[Congressional Record (Bound Edition), Volume 160 (2014), Part 8]
[House]
[Pages 12017-12024]
[From the U.S. Government Publishing Office, www.gpo.gov]




                   PERMANENT INTERNET TAX FREEDOM ACT

  Mr. GOODLATTE. Madam Speaker, I move to suspend the rules and pass 
the bill (H.R. 3086) to permanently extend the Internet Tax Freedom 
Act.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 3086

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

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

     SEC. 2. PERMANENT MORATORIUM ON INTERNET ACCESS TAXES AND 
                   MULTIPLE AND DISCRIMINATORY TAXES ON ELECTRONIC 
                   COMMERCE.

       (a) In General.--Section 1101(a) of the Internet Tax 
     Freedom Act (47 U.S.C. 151 note) is amended by striking `` 
     during the period beginning November 1, 2003, and ending 
     November 1, 2014''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxes imposed after the date of the enactment 
     of this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Virginia (Mr. Goodlatte) and the gentleman from Michigan (Mr. Conyers) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Virginia.


                             General Leave

  Mr. GOODLATTE. Madam Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous materials on H.R. 3086, currently 
under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Virginia?
  There was no objection.
  Mr. GOODLATTE. Madam Speaker, I yield myself such time as I may 
consume.

[[Page 12018]]

  The clock is ticking down on a key law that protects Internet 
freedom. On November 1, 2014, a temporary moratorium on State taxation 
of Internet access will expire.
  In 1998, Congress temporarily banned State and local governments from 
newly taxing Internet access or placing multiple or discriminatory 
taxes on Internet commerce. With minor modifications, this ban was 
extended three times with enormous bipartisan support. The most recent 
extension passed in 2007.
  If the moratorium is not renewed, the potential tax burden on 
consumers will be substantial. The average tax rate on communications 
services in 2007 was 13.5 percent, more than twice the average rate on 
all other goods and services. To make matters worse, this tax is 
regressive. Low-income households pay 10 times as much in 
communications taxes as high-income households as a share of income.
  The Permanent Internet Tax Freedom Act converts the moratorium into a 
permanent ban on which consumers, innovators, and investors can 
permanently rely by simply striking the 2014 end date. This legislation 
prevents a surprise tax hike on Americans' critical services this fall. 
It also maintains unfettered access to one of the most unique gateways 
to knowledge and engines of self-improvement in all of human history.
  This is not an exaggeration. During the 2007 renewal of the 
moratorium, the Judiciary Committee heard testimony that more than 75 
percent of the remarkable productivity growth that increased jobs and 
income between 1995 and 2007 was due to investments in 
telecommunications networks technology and the information transported 
across them.
  Everyone in Silicon Valley knows Max Levchin's story. He came to 
America from the Soviet Union at age 16. His family had $300 in its 
pocket, and he learned English by watching an old TV set he hauled out 
of a dumpster and repaired. Ten years later, he sold PayPal, the well 
known Internet payments platform he cofounded, for $1.5 billion.
  That is the greatness of the Internet. It is a liberating technology 
that is a vast meritocracy. It does not care how you look or where you 
come from. It offers opportunity to anyone willing to invest time and 
effort. That is precisely why Congress has worked acidulously for 16 
years to keep Internet access tax-free. Now we must act again once and 
for all.
  The Permanent Internet Tax Freedom Act has 228 cosponsors. The 
Judiciary Committee reported it favorably by a vote of 30-4. 
Nevertheless, small pockets of resistance remain. They argue that the 
Internet is no longer a fledgling technology in need of protection. But 
it is precisely the ubiquity of the Internet that counsels for a 
permanent extension. It has become an indispensable gateway to 
scientific, educational, and economic opportunities. It is the platform 
that turned Max Levchin from an impoverished immigrant into a 
billionaire. The case for permanent tax-free access to this gateway 
technology is stronger today than it ever has been.
  Opponents also claim that this legislation will lower State revenues. 
Seven States currently enjoy an exemption from the moratorium. This 
legislation lets these grandfather clauses expire. But these 
grandfathered States had no reasonable expectation of maintaining their 
special status. The original moratorium included a grandfather clause 
to give States that were then taxing Internet access some time to 
transition to other sources of revenue. Some discontinued taxing 
Internet access in support of a national broadband policy. For those 
that still haven't, it has been 16 years, time enough to change their 
tax codes. If the revenue grandfathered States now reap is truly 
essential, it should be straightforward for the State to recoup it 
through a different form of taxation.
  It is important to note that the Permanent Internet Tax Freedom Act 
does not address the issue of State taxes on remote sales made over the 
Internet. It merely prevents Internet access taxes and unfair multiple 
or discriminatory taxes on e-commerce, whether inside the taxing State 
or without.
  I would like to specifically thank Mr. Chabot, Ms. Eshoo, 
Subcommittee Chairman Bachus, and Subcommittee Ranking Member Cohen for 
their work on and support of this legislation.
  This bipartisan legislation is about giving every American unfettered 
access to the Internet, which is the modern gateway to the American 
Dream. I urge all of my colleagues to support it.
  I reserve the balance of my time.
  Mr. CONYERS. Madam Speaker, I yield myself such time as I may 
consume.
  Ladies and gentlemen, the Internet Tax Freedom Act, enacted in 1998, 
established a temporary moratorium on multiple and discriminatory 
taxation of the Internet as well as new taxes on Internet access. This 
moratorium is due to expire on November 1 of this year.

                              {time}  1245

  Since 1998, Congress has extended the moratorium on three occasions. 
Unfortunately, however, H.R. 3086, the Permanent Internet Tax Freedom 
Act, responds to the impending expiration of the moratorium by making 
it permanent and ending the act's grandfather protections for States 
that impose such taxes prior to the act's enactment date.
  The approach taken in H.R. 3086 is problematic for a number of 
reasons. First, Congress, instead of supporting this seriously flawed 
legislation, should really be focusing on meaningful ways to help State 
and local governments, taxpayers, and local retailers. The House can do 
that by addressing the remote sales tax issue.
  In addition to extending the expiring moratorium on a temporary 
basis, the House should take up and send to the Senate legislation such 
as the Marketplace Fairness Act, which was mentioned earlier today on 
the floor of the House by the distinguished gentleman from Vermont (Mr. 
Welch). That bill incentivizes remote sellers to collect and remit 
sales taxes as well as require States to simplify several procedures 
that would benefit retailers. Such legislation would enable States and 
local governments to collect the over $23 billion in estimated 
uncollected sales tax each year.
  The measure would also help level the playing field for local 
retailers--who must collect sales taxes--when they compete with out-of-
State businesses that do not collect these taxes. Retail competitors 
should be able to compete fairly with their Internet counterparts at 
least with respect to sales tax policy. The House should do its part 
and adjust the remote sales tax disparity before the end of this 
Congress.
  In addition, this legislation will severely impact the immediate 
revenues for the grandfather-protected States and all States 
progressively in the long term. The Congressional Budget Office, for 
example, estimates that this bill will cost certain States ``several 
hundred million dollars annually'' in lost revenues.
  Indeed, the Federation of Tax Administrators estimates that the bill 
will cause the grandfather-protected States to lose at least $500 
million in lost revenue annually. These States include Texas, which 
would lose $350 million a year in revenue; Wisconsin, which would lose 
about $127 million per year; Ohio, which would lose about $65 million 
per year; and South Dakota, which would lose about $13 million per 
year.
  Further, this bill would become effective during the mid-cycle for 
the grandfather-protected States. Because these States have to balance 
their State budgets, they will need to cut spending or raise taxes to 
balance their budgets.
  Should this become law, State and local governments will have to 
choose whether they will cut essential government services--such as 
educating our children, maintaining needed transportation 
infrastructure, and providing essential public health and safety 
services--or shift the tax burden onto other taxpayers through 
increased property, income, and/or sales taxes.
  Meanwhile, the Center on Budget and Policy Priorities estimates that 
the permanent moratorium will deny the

[[Page 12019]]

non-grandfathered States almost $6.5 billion in potential State and 
local sales tax revenues each year in perpetuity. H.R. 3086 will burden 
taxpayers and services while excluding an entire industry from paying 
their fair share of taxes.
  Finally, the bill ignores the fundamental nature of the Internet. The 
original moratorium was intentionally made temporary to ensure that 
Congress, industry, and State and local governments would be able to 
monitor the issue and make adjustments where necessary to accommodate 
new technologies and market realities.
  The act was intended as a temporary measure to assist and nurture the 
fledgling Internet that back in 1998 was still in its commercial 
infancy. Yet this bill is oblivious to the significantly changed 
environment of today's Internet.
  The bill's supporters continue to believe that the Internet still is 
in need of extraordinary protection in the form of exemption from all 
State taxation. But the Internet of 2014 is not the same as its 1998 
predecessor. Today's Internet is considerably different in terms of 
both the types of accessibility and the accompanying technology.
  The Internet then was access primarily a slow, unreliable dial-up 
service. But now technology has provided many types of methods to 
access the Internet, and we can anticipate that the Internet and its 
attendant technology will continue to evolve. By permanently extending 
the tax moratorium, however, Congress severely limits its ability to 
revisit it and to make any necessary adjustments.
  Simply put, a permanent moratorium is unwise, and so I urge my 
colleagues to think about this carefully and oppose H.R. 3086.
  Madam Speaker, I reserve the balance of my time.
  Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to 
yield 2 minutes to the gentleman from Ohio (Mr. Chabot), a member of 
the Judiciary Committee.
  Mr. CHABOT. Madam Speaker, I would like to thank the gentleman from 
Virginia (Mr. Goodlatte) for his leadership on this bill.
  Madam Speaker, I rise today in support of H.R. 3086, a bill that 
would make permanent the Internet Tax Freedom Act, which was passed a 
number of years ago, around the time when I came to Congress the first 
time.
  The Internet is an essential part of our everyday lives. Americans 
use it to run small businesses, to do research, apply for jobs, listen 
to music, communicate with friends and family, check the weather and 
traffic, and a whole bunch of things. It is really a part of virtually 
all Americans' lives nowadays.
  Madam Speaker, since 1998, Congress has made sure that access to the 
Internet remains tax-free. Unfortunately, this protection expires in 
November, as has been mentioned, at which point taxes will go up on 
every American who wants to get online.
  Now is the time to make this policy of having access to the Internet 
free of taxes permanent. Now is the time to protect Internet access.
  Madam Speaker, the Internet is an essential component of our economy. 
It drives innovation, job creation, and has resulted in a higher 
standard of living for virtually every American. The bill before us 
today provides certainty to Americans by making the current law of the 
land permanent and protecting access to the Internet from new taxes.
  Madam Speaker, there is common ground in this Chamber today. We all 
agree that the Internet is an essential part of our lives and an 
incredibly powerful tool for communication, education, and job 
creation. Let's not make accessing the Internet more costly and more 
difficult.
  Madam Speaker, the Permanent Internet Tax Freedom Act protects all 
Americans' access to the Internet from new taxes, and I urge my 
colleagues to support this important bill.
  Mr. CONYERS. Madam Speaker, I am pleased now to yield 1 minute to the 
gentlewoman from California, Ms. Zoe Lofgren, a senior member of the 
Judiciary Committee.
  Ms. LOFGREN. Madam Speaker, after nearly two decades, it does make 
sense to make this moratorium permanent. The moratorium is one of the 
reasons for the huge growth in the digital economy. The Internet 
wouldn't be what it is today without affordable Internet access. And, 
by the way, this tax relief is not to companies. It is to individuals 
who access the Internet.
  Madam Speaker, I applaud the Judiciary Committee for ensuring that 
the moratorium is made permanent before it expires. But the work on 
discriminatory taxes is not done. Wireless access to the Internet is 
still vulnerable to discriminatory taxation. The average tax is 17.2 
percent--it goes as high as 25 percent in some States--and a 
disproportionate number of low-income Americans access the Internet 
only through wireless devices.
  We have the Wireless Tax Fairness Act that I introduced. It has 220 
cosponsors. So, in addition to voting for this moratorium on Internet 
taxation, I would encourage my colleagues to ask for a vote on the 
Wireless Tax Fairness Act that, after all, is sponsored by a majority 
of this House.
  Mr. GOODLATTE. Madam Speaker, I want to thank the gentlewoman from 
California and the gentleman from Ohio (Mr. Chabot) for their 
leadership on this issue.
  Now I would like to yield 1 minute to the gentleman from Indiana (Mr. 
Bucshon) for his statement and thank him for his leadership on this 
issue as well.
  Mr. BUCSHON. Madam Speaker, I rise in strong support of H.R. 3086, 
the Permanent Internet Tax Freedom Act. I believe that this permanent 
extension is necessary to ensure the Internet remains accessible for 
all Americans.
  Madam Speaker, the Internet economy is growing and changing every 
day, and this pro-growth legislation will support the vibrant online 
marketplace of goods and ideas by preventing State and local tax 
policies from creating barriers to access.
  Americans use the Internet every day to communicate, to work, and to 
get an education. They shouldn't have to pay an unnecessary and unfair 
tax to do so.
  Madam Speaker, I thank Chairman Goodlatte for his work on this 
important bipartisan bill. I urge all my colleagues to vote ``yes.''
  Mr. CONYERS. Madam Speaker, it is my pleasure now to yield 3 minutes 
to the gentlewoman from California, Ms. Judy Chu, a distinguished 
member of the House Judiciary Committee.
  Ms. CHU. Madam Speaker, I rise to speak in opposition to H.R. 3086 in 
its current form.
  As a former member of the Board of Equalization, which is 
California's elected statewide tax board, and as a member of the 
Judiciary Committee, I support a temporary--not a permanent--extension 
of the current moratorium.
  Madam Speaker, when the Internet was in its infancy, Congress 
rightfully put the moratorium in place to outlaw any burdensome tax 
regulations on Internet access. The Internet has grown tremendously 
since then, and it will undoubtedly evolve over time. As it evolves, 
Congress should be called upon to revisit these issues. But I believe 
that a permanent moratorium would make reexamination of technology and 
market realities very difficult in the future.
  A permanent moratorium would impede a State or local government's 
ability to make taxing decisions that are right for them. This is the 
message I have heard from States, counties, and cities. Take, for 
example, the city of Pasadena, which is the largest city in my 
district. Pasadena does not have any plans to impose taxes and fees on 
Internet access. However, it has concerns with a permanent extension 
that could shut the doors years down the line.
  In fact, Madam Speaker, the National League of Cities, the League of 
California Cities, and the California State Association of Counties all 
oppose this bill. They are opposing it because they see a dramatic 
decline of sales tax revenue due to the increase in online sales that 
are not taxed, and that is why I also support the Marketplace Fairness 
Act. It would require large businesses to collect online sales tax.

[[Page 12020]]

  I can tell you that this makes a dramatic difference in whether local 
government has the funds to fill the potholes and clean the streets. 
Since enacting its remote sellers sales tax law, my home State of 
California brought in $260 million in its first year of collection. 
This is an improvement, but the potential for future growth is even 
greater, with a little over $1 billion of use taxes still to be 
collected from remote sales in California alone.

                              {time}  1300

  With this act, we can stop the closing of businesses on Main Street 
and have a fighting chance to keep the jobs that they provide our 
communities. Keeping the Internet tax moratorium temporary helps in 
this fight. A short-term moratorium strikes the right balance between 
respecting the rights of local taxing authority and the ability for the 
Internet to grow.
  Congress must reserve the flexibility to examine the Internet Tax 
Freedom Act from time to time. That is why I urge a ``no'' vote on this 
bill.
  Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to 
yield 2 minutes to the gentleman from Georgia (Mr. Collins), a member 
of the Judiciary Committee and a leader on technology issues.
  Mr. COLLINS of Georgia. Madam Speaker, I am pleased to rise in 
support of H.R. 3086, the Permanent Internet Tax Freedom Act, because I 
support ensuring that Internet access remains free from predatory taxes 
imposed by State and local governments looking to fill their coffers at 
the expense of their residents.
  I think we just saw why this bill is needed because there are two 
different philosophies. Especially for those who support this 
legislation, this is an area where we want to continue to have the 
Internet free, especially as the gentlelady from California (Ms. 
Lofgren) said, that this goes to the user, and I think that is one 
thing that we need to understand here.
  This legislation ensures that no person is discouraged from accessing 
the Internet and experiencing its transformative power. The Internet is 
a tool for democracy and education. It is an outlet for free expression 
and the megaphone for those who were previously ignored. It connects 
individuals and is a means for creative entrepreneurship.
  The Internet allows for all boundaries to be transcended--cultural, 
religious, geographical, and lingual. Our economy, the expressions of 
our freedom, and our role as a beacon of hope and democracy are all 
enhanced by free and open access to the Internet.
  I want to applaud the work of the chairman in ensuring this Congress 
is doing everything in its power to promote an open Internet that can 
be accessed without predatory taxes and fees.
  Again, this is about the people that we represent, moms and dads who 
have the dream of a better America where they are making it for their 
kids and not being imposed upon by government simply looking to fill 
their coffers at the expense of citizens.
  Mr. CONYERS. Madam Speaker, I am pleased to yield 2 minutes to the 
gentlewoman from California (Ms. Eshoo).
  Ms. ESHOO. Madam Speaker, I thank the distinguished ranking member of 
the Judiciary Committee and my friend for yielding this time to me.
  Madam Speaker, I rise in strong support today of this legislation, 
the Permanent Internet Tax Freedom Act. This is a bill that has been 
stated before that will permanently eliminate any barriers created by 
the taxation of Internet access.
  The current tax moratorium is going to expire shortly on November 1, 
which would then open the doors to taxation on Internet access. I think 
it is very important to make this very clear. This really protects 
consumers because the taxation would fall to them and their access to 
the Internet.
  This issue should not be confused with the issue of sales taxes 
collected by jurisdictions and the discrepancies between Main Street 
and what is purchased on the Internet. That is not what this issue is 
about. This is clearly, I think, a consumer issue.
  Now, whether for communication, commerce, business, education, 
research, the Internet is an integral part of the everyday lives of the 
American people and around the world as well, so we need to encourage 
its usage. We need to protect that usage, and I think we need to do 
everything we can to ensure that the access to the Internet is 
universal.
  This legislation has widespread support in the House. It has been my 
pleasure to work with Chairman Goodlatte as the Democratic lead on this 
effort. It has 228 bipartisan cosponsors in the House--I think that is 
the most eloquent statement about it--and there are 51 bipartisan 
cosponsors in the Senate. It has strong support of the communications, 
Internet, and e-commerce communities.
  I think this is an affordability issue. It is a consumer issue. It is 
sensible. It is bipartisan, and I believe that it deserves the full 
support of the House.
  Mr. GOODLATTE. Madam Speaker, I want to thank the gentlewoman from 
California (Ms. Eshoo) for her leadership on this issue.
  Madam Speaker, I yield 2 minutes to the gentleman from Texas (Mr. 
Farenthold), a member of the Judiciary Committee.
  Mr. FARENTHOLD. Madam Speaker, I am here to speak in strong support 
of Internet tax freedom. I am a believer in the power of the Internet. 
It means a lot for America. It means a lot for the world.
  Because of our commitment to keeping Internet access largely 
unencumbered by taxes and government control, we have created something 
really cool--a dynamic market for goods and services and, most 
importantly, a marketplace for ideas.
  Our rights to freedom of speech and freedom of association have grown 
as the Web opens new outlets for expression in advocacy. Whether it is 
a group of citizens organizing to petition the government for a redress 
of their grievances or somebody looking for the love of their life on 
an Internet dating site, the Internet is there, but we cannot get 
comfortable.
  We cannot forget that the power to tax--and might I add the power to 
overregulate--is the power to destroy. That is why I am up here 
supporting the Permanent Internet Tax Freedom Act, and I thank Chairman 
Goodlatte and our numerous cosponsors on both sides of the aisle. This 
is good for America and good for the world.
  Please join me in voting ``yea.''
  Mr. CONYERS. Madam Speaker, I reserve the balance of my time.
  Mr. GOODLATTE. Madam Speaker, at this time, it is my pleasure to 
yield 1 minute to the gentleman from Texas (Mr. Barton).
  Mr. BARTON. Madam Speaker, I thank the gentleman from Virginia, the 
full committee chairman, and I would like to enter into a little bit of 
a colloquy.
  I am an original cosponsor. I certainly want to prevent taxation of 
the Internet, but as you know, I represent one of the 36 districts in 
Texas, and in my district, my largest city is the city of Arlington, 
and they currently collect approximately $1 million a year in revenue 
from connection fees to the Internet in their city limits, and under 
this bill, that would be prohibited.
  I had been led to believe that we were going to have the same 
grandfather provision that we have had for the last 16 years. 
Apparently, that is not the case.
  Could the chairman enlighten me why we are not grandfathering 
existing local collection fees, and what might be done in conjunction 
with the other body if and when this goes to conference?
  I yield to the chairman.
  Mr. GOODLATTE. First of all, I thank the gentleman for his question, 
and I and others have been clear that we think these grandfather 
clauses should expire. When they first were adopted 16 years ago, it 
was with the intention that they be phased out. Of course, they have 
had 16 years, and we would like to have them do that.
  The SPEAKER pro tempore. The time of the gentleman has expired.
  Mr. GOODLATTE. Madam Speaker, I yield myself an additional 30 
seconds.
  Our goal is to have a clean, permanent moratorium signed into law as

[[Page 12021]]

promptly as possible. If the gentleman from Texas can engineer a 
phaseout consistent with that goal, I am certainly willing to work with 
him in that objective.
  Mr. BARTON. Will the gentleman yield?
  Mr. GOODLATTE. I yield to the gentleman from Texas.
  Mr. BARTON. If the gentleman will allow me to be part of the process 
and inform me at such a time that it would be possible to offer an 
amendment or to work with you and the other body, I would certainly be 
more than willing to do that.
  Mr. GOODLATTE. As this measure is considered in the Senate and then 
in conference between the House and Senate, we would look forward to 
working with you.
  Mr. BARTON. I thank the gentleman.
  Mr. CONYERS. Madam Speaker, I yield 3 minutes to the distinguished 
gentlewoman from Texas (Ms. Jackson Lee).
  Ms. JACKSON LEE. Madam Speaker, let me thank the ranking member and 
the chairman of the full committee. We seek opportunities on the 
Judiciary Committee to compromise and work together. This legislation 
would have been an excellent opportunity to be able to work together.
  I appreciate the position of my chairman, but I know that Mr. Conyers 
and myself worked on a compromise that I think and hope that, as we 
ultimately watch this bill make its way through the process, that we 
will be able to draw upon the Conyers-Jackson Lee compromise that makes 
this Internet Tax Freedom Act extended for a certain period of time.
  We understand that there are frustrations on all sides. This bill 
would make permanent the Internet Tax Freedom Act, which imposes a 
moratorium on taxing Internet services, but as written would delete the 
existing grandfather clause which has been in place since the original 
passage of the bill in 1998 that allowed a number of States with unique 
circumstances, at the State and local level, to impose tax on Internet 
access services.
  Now, we can suggest that the present bill is a laissez-faire bill. 
Let me say that there is another principle of states' rights, and I 
have often heard it from my friends on the other side of the aisle. 
When it is for good, we should look at it as a reasoned answer to the 
uniqueness of the 50 States.
  The Conyers-Jackson Lee amendment preserves the grandfather clause, 
so that Texas and other States could raise this very valuable revenue, 
but more importantly, it retains the moratorium for 4 years for us to 
be able to address this question in a fair manner. We offered this in 
the full committee, and there are many who support this compromise 
beyond the States that would be impacted.
  A letter that I have received from the director of Citizens for Tax 
Justice writes in opposition to making permanent the Federal law--and I 
will include the letter for the Record--by banning State and local 
governments from subjecting Internet access to the same taxes they 
impose on other goods and services.
  This letter goes on to say that it was decided that this infant 
industry needed special protection from taxes. Now, we are beyond that, 
but we are harming States.
  I just want to use, as an example, the State of Texas will lose $280 
million; cities will lose $51 million; transit, $18 million; special 
districts, $4 million; a total of $358 million. When we are putting 
more burdens on States, we need to not remove an opportunity where they 
can raise revenue innocently and in good conscience.
  The SPEAKER pro tempore. The time of the gentlewoman has expired.
  Mr. CONYERS. I yield an additional 15 seconds to the gentlelady.
  Ms. JACKSON LEE. Why are we barring our States from doing their good 
due diligence, providing resources--needed resources--for schools and 
infrastructure and health care?
  So I am well aware of the arguments on the other side, but listen to 
our arguments. We are not stopping the taxation issue; we are putting a 
moratorium for 4 years, so that we can reassess it.
  I ask my colleagues to consider that as they consider this 
legislation. I rise in opposition to this legislation.
  Madam Speaker, the bill would make permanent the Internet Tax Freedom 
Act, which imposes a moratorium on taxing Internet services, but, as 
written, would delete the existing grandfather clause that has been in 
place since the original passage of the bill in 1998 that has allowed 
Texas at the state and local level to impose tax on Internet access 
services.
  At the markup in the Judiciary Committee, Ranking Member Conyers and 
I offered an amendment to extend the moratorium and the grandfather 
protections for four years. Unfortunately it failed on a primarily 
party line vote in the Committee.
  Now, the authors of this bill would deem to tell Texas what it can do 
or not do regarding its tax policy. At the heart of the notion of 
federalism is the right of states to legislate matters within their own 
jurisdiction.
  The lines of authority between states and the federal government are, 
to a significant extent, defined by the United States Constitution and 
relevant case law.
  The Constitution does, however, provide certain specific limitations 
on that power. In this instance, states would be prohibited from taxing 
Internet access.
  H.R. 3086 would make the moratorium permanent but it would not extend 
the grandfather protections on which seven states, including Texas, 
still rely on.
  The Conyers-Jackson Lee amendment preserved this ``grandfather 
clause'' so that Texas could continue to raise this very valuable 
revenue.
  And the Conyers-Jackson Lee amendment retained the moratorium on 
taxation for four years instead of making it permanent.
  Unfortunately, for Texas, this legislation would delete the existing 
grandfather clause that has been in place since the original passage of 
the bill in 1998 that has allowed Texas at the state and local level to 
impose tax on Internet access services.
  The original intent of ITFA in 1998 was to encourage development of 
the Internet, which at the time was a new technology. The Internet is 
no longer an infantile industry.
  Madam Speaker, as a practical matter this justification is no longer 
applicable given the substantial advancements in technology that have 
occurred since 1998.
  Bundling non-Internet based services with Internet services creates a 
loophole for industry to avoid taxes altogether.
  Again, the Conyers-Jackson Lee amendment would have preserved this 
``grandfather clause'' so that the state can continue to raise this 
very valuable revenue. As written the bill raises significant 
federalism concerns and essentially tells Texas what to do--nobody 
messes with Texas.
  I urge my colleagues to vote for fairness and judicial economy by 
opposing this legislation in its current form.

                       H.R. 3086: Effect on Texas

     State: $280 million
     City: 51 million
     Transit: 18 million
     County: 5 million
     Special districts: 4 million
     Total: $358 million (per year)
                                  ____

                                                    July 14, 2014.
     Hon. Sheila Jackson Lee,
     House of Representatives,
     Washington, DC.
       Dear Representative Jackson Lee: Citizens for Tax Justice 
     writes in opposition to making permanent the federal law 
     banning state and local governments from subjecting Internet 
     access to the same taxes that they impose on other goods and 
     services. This ban was first enacted with the ``Internet Tax 
     Freedom Act'' (ITFA) in 1998 and extended several times since 
     then.
       Both the ``Permanent Internet Tax Freedom Act'' (H.R. 3086) 
     and ``Internet Tax Freedom Forever Act'' (S. 1431) would make 
     this ban permanent, thereby forever treating the Internet 
     differently from other goods and services by barring state 
     and local governments from deciding for themselves whether or 
     not to tax it.
       In 1998 Congress decided that the internet was an ``infant 
     industry'' needing special protection from the taxes that 
     state and local governments impose on other goods and 
     services. Today, the infant of 1998 has the keys to the 
     American economy, yet lawmakers are still coddling it by 
     proposing to make the tax ban permanent.
       Congress should allow the ban to expire as scheduled on 
     November 1.
           Sincerely,
                                               Robert S. McIntyre,
                               Director, Citizens for Tax Justice.

[[Page 12022]]

     
                                  ____
         National Association of Counties, National League of 
           Cities, U.S. Conference of Mayors, International City/
           County Management Association, Government Finance 
           Officers Association, National Association of 
           Telecommunications Officers and Advisors,
                                                    June 17, 2014.
       Dear Representative Jackson Lee: On behalf of local 
     governments across the nation, our organizations want to 
     express our opposition to H.R. 3086, the ``Permanent Internet 
     Tax Freedom Act (ITFA).'' Instead, as the expiration date for 
     the current moratorium on taxing Internet access approaches, 
     and Congress considers changes to ITFA, our organizations 
     recommend a shorter-term extension of ITFA, as a sensible 
     solution that respects state and local taxing authority. In 
     addition, any extension must maintain both the long-standing 
     grandfather provisions that preserve existing state and local 
     revenues, as well as certain general business taxes that were 
     not intended to be part of the moratorium.
       Over the next several years, most of the services known as 
     telecommunications and cable services will transition to 
     broadband. As a result, the scope of the services that ITFA 
     shields from state and local taxation will greatly expand, 
     even if ITFA's language remains unchanged. In light of this 
     substantial expansion and the need to protect the fiscal 
     strength of state and local governments, we encourage you to 
     support a temporary extension of ITFA, rather than making it 
     permanent, as H.R. 3086 would do. That would allow time to 
     assess more fully (1) the transition from telecommunications 
     and cable services to ITFA-protected broadband services; (2) 
     its impact on state and local governments' tax bases and 
     revenues; and (3) its impact on the relative tax obligations 
     of industry sectors to which ITFA does not apply. A temporary 
     extension of ITFA ensures that Congress has the opportunity 
     to revisit the moratorium to correct any unintended 
     consequences.
       For these reasons, our organizations urge you to support a 
     fair, short-term extension of the Internet tax moratorium. We 
     look forward to assisting you and your staff in these 
     efforts.
           Sincerely,
     Matthew D. Chase,
       Executive Director, National Association of Counties.
     Clarence E. Anthony,
       Executive Director, National League of Cities.
     Tom Cochran,
       Executive Director, U.S. Conference of Mayors.
     Robert J. O'Neill,
       Executive Director, International City/County Management 
     Association.
     Jeffrey L. Esser,
       Executive Director, Government Finance Officers 
     Association.
     Stephen Traylor,
       Executive Director, National Association of 
     Telecommunications Officers and Advisors.
                                  ____


                     [From the Hill, July 14, 2014]

       Congress Poised To Slam States on Internet Access Charges

                          (By Michael Mazerov)

       The House is slated to vote this week on a bill to 
     permanently bar states from applying their normal sales taxes 
     to the monthly charges that households and businesses pay 
     companies like Comcast or Verizon Wireless for Internet 
     access--potentially costing states roughly $7 billion a year 
     in potential revenue.
       For starters, the bill would strip Hawaii, New Mexico, 
     North Dakota, Ohio, South Dakota, Texas, and Wisconsin of at 
     least $500 million in annual state and local revenue from 
     their existing taxes on these charges.
       Beyond costing states the $7 billion a year in potential 
     revenue to support education, healthcare, roads, and other 
     services, the bill would violate an understanding between 
     Congress and the states dating back to the 1998 Internet Tax 
     Freedom Act (ITFA): that any ban on applying sales taxes to 
     Internet access charges would be temporary and not apply to 
     existing access taxes.
       Enacted when Internet commerce was still in its infancy, 
     ITFA sought to balance Congress' desire to encourage 
     development of the Internet against states' and localities' 
     need to finance essential services. Thus, it imposed only a 
     temporary ``moratorium'' on new taxes on Internet access and 
     protected existing taxes through a ``grandfather'' clause.
       Congressional extensions of ITFA in 2001, 2004, and 2007 
     maintained those two key features. This latest ITFA 
     legislation, though, eliminates both--the first time Congress 
     has seriously considered doing so.
       Every state would feel the impact. The seven states with 
     taxes would start losing revenues this year, forcing some to 
     cut services or raise other taxes to keep their budgets 
     balanced. The remaining states would continue to lose as much 
     as $6.5 billion in potential revenue each year from their 
     inability to tax Internet access charges.
       The forgone revenue would likely grow substantially over 
     time as more people sign up for Internet access and current 
     subscribers trade up to faster, more expensive, service.
       The House bill would have other, unintended effects. 
     Eliminating the grandfather, for example, would put at risk 
     numerous other state and local taxes that Internet access 
     providers pay on the things they buy in order to provide 
     Internet service, such fiber-optic cable, or gasoline for 
     their vehicles. Almost all of these taxes existed before 
     1998, so the grandfather protects them from legal challenge. 
     But if Congress eliminates the clause, Internet access 
     providers could challenge these taxes in court as indirect 
     taxes on access service and therefore voided by ITFA.
       The bill's proponents argue that banning taxes on Internet 
     access charges is necessary to close the ``digital divide'' 
     between low- and high-income households. Keeping monthly 
     Internet access as inexpensive as possible by exempting it 
     from roughly $2-$4 in taxes will encourage low-income people 
     to subscribe and service providers to extend broadband 
     service to low-income neighborhoods, they claim.
       But there's scant evidence to support this argument. 
     Studies haven't found a significant difference, in either the 
     share of households with broadband or the availability of 
     broadband service, between states that tax access and those 
     that don't. And numerous studies find that Internet access 
     costs are a smaller cause of the ``digital divide'' than 
     unfamiliarity with computers and the Internet and a belief 
     that the Internet is irrelevant to the person's life.
       In fact, a permanent ITFA would likely impede the goal of 
     getting more people online--especially low-income people who 
     don't have Internet at home. Many people first use the 
     Internet in public schools, libraries, and community centers, 
     all of which rely on state and local tax revenue. The less 
     state and local revenue that such institutions receive, the 
     less they could provide Internet service.
       Some in Congress argue that states and localities should 
     accept a permanent ITFA as part of a deal that would also 
     include enactment of the Marketplace Fairness Act, which 
     would empower states to require large Internet merchants to 
     charge sales tax on all taxable sales. Any extension of the 
     moratorium, however, must include the grandfather clause. 
     Eliminating that clause would threaten to invalidate many 
     existing taxes on Internet access providers, as noted 
     earlier.
       Congress' proper course would be to end, not extend, the 
     ban on state and local taxation of Internet access. The 
     Internet is no longer an infant industry needing protection 
     from taxes that apply to other services for which Internet 
     access is a close substitute. Cable television service is 
     widely taxed, for example, but if someone decides to pay 
     Verizon $50 a month so that they can stream Netflix to their 
     TV, ITFA bans the taxation of the access charge. This unequal 
     treatment doesn't make sense.
       Even if Congress wants to renew ITFA, surely the terms 
     should be no more favorable than in 1998--a temporary 
     exemption for taxes on access service, with pre-1998 taxes 
     still grandfathered--and must include the Marketplace 
     Fairness Act, which the Senate has passed with broad 
     bipartisan support.

  Mr. GOODLATTE. Madam Speaker, it is my pleasure to yield 3 minutes to 
the gentleman from Utah (Mr. Chaffetz), who has been a steadfast 
proponent of Internet tax freedom.
  Mr. CHAFFETZ. Madam Speaker, I thank Chairman Goodlatte for bringing 
this piece of legislation forward, and I appreciate the bipartisan 
manner in which it is done.
  The Internet is working. It is working. It is one of the great things 
about our economy. It is one of the great things that is happening in 
this country. It is creating jobs, and it is creating excitement with 
the younger generation. It is providing for innovation. We are leading 
the world in what we are doing.
  Access is not necessarily available to everybody. We have people from 
inner cities to Indian reservations to rural communities to those who 
are just seeking to try to be part of this community and have access 
and get information and be informed and be educated and allowed to 
engage in commerce.
  Since 1998, this has been the position of the United States of 
America, and if you look at the Internet, it truly is interstate 
commerce. We can be standing side by side, right next to each other, 
and you can send a tweet or a Facebook message or an email, whatever 
sort of electronic communication,

[[Page 12023]]

and it literally can zoom around the country--hopefully through Utah--
and then back to the person standing right next to you.

                              {time}  1315

  But in order for all that to work, the magic of the Internet and all 
that to work, it needs to be unimpeded. It needs to keep those costs as 
low as possible to ensure the maximum amount of access so those in our 
communities who are still trying to get in there, from our seniors, the 
rural communities, again, to our inner cities.
  The wisdom that happened in 1998 has been reaffirmed multiple times. 
Only two people in the history of this piece of legislation have ever 
voted against this piece of legislation. The majority of the House of 
Representatives are cosponsors on this piece of legislation that is 
before us today. So, I urge its passage.
  There are some other pieces of legislation that I would like the body 
to look at. I think we do have to deal with the remote sales tax 
issues. I think there are transactions that happen remotely. I would 
like to see parity in that--another topic for another day, but 
something that needs to be addressed sooner rather than later.
  The issue before us today is are we going to allow the freedom for 
Internet access to happen at the lowest cost possible without the 
government coming in and thinking, oh, this is another bucket of funds 
that we can just tax on. The consequence is we would have less people 
involved and engaged. Companies are going to take care of this, but 
individuals who are trying to access the Internet, we need to keep 
those costs as low as possible.
  Think about your telephone bill. We don't want that to be lit up. You 
know how that is lit up with all these different taxes. We don't want 
the Internet to be lit up like a Christmas tree with all these 
different taxes. It is interstate commerce. It is the purview, I think, 
of the United States Congress. That is why this bill is so needed. That 
is why I proudly joined as a cosponsor and why I urge its passage 
today.
  And again, I thank Chairman Goodlatte and Members on both sides of 
this body for bringing this bill forward. I urge its passage.
  Mr. CONYERS. Madam Speaker, I yield myself such time as I may 
consume.
  I want to conclude by pointing out that we might be going in the 
wrong direction with this misguided legislation. It will devastate 
State revenues, especially those States currently protected by the 
grandfather clause, and force State governments to eliminate essential 
governmental programs and services and burden taxpayers.
  Furthermore, 11 national organizations are concerned with the fiscal 
impact on our State and local governments: the National Governors 
Association, the National Association of Counties, the National League 
of Cities, the U.S. Conference of Mayors, and 15 other labor 
organizations: the AFL-CIO, AFSCME, the American Federation of 
Teachers, the UAW, SEIU. Fifteen national labor organizations and 11 
national, local, and State government organizations all join with us 
who are urging my colleagues to reject this seriously flawed 
legislation.
  Please join us in making sure that we, the people, prevail on this 
measure in the House of Representatives.
  I yield back the balance of my time.

                     List of Opponents of H.R. 3086

       There is a long list of opponents of this bill. These 
     opponents are concerned with the fiscal impact on our state 
     and local governments. Opponents include such state and local 
     groups as--the National Governors Association, the National 
     Association of Counties, the National League of Cities, the 
     U.S. Conference of Mayors, the Federation of Tax 
     Administrators, the League of California Cities, the 
     California State Association of Counties, the International 
     City/County Management Association, the Government Finance 
     Officers Association, the National Association of 
     Telecommunications Officers and Advisors, and the Multistate 
     Tax Commission.
       Also opposing this bill are labor groups such as--the 
     American Federation of Labor and Congress of Industrial 
     Organizations (AFL-CIO), the American Federation of State, 
     County and Municipal Employees (AFSCME), the American 
     Federation of Teachers (AFT), the American Federation of 
     Government Employees (AFGE), the Communication Workers of 
     America (CWA), the Department for Professional Employees 
     (DPE), the International Association of Fire Fighters (IAFF), 
     the International Federation of Professional and Technical 
     Engineers (IFPTE), the International Union of Police 
     Associations (IUPA), the National Education Association 
     (NEA), the Services Employees Union International (SEIU), the 
     United Auto Workers (UAW), and the United Food and Commercial 
     Workers International Union (UFCW).

  Mr. GOODLATTE. Madam Speaker, I yield myself the balance of my time.
  Madam Speaker, passing the permanent Internet Tax Freedom Act would 
increase access all across America for millions of Americans, 
especially lower-income Americans, increase growth and increase 
opportunity, increase jobs in this country.
  Now is the time to act. A permanent ban on taxation of Internet 
access is crucial for protecting the future of our digital economy. If 
the ban on Internet access taxes is not renewed by November 1, the 
potential tax burden on Americans will be substantial. It is estimated 
that Internet access tax rates could be more than twice the average 
rate of all other goods and services. Low-income households could pay 
ten times as much as high-income households as a share of income.
  The last thing that Americans need is another bill on their 
doorsteps. A tax on Internet access would burden millions of Americans 
who rely on the Internet to conduct business, communicate, educate, and 
live.
  Over the past 14 years, Congress has extended ban after ban on States 
taxing Internet access. The measures have been met with enormous 
bipartisan support. Only five ``no'' votes were cast in the history of 
these renewals in the House and the Senate.
  As price rises, demand falls. If the ban lapses, State 
telecommunications taxes could take effect, and those rates are already 
too high. Former White House Chief Economist Austan Goolsbee estimated 
that a tax that increased the price of Internet access by 1 percent 
would reduce demand for Internet access by 2.75 percent.
  The permanent Internet Tax Freedom Act merely prevents Internet 
access taxes and unfair multiple and discriminatory taxes on e-
commerce. It does not tackle the issue of Internet sales taxes.
  Madam Speaker, this is a great issue for the Congress to move forward 
on in a bipartisan fashion that will help to create jobs and economic 
growth and foster continued greater access of the Internet. After all, 
isn't that what we want? We want every American to have opportunity to 
access this in the most affordable way so that they can have the 
educational opportunities, the employment opportunities, the 
recreational opportunities, the social opportunities that are created 
by the Internet.
  I urge my colleagues to support this legislation, and I yield back 
the balance of my time.
  Ms. DelBENE. Madam Speaker, several weeks ago, I joined my colleagues 
on the House Judiciary Committee in supporting the Permanent Internet 
Tax Freedom Act when it was reported out of committee by a vote of 30 
to 4.
  It is clear that there is broad bipartisan agreement that we should 
not allow the current moratorium on Internet access taxes to expire. 
While I joined my colleagues in moving this legislation forward to 
provide clarity and certainty in this area, I also have serious 
concerns that Congress has failed to resolve another critical issue 
related to state taxation and the Internet: e-fairness and the current 
exemption for state and local sales tax collection for online 
purchases.
  Since the Internet Tax Freedom Act first passed in 1998, Congress has 
made far too little progress in developing a coherent policy that 
addresses the intersection of state taxation and the Internet. Aside 
from extending this tax moratorium three times since it first passed, 
Congress has yet to pass legislation like the Marketplace Fairness Act 
or similar legislation that would allow states to tax e-commerce sales 
at the same rate as sales from brick-and-mortar stores. Instead we have 
seen states attempting to set a patchwork of policies that simply 
doesn't work. A federal solution is needed from Congress.
  In the meantime, adoption of the Internet has exploded since ITFA 
first passed in 1998, and today, 75 percent of American households

[[Page 12024]]

subscribe to broadband Internet services, and hundreds of billions of 
dollars worth of commerce is done over the Internet annually. The 
Census Bureau recently announced that total e-commerce sales for 2013 
were estimated to have increased nearly 17 percent (16.9 percent) from 
2012, totaling $263 billion in 2013.
  Given the importance of the Internet to consumers and to economic 
growth, it is Congress's responsibility to determine a federal approach 
to e-fairness, and I am disappointed that we are simply looking at this 
bill in isolation without regard to the other issues related to 
Internet and taxation.
  While I support an extension of the current moratorium on Internet 
access taxes, I believe we cannot move this legislation forward while 
also continuing to allow the Internet to serve as a sales tax loophole. 
The issue of e-fairness is a related issue that we must commit to 
tackling, and I know there is bipartisan support for doing so.
  This is a critical jobs issue that I continue to hear about from 
small businesses in my district.
  It is the role of Congress to ensure that our nation's tax policies 
and regulation don't unfairly burden one business model over the other. 
Yet, brick and mortar businesses can't fairly compete right now because 
states do not have the ability to efficiently collect the taxes owed 
from online purchases. Only Congress can fix this and I believe we must 
continue to move forward on legislation like the Marketplace Fairness 
Act.
  I hope that House Leadership does not consider our work on Internet 
tax policy complete after voting today on the Permanent Internet Tax 
Freedom Act and I look forward to continuing to work with members on 
both sides of the aisle to work to find a solution to move forward on 
both ITFA and e-fairness legislation like the Marketplace Fairness Act 
before the end of this year.
  Ms. EDDIE BERNICE JOHNSON of Texas. Madam Speaker, I rise today in 
support of H.R. 3086, the Permanent Internet Tax Freedom Act (ITFA). I 
want to commend my colleagues on both sides of the aisle for bringing 
this legislation to the floor today.
  H.R. 3086 which permanently extends the moratorium on Internet access 
taxes and prohibits discriminatory taxation of internet commerce has 
228 bi-partisan cosponsors. Originally passed in 1998 and extended 
three times since with broad bi-partisan support. H.R. 3086 encourages 
the flow of commerce and information over the internet and improves our 
nation's ability to compete in the global economy.
  The original intent of this law was to protect and nurture what once 
was a fledgling industry. Today, access to the internet has become the 
engine of our 21st century global economy. The internet is one the 
primary drivers of U.S. economic growth innovation and productivity and 
it is indispensable for finding jobs and accessing education and health 
care resources. Permanently extending the ITFA protects citizens from a 
fee to access this indispensable tool while continuing to encourage the 
growth of a key driver for American global competitiveness.
  Mr. PAULSEN. Madam Speaker, I rise in support of H.R. 3086, the 
Permanent Internet Tax Freedom Act. This legislation makes permanent 
the ban on state and local taxation of Internet access. This is vital 
to ensuring continued economic growth powered by the Internet and 
digital economy.
  I am encouraged by the bipartisan support for this legislation and am 
hopeful that it will be enacted into law before the November 1 
expiration date.
  As a former state legislator and Minnesota House Majority Leader, I 
am a strong believer in states' rights. In addition to the legislation 
before the House today, I would also like to highlight the efforts of 
my colleagues Jason Chaffetz, Steve Womack, Suzan DelBene, Jackie 
Speier, and other members of the Judiciary Committee.
  They are working diligently on similar states' rights legislation to 
address federal law for sales made over the Internet. This is 
important, because purchasing items on the Internet should not offer 
tax breaks that are not extended to brick and mortar retailers. States 
should be encouraged to compete with one another by keeping tax rates 
low, not by promoting one form of commerce over another.
  The Internet Tax Freedom Act has helped e-commerce grow to over $220 
billion this year. And with 20 percent annual growth projected through 
2017, it's time to update outdated federal interstate commerce laws to 
ensure all retailers are treated the same.
  The tax code should not pick winners and losers. As commerce is 
conducted on the Internet, we should ensure there is an even playing 
field for all businesses.
  In fact, I've heard from many retailers in my home state of Minnesota 
about the importance of this legislation to their ability to compete on 
a level playing field.
  Madam Speaker, I'm hopeful this body will also consider this 
legislation before the end of the year.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Virginia (Mr. Goodlatte) that the House suspend the 
rules and pass the bill, H.R. 3086.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

                          ____________________