years and years.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. FEINSTEIN. Madam President, I rise to claim an hour under the 
motion to proceed to speak on the bill.
  Before I do, I compliment the Senator from Florida on his comments on 
Venezuela. He may not know this, but I had the pleasure of spending 
some time in Venezuela when I was mayor, leading a delegation. We had a 
sister city relationship with Caracas. I saw the vibrancy of that 
democracy at that time. This was in the mid-1980s. All the progress 
that had been made in the Bolivar nations and the closeness that 
existed between Venezuela and our country, it was something very 
special to see. You could say, I think, that Venezuela led all the 
nations in terms of its relationship to us. So the deterioration of 
that relationship is very much regretted by me. I associate myself with 
the comments of the Senator from Florida and thank him very much for 
making them.
  I wish to speak about a bill that I am not sure everybody understands 
very well, let alone exactly what it is. There are essentially three 
bills floating around. One of them is S. 150. This is a permanent 
measure. It includes a 3-year grandfather on Internet access if the 
taxes existed in 1998. That is the Allen-Wyden bill.
  There is a McCain proposal that may be brought forward. And, as I 
understand it, in would last for 4 years. It includes a 3-year 
grandfather on Internet access taxes that existed in 1998 and a 2-year 
grandfather on Digital Subscriber Lines (DSL) taxes.
  And there is the Alexander-Carper bill, of which I am a cosponsor. 
This is a 2 year temporary moratorium that includes a 2-year 
grandfather on Internet access taxes that were in place in 1998 and a 
2-year grandfather on DSL service.
  What all that means is very difficult. The last time this bill was on 
the floor was November 6 and 7 of last year. I remember coming to the 
floor and saying I had been approached by more than a hundred 
California cities to oppose the bill. It was a deluge. I had never had 
that kind of opposition from California cities before in my 12 years in 
the Senate. That deluge has only increased.
  Interestingly enough, I have not received a single letter from a 
telephone company in support of any of these bills, which is very 
interesting.
  The most dominant voice has been the League of California Cities, 
firefighters, labor. The League in particular represents over 470 
California cities. These cities believe this bill, S. 150, will cost 
billions of dollars nationwide, and in California it will cost local 
jurisdictions as much as $836 million once it really gets started.
  Cities and counties across the Nation are facing budget crises. These 
cuts only make the situation worse. There would be less money to pay 
for police officers, firefighters, libraries, and parks. Passing this 
bill, which essentially would end revenue streams which cities have 
counted on for years to fund vital services, is something I can't do. 
That is why you have Senator Carper, a Governor, Senator Voinovich, a 
former mayor and Governor, Senator Alexander, a Governor, and myself, a 
mayor, all saying, please don't do this.
  I support legislation sponsored by Senators Alexander and Carper 
which would extend the recently expired moratorium on Internet access 
by 2 years, and make the moratorium technology neutral.
  The Allen-Wyden bill changes the definition of Internet access 
significantly. That is the problem. Simply put, the definition included 
in the bill before us is far too broad. The bill says that 
telecommunications are taxable, and then it adds this:

     . . . except to the extent such services are used to provide 
     Internet access.

  But what does the phrase ``to provide Internet access'' actually 
mean? Cities, counties, and States believe it means they won't be able 
to tax telecommunications services, which they currently can, to the 
tune of $2 to $9 billion annually all across the United States. So that 
is really what is at stake.
  Let me read what the Center on Budget and Policy Priorities says 
about the definition contained in Allen-Wyden:

       The ban on State and local taxation of telecommunications 
     services used to provide Internet access would effectively 
     eliminate billions of dollars' worth of taxes on voice 
     telephone service as the provision of that service is 
     migrated to the Internet, a process that is well underway.

  Then it goes on and it says there will be substantial revenue losses 
for State and local governments. It points out that 11 States would 
lose between $80 million to $120 million: Colorado, Hawaii, New 
Hampshire, New Mexico, North Dakota, South Dakota, Ohio, Tennessee, 
Texas, Washington, and Wisconsin. It says 28 States and the District of 
Columbia would lose $70 million annually. Let me quickly mention which 
ones they are: Alabama, Alaska, Arizona, Colorado, Connecticut, DC, 
Florida, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, 
Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New 
Mexico, New York, North Carolina, Ohio, Rhode Island, South Carolina, 
Tennessee, Texas, Washington, and Wisconsin.
  A lot of States stand to lose. It goes on to say many more State and 
local governments would lose their ability to tax telecommunications 
services purchased by Internet access providers, such as the high-speed 
lines providers

[[Page 7562]]

use to link to the backbone of the Internet.
  A lot of States stand to lose. Now, you can talk to authors of the 
bill and they will say, oh, no, that really is not true. But the fact 
is that even CBO cannot give you a real estimate because companies 
don't maintain records; but cities, interestingly enough, have retained 
specialists to estimate for them.
  Let me read from one of those specialists. His name is William T. 
Fujioka. He is the administrative officer for the city of Los Angeles. 
He points out that:

       In California, the utility user tax has been applied to 
     telecommunications services on a technology-neutral basis for 
     over 30 years. With 150 cities receiving over $830 million--I 
     have been over that.

  He goes on to say:

       For the city of Los Angeles, our telecommunication's 
     utility user tax covers local exchange service, long 
     distance, and wireless, which total $260 million. S. 150 
     places all of these revenues in jeopardy. The loss would come 
     from: 1, the migration of traditional telephone services to 
     Internet-based telephone services, or Voice over Internet 
     Protocol; and 2, the application of S. 150 to local exchange 
     and wireless services that also provide voice and Internet 
     access (in the same manner as DSL and cable modem), which 
     would prevent the city of Los Angeles from taxing these 
     services.

  He then goes on to point out:

       The migration of telecommunication services to the Internet 
     is not just speculation. AT&T, SBC, Verizon, and Time-Warner 
     have all announced their intent to introduce Internet 
     telephone service in California this year.

  It is important to note that currently, DSL and cable modem are not 
subject to the Federal excise tax, or UUT, utility user tax, because 
until recently these broadband communication services were not used for 
voice and were properly deemed private communication services.
  Now, the Ninth Circuit Court of Appeals has changed even that and is 
essentially saying that both cable and DSL can be taxed. That just came 
out. I am told that it will take another 18 months to 2 years just to 
straighten that out and to see if there is an appeal on a writ of 
certiorari to the U.S. Supreme Court.
  So this whole area is in flux and it could change dramatically. It 
makes no sense to do a permanent piece of legislation at this point in 
time, in my view, particularly with this Ninth Circuit case recently 
coming down.
  If Allen-Wyden is approved, phone services, which are currently 
taxable, will become tax exempt. This means local jurisdictions will 
lose revenues they can collect today. In turn, this means less revenue 
to pay for local priorities.
  I support making business and residential access to the Internet tax 
free. There are primarily three ways to access the Internet today: 
dial-up service; cable modem; and DSL, digital subscriber lines. Under 
the recently expired moratorium, two of these methods--dial-up service 
providers and cable modem--were exempted from taxation. The third, DSL, 
could be taxed, though many jurisdictions, including California, didn't 
tax that. But, as I have just told you the Ninth Circuit has just made 
a change by saying that you can now tax cable modem.
  Alexander-Carper--the bill I support--would level the playing field 
and make DSL tax exempt, except in those jurisdictions which already 
taxed it. This grandfather would last for 2 years. And, it would 
grandfather access taxes in place in 1998--again for 2 years. It is 
hoped that this will ensure that the Internet could continue to mature.
  I must say, also, it is my understanding that Senator Enzi is going 
to introduce a bill that will be a simple extension of the 2-year 
moratorium, which expired a few months ago. If the Alexander-Carper 
bill isn't successful, I will support this solution.
  I really believe that is the solution--that we should simply extend 
it, let the Ninth Circuit case go up to the Supreme Court, and let the 
Supreme Court speak. Or we should add an amendment to S. 150 that says 
that all present taxes remain unaffected, so that cities, counties, and 
States, through your State, Madam President, and my State, as well as 
every other State, can know with certainty that the revenues they have 
counted on they can continue to count on.
  If you ask people whether they want police and fire, the answer is 
yes. If you ask them whether they want local services, the answer is 
clearly yes. To pass a bill that ends the method of revenue collection 
and funds up to 15 percent of these local services in many 
jurisdictions, I think, is an unconscionable thing to do.
  Much like the tax cuts, they explode in outer years. So while Members 
that vote for that may be popular for a short period of time, to be 
able to go home and say they are assuring their local jurisdiction that 
they are protecting their revenue sources, they cannot do that by 
voting for S. 150. Just too much is unknown.
  Fifteen percent means layoffs, and it could mean major cuts in 
service. It could mean higher local taxes.
  The cities that have contacted me, large and small, are like San 
Francisco, Los Angeles, Sacramento, LaVerne, San Leandro, and Santo 
Rosa.
  Let me quote from the comptroller of the city of San Francisco, Ed 
Harrington. Again, this is a technical person writing:

       For the city of San Francisco, our telecommunications UUT--
     utility users tax--covers local exchange service, long 
     distance, and wireless, which totals $32 million a year. S. 
     150--that is Allen-Wyden--places all of these revenues in 
     jeopardy.
       The loss would come, again, from the migration of 
     traditional telephone services to the Internet-based 
     telephone services or Voice Over Internet Protocol; and, 2, 
     the application of S. 150 to local exchange and wireless 
     services that also provide voice and Internet access, which 
     would prevent the city of San Francisco from taxing these 
     services.

  That is the same as Los Angeles.
  So you have two of the major cities in the State and their technical 
and financial people both saying the same thing.
  The League of Cities, which represents all of California's 478 
cities, its county administrators, its police officer associations, its 
firefighter associations, all oppose this bill.
  In the city I served as mayor for 9 years, the current definition of 
telecom services could lead to a loss of $32 million annually. This 
translates into 300 police and firefighters.
  I want to also cite the city of Pasadena. Mayor Bill Bogarrd wrote my 
office to protest that his city would lose $11.4 million under Allen-
Wyden, and he writes:

       By using vague language to include broadband Internet under 
     the moratorium, we fear that the bill will allow telephone 
     and cable companies to use that protection to avoid paying 
     local franchise or utility fees.

  Which is exactly what is going to happen.
  He goes on to state:

       It is our understanding that it was not the intent of the 
     bill sponsors to endanger local franchising authority, but 
     the legislation has yet to be changed to correct these 
     unintended consequences.

  Virtually every technical person who looks at this bill--the Center 
for Budget and Policy Priorities, as well as every controller, 
technical professional employee of cities and counties--says the same 
thing: The definition is flawed, it is vague, and under that 
definition, any number of things can happen.
  Madam President, 150 cities in my State levy a utility user tax. That 
includes telephone and cable television services. These taxes provide 
the contribution that I mentioned of approximately 15 percent in 
general purpose revenues. So they make a utility user's tax vital in 
helping fund critical city services.
  I know why telephone companies do not want this. They do not want to 
be bothered by local taxes. But on the other hand, why not say that 
present taxes are excepted, present taxes would not be covered? Cities 
can continue those taxes where they are.
  I believe that because of the determination that this bill is an 
unfunded mandate and other reasons, S. 150 is subject to a point of 
order when it is under consideration, and I fully expect that this 
point of order will be raised. For this Senate to pass a bill that 
further ties the hands of local government I think will be unfortunate 
just at a time when so many States face budget deficits and so many 
cities have the same situation.

[[Page 7563]]

  In short, the problem with Allen-Wyden is that it changes the 
definition of Internet access in the recently expired Internet tax 
moratorium in such a way that cities lose billions nationally, that 
this escalates over time, and that this will lead to reduced 
preparedness of our cities, to fewer firefighters, and to fewer police 
officers.
  Anyone who has ever done a city budget knows you cannot lose up to 15 
percent of your revenue and keep services at the same level.
  I am hopeful that as the days go on and as we consider amendments to 
the bill, there will be a straight amendment that will just simply 
extend a 2-year moratorium to give the Supreme Court case Brand X 
Internet Services v. the FCC the opportunity to go up on appeal, 
hopefully for the Supreme Court to take it up, or else to leave in 
place the appellate court opinion which makes very clear that States 
will be able to tax cable modem service since the 1996 act allows 
States to tax telecommunications services.
  One of the most disturbing aspects about the bill is some people 
think that it imposes Internet sales taxes when this is not true at 
all. These taxes are all at the point where the Internet comes in to 
the home, and yet they reach back in the chain as various services come 
together substantially before the Internet reaches the house. I think 
if that currently taxable aspect of the service is made unavailable to 
local communities that have very few revenue sources, it is going to 
present a substantial hardship for the quality of life of the people we 
care about in our cities and in our States.
  I will oppose S. 150. I will vote for the Alexander-Carper bill and 
will also vote for Senator Enzi's bill should he make that available.
  I reserve the remainder of my time and yield the floor.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Madam President, I congratulate the Senator from 
California. She represents a State that has 12 to 13 percent of all the 
people in our country with lots of cities and counties. She has been a 
leader as a mayor, as I have been a Governor. Once you get to the 
Senate, you are not supposed to forget what you learned as a mayor or a 
Governor, and what you know for sure is that if Congress comes along 
and says, You can't tax property in San Francisco, for example, then 
you are going to have to raise taxes on something else. Or, on the 
other hand, if they said, You can't tax automobiles in California, then 
you will have to raise taxes on something else.
  When Congress comes along and says to California, to 118, 122, or 
however many, we are going to take $260 million potentially from Los 
Angeles, $32 million potentially from San Francisco, that is not 
lowering anybody's taxes. You just raise other taxes. If you say, 
Senator Alexander, we think you are special, you don't have to pay 
taxes, the Senator from California is going to have to make up what I 
have not paid, or someone is. If you say, We will just cut Government, 
we will cut services, good, maybe we should do that, but still I would 
be paying lower taxes and you would be paying higher taxes.
  What we are talking about is a very simple idea: Should the Congress, 
in its wisdom, decide to give yet one more subsidy to the high-speed 
Internet access industry and then send the bill to mayors and 
Governors? I can see us having a big debate and getting all excited 
about high-speed Internet access. When the internal combustion engine 
was invented, somebody in the Senate got excited about it, or when the 
telephone was invented, somebody got excited about it, or when the 
railroad was invented, somebody got excited about it, but we did not 
say in order to encourage them, there may be no taxes by State and 
local governments on these great new inventions. Whenever we decide 
something is worth a subsidy, we do it ourselves, or we should do it 
ourselves. That is the great irony here.
  Here we have one of the most subsidized technologies in America and 
the fastest growing technology in America. There is nothing to indicate 
anything is stopping it from growing. Yet we are piling on more 
subsidies and giving the bill to State and local governments.
  I thank the Senator from California for her leadership, her 
directness, and her consistency. I look forward to working with her 
tomorrow.
  I think we have achieved tonight some of what we had hoped. The 
Senate has rules that permit a small group of Senators to make a point. 
I think the point we made tonight by insisting on a cloture vote on a 
procedural motion, on the motion to proceed, was to speed along some 
new compromises.
  I am glad to see the Senator from Arizona with a new compromise 
proposal. I have been working on one for 6 months with the Senator from 
Virginia.
  We even made some progress, but not enough. Perhaps the proposal of 
the Senator from Arizona is even a step further. We received it this 
afternoon and I have not had a chance to analyze it, which is why we 
need time to do that. We will move toward that objective the leadership 
wants and we all want, which is to create a consensus in this body 
about what we should do for the time being about State and local 
taxation of Internet access.
  What I believe and the Senator from California believes and many 
other Senators believe is these should be our principles: No. 1, we 
should take the time to give the Senate Commerce Committee and the 
House of Representatives time to think carefully about this new 
technology, high-speed Internet access, which has the potential to 
deliver to our homes and our offices so many services. We should think 
carefully about that and not deal with it in any piecemeal fashion. 
That is why a short-term extension of the ban on State and local 
taxation of Internet access is much wiser than anything permanent, and 
I am glad to see us moving away--not far enough yet, but away from the 
notion of permanent confusion, which is what would happen.
  Why in the world, when the Commerce Committee, when Senator Stevens, 
Senator McCain, and others have said they want to look into this, would 
we short-circuit that by making a decision about a little bit of the 
growth of high-speed Internet access?
  We ought to carefully look at whether there is a need for an 
additional subsidy to high-speed Internet access. I will be talking 
about that some tomorrow. There is $4 billion of Federal subsidy 
already. I have a study by the Alliance for Public Technology about all 
of the State and local subsidies to high-speed Internet access. They 
may all be good things, but we should know they are there. I mentioned 
this earlier, that in 1995 the Texas telecommunications infrastructure 
fund put in motion raising taxes to generate $1.5 billion over 10 
years, to basically put in high-speed Internet access everywhere. That 
is true in virtually every State.
  I mentioned earlier today, in LaGrange, GA, they are giving it away 
for free and still only about half the people want it. We cannot force-
feed it to people, and giving a big new subsidy to the high-speed 
Internet access companies is not going to make people who can get it 
for free in LaGrange, GA, use it if they do not want it.
  While my distinguished colleagues, who have a different point of 
view, say it does not cost much, well, the House bill costs a lot. Up 
to $10 billion in State and local taxes on telephones are at risk. Up 
to $7 billion in business taxes the States collect today are at risk. 
Half a billion dollars in business taxes collected on the Internet 
backbone would be wiped out. Sales taxes on Internet access being 
collected now in 27 States, gone. Universal service fund fees and 9-1-1 
service fees threatened. Now people may be listening to that and 
saying, great, no more taxes. That is the big trick. Do not let 
yourself be tricked by that, because if I run for the Senate and 
promise to abolish local property tax, do not people know the mayor and 
the Governor are going to have to raise sales tax on food to make up 
for it? Or if I run for the Senate and say I have this great idea, I am 
going to abolish the car tax in California, Virginia, Tennessee, and 
all around the country, hooray, that sounds good, does it not? But they 
are

[[Page 7564]]

going to come up with another tax. They will raise sales tax on food or 
on business.
  So this is real money we are talking about, and that is the second 
point we should be discussing in this compromise, that we do not need 
any more subsidy.
  The third point is we should not break our promise to do no harm to 
State and local governments. That simply means this: If Congress in its 
wisdom concludes high-speed Internet access needs one more subsidy, 
then we ought to be big enough men and women to stand up and say, okay, 
we will pay for it. But what are we doing? We are sending the bill to 
State and local governments. At least that is the way the Governors, 
the mayors, and everyone I have talked to, who has carefully read the 
bill from that perspective, reads it.
  Maybe the compromise of the Senator from Arizona moves in that 
direction. I hope it does. I am studying it tonight, and I will study 
it in the morning.
  It is a great surprise to me to come to the Senate and find one of 
the first things we do in my first 2 years is break the promise the 
Republican Congress made in 1995, ``No money, no mandate. If we break 
our promise, throw us out.''
  I would rather not be thrown out. I would rather we keep our promise. 
Everyone knows this is an unfunded mandate. To say we passed some 
unfunded mandates is like asking, why are you arresting me for this 
one? I robbed some other stores last week and you did not catch me.
  We do enact unfunded mandates on occasion, but the Congress has done 
it a lot less since 1995, and it has had to stand up and be counted.
  I want to make sure everyone knows what we are talking about this 
week is an unfunded Federal mandate and that every Democrat or 
Republican Senator who made a speech on the floor in 1995--and I have 
those speeches--or who goes back to a Lincoln Day dinner or a 
Jefferson-Jackson Day dinner and starts off by making a great big 
speech about local control is overlooking support for S. 150 because it 
is about adding a new cost on State and local governments and not 
paying the bill.
  The Senator from California says it is 5 to 15 percent of the revenue 
base of many of her cities. The Governor of Tennessee told me it is up 
to 5 percent of the revenue base of Tennessee. In our State, if we take 
out 5 percent of the sales tax base, there will be an income tax. We do 
not have a State income tax because the people of Tennessee make a 
choice. We thought the Governor and the legislature were elected to 
decide what taxes we could impose.
  Then finally, if we insist on this additional subsidy to encourage 
high-speed Internet access, why do we not follow President George W. 
Bush's example? Let's put in the Texas plan. It is very simple. It 
avoids all of this discussion we are having about definitions, all this 
argument we are having about whether it costs anything. What they did 
in Texas from 1999 when President Bush was Governor Bush was the 
following: They said you do not have to pay any State tax on the first 
$25 of your monthly bill for high-speed Internet access.
  Twenty-five dollars is all one has to pay for high-speed Internet 
access in Manassas, VA, where they deliver it through the power 
company, and people can also get it through the phone company, the 
cable company, and from the sky through the satellite. It can be gotten 
from everywhere. One cannot walk down the street without somebody 
selling people high-speed Internet access. It is the fastest growing 
technology in America. The Congressional Budget Office and the 
Department of Commerce have told us we do not need to intervene. It 
does not need a subsidy. There is no economic benefit to paying more 
taxpayers' money for this one industry.
  So why is it? Why are we suddenly running a railroad train through 
the Congress saying we are going to pick out this one industry? This is 
a country where we have had many great inventions before. This is not 
the first invention we have ever had, high-speed Internet access. It is 
a great thing. But so was the telephone. So was the railroad. So was 
the internal combustion engine. Now we are saying more subsidies--4 
billion in Federal dollars is not enough. A whole book full of State 
and local subsidies is not enough. The fact that it is the fastest 
growing technology in America, that is not fast enough. We want to pour 
more money in here, and it is not really going to the consumers; it is 
going to the companies; it is going to the industries.
  My friend from Virginia will say that is passed on to the consumer. 
Maybe it is. But if we are going to pass corporate taxes on to 
consumers, why not do it for all corporations? We have a lot of 
manufacturing companies getting ready to move jobs overseas. Let's 
lower their taxes. Let's lower everybody's taxes.
  I am disappointed, to tell you the truth, that this bill is even 
being considered in this way. I am surprised. If I were still the 
Governor of Tennessee--which maybe some in the Senate wish I still 
were--I would be roaring and screaming about this. I would be calling 
my Governors on the telephone saying, What are these men and women in 
Washington, DC doing? If they want to decide what the taxes ought to be 
in Tennessee and California and Iowa, let them come home and run for 
Governor or mayor. If they want to give a subsidy to some company, let 
them pay for it; don't send the bill to us. Let them come down and 
figure how to keep State university tuitions from going up and how we 
keep from raising State and local property taxes to deal with a Federal 
law that requires more State aid to children with disabilities but 
doesn't fund it. That is what I would be doing.
  I would have them on the phone tonight on a conference call and 
asking them to call every single Senator saying, What are you doing up 
there? We have a war in Iraq. We have a national economy. We have 
plenty of national issues without you trying to be the Governor of the 
home State at the same time, and if you want to be the mayor of 
Knoxville or Nashville or Memphis, come on home. We will share all our 
problems with you and you can decide what to spend and how high the 
property taxes ought to be.
  When we take hundreds of millions and potentially billions of dollars 
out of State and local governments, we are raising local taxes, not 
cutting local taxes. We are creating permanent confusion, and we are 
breaking our promise.
  So I am glad we had this vote tonight. I hope by coming in here and 
voting we encouraged some work over the weekend, and late last week. I 
know Senator McCain was working, Senator Allen was working, Senators 
Carper and Feinstein and I were working, and I hope we have made some 
progress.
  Tomorrow when we come in here after our lunch and begin to move to 
the bill at hand, I think we will have on our side--I mean those of us 
who oppose S. 150--that we will have upheld our part of the 
responsibility of keeping this Senate moving toward a conclusion. We 
want a result, but we want a good result.
  May I say one more time what I believe a good result is. A good 
result is a 2-year ban on State and local taxation of Internet access 
so the U.S. Congress can think carefully about the migration of digital 
services to the Internet because of high-speed Internet access. So that 
is No. 1--2 years or less.
  No. 2, no big subsidy to a heavily subsidized industry already.
  No. 3, let's keep our promise and do no harm to State and local 
governments. Let's show the people of this country that when we make a 
promise, as we did in 1995 when we said no more unfunded Federal 
mandates, when 300 Republicans stood on the Capitol steps and said, If 
we break our promise throw us out, let's show that we mean that and not 
engage in rhetoric that tries to confuse the issue.
  If we meet those three tests, then we can have a result. We can have 
one quickly tomorrow, or Wednesday, or Thursday. But if we insist on 
legislation here like the legislation that passed the House, that 
creates permanent confusion instead of careful study,

[[Page 7565]]

an unwarranted expensive subsidy to a heavily subsidized fast-growing 
technology, and that does harm to State and local governments, which 
breaks our promises, then I am going to continue to oppose that and so 
are a great many of the Democrats and Republicans who joined us in the 
Alexander-Carper legislation.
  I think this has been a successful day. I appreciate the time we have 
been given to debate the issue. I know Senator Enzi and others will be 
here tomorrow morning to continue that discussion, and I look forward 
to moving in an orderly way to the legislation at hand, S. 150, 
sometime tomorrow afternoon, based upon the decision of the leadership.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Talent). The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. ALEXANDER. Mr. President, I ask unanimous consent that the order 
for the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. ALEXANDER. Mr. President, on behalf of the majority leader, I ask 
unanimous consent that when the Senate resumes the motion to proceed to 
S. 150, the Internet tax access bill, there be 2 hours and 40 minutes 
for debate remaining with 2 hours under the control of Senator 
Alexander or his designee, with 20 minutes under the control of the 
chairman of the committee and 20 minutes under the control of Senator 
Dorgan; provided further that at the use or yielding back of that time 
the motion to proceed be agreed to.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________