The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“INTERNET TAXATION” mentioning the U.S. Dept. of Commerce was published in the Senate section on pages S4337-S4339 on April 26, 2004.
The publication is reproduced in full below:
INTERNET TAXATION
Mr. WYDEN. Mr. President, this week the Senate will spend most of its time on the question of taxation of the Internet. Having been the principal sponsor of the legislation on this subject in the Senate twice, I would be the first to say this subject inherently is about as interesting as prolonged root canal work. But at the same time, I think it is fair to say the decisions the Senate makes with respect to this subject will say a whole lot about the future of the Internet.
For example, the decisions will determine, to some extent, whether e-
mail and spam filters and Google searches and Web sites and instant messaging are singled out for discriminatory tactics. The Senate is going to have to make some decisions about whether Internet access through cable is tax free, but consumers who choose DSL Internet access would get taxed.
I wanted to take just a few minutes this afternoon to go through some of the history with respect to this issue, and particularly suggest that I think the key, as the Senate takes up this subject, is to keep in mind two principles that have been important to me.
First has been the question of technological neutrality. I think it is absolutely key that as the Senate looks to make technology a policy that we ensure there is fair treatment and true competition among all of the various technologies that drive decisions in this field.
I say to the President pro tempore of the Senate, I can recall when we were looking at this legislation initially, and the Senator from Alaska was enormously helpful to me. What we found out was, for example, early on, if you bought the Wall Street Journal in some States and you got the interactive edition, you paid a big tax, but if you bought it the traditional way, through snail mail, for example, there was no tax. That, it seemed to me, was not technologically neutral. That did not ensure we would have competition in the greatest possible way to benefit the consumer, and that was very much at the heart of my concern as I authored in the Senate the first internet tax freedom bill.
The second concern that was foremost in my mind was the question of how this would affect our States and localities with respect to revenue. At that time, we had a number of Governors, mayors, county officials, and others expressing tremendous concern with respect to revenue. I have always tried to take those concerns very seriously. That is why I wanted to outline some of what was said during the years when those early bills were debated because I think we are going to have a repeat of those discussions.
To some extent, some of the State and local officials who raised concerns about the revenue impact of what we did during the first two iterations of the internet tax freedom bill have dusted off the arguments and, in effect, brought them to the Senate again.
To go through some of the history, if I might, back in 1997, the National Governors Association, an organization I tremendously respect, said the Internet Tax Freedom Act would ``cause the virtual collapse of the State and local revenue base.'' But the record shows that the following year, State and local sales tax revenues were up $7.2 billion.
Let me repeat that. We were told in 1997 that we would have a virtual collapse of the State and local revenue base. The following year, we saw a significant increase in local and State tax revenues.
In 2001, when we dealt with the issue again, opponents said:
The growth of e-commerce represents a significant threat to State and local tax revenues and they might lose tax revenue in the neighborhood of $20 billion in 2003.
Once again, the record shows otherwise. According to the National Association of State Budget Officers, State sales tax collections rose from $134.5 billion in 2001 to $160.4 billion in 2003, an increase of more than $15 billion in just 2 years.
We saw this pattern continue in 1998 as well when the National League of Cities said:
A tax-free Internet would place Main Street retailers at competitive disadvantage and would doom the sales tax.
But e-commerce still only represented 1.6 percent of total retail sales in 2003, while brick-and-mortar retail sales grew from $2.6 trillion in 1998 to $3.4 trillion in 2003, according to the Commerce Department.
In three instances with respect to projections by the National Governors Association, the National Association of State Budget Officers, and the National League of Cities, as the Senate dealt with the two iterations of the tax freedom bill, when this body was told that tremendous amounts of revenue would be lost, in each instance, as I have just documented this afternoon, actual revenues collected went up rather than revenues going down.
The reason I have taken the time to go through that is I am sure during the course of this week, we are going to hear the same kinds of projections. We are going to see State and local officials come and say if the Senate reauthorizes this law that has been reauthorized twice, pretty much Western civilization is going to come to an end. They are going to say they are going to be in dire straits with respect to the funds they are going to need for critical services and that they will find all form of financial calamity.
I am very interested in addressing those concerns. I have great empathy for the challenge of funding State and local services, but I just want the Senate to know, and why I am focusing on this point at the start of the debate, that again and again over the last 7 years, as this debate has gone forward, the Senate has been given these projections about calamitous losses to our States and localities if the internet tax freedom bill is passed, and as I have pointed out, in instance after instance, revenue has gone up rather than down.
I think it is fair to say that all of these technologies, in the issue of whether someone gets internet access over DSL or whether they obtain it through cable, are complicated. That is why I, Senator Allen, Senator McCain, and others who have worked on this issue have tried to spend time talking to all concerns. Frankly, we have made a number of changes in an effort to try to accommodate the issues brought up by those who do not share our view.
For example, we have in several instances tightened definitions of Internet access that have been raised. We have agreed to a request for new statutory language on what is called bundling, where various technologies are bundled together. We have added language to protect a host of taxes for States and localities, such as property and income taxes that have never been affected by the original legislation, but because there was concern on the part of States and localities, we wanted to drive home our intent not to have these areas taxed.
We have also agreed to a request for provisions to protect universal service, regulatory proceedings, and we also agreed to deal with some requests from States for what is called grandfathering so as to protect existing sources of revenue.
At the end of the day, we want to make sure that consumers who now hear the message ``You've got mail'' don't get a message, ``You've got special taxes.'' That is what this issue has always been about. It is clear from the history of this legislation that we do not want the Internet to get preferential treatment, nor do we want it singled out for discriminatory treatment. That is what I sought to do when we began this debate late in 1996. I pointed out, for example, how a newspaper that was purchased online would be taxed, but a newspaper that was purchased in the traditional way would not be taxed. That is not technological neutrality.
That is what the sponsors of this legislation are seeking to protect. The alternative that several of our colleagues are interested in would take a very different approach. That alternative would essentially break up Internet access into individual components so that if they chose to do so, States and localities could tax each one of those components.
Under that, for example, Internet consumers could be subjected to close to 400 separate telecommunications taxes, administered by something like 10,000 different jurisdictions.
In effect, each piece of e-mail, the filtering systems that families use to block pornography and spam and each Web site, each blackberry message conceivable is exposed to tax by scores of jurisdictions. Each town that chooses to do so could tax the e-mail flowing through its phone or cable lines even if the e-mail was not being sent from or to someone in the jurisdiction. I think it is fair to say if even a modest portion of the jurisdictions that could impose these taxes chose to do so, we would be talking about a massive increase in the cost of Internet access to every consumer in America.
What I think this is really all about is that the States and localities essentially see the Internet as the last cash cow in the pasture. In effect, they have been barred by the courts from going after phone sales. They have been barred by the courts from going after mail order. So now along comes the Internet, and the Internet is being seen as an enormous cash opportunity.
The fact is, Internet sales in 2003 are still only 1.6 percent of total retail sales. They grew at a far more modest rate than brick and mortar sales grew over the last few years, but that is not even the central point.
All of us understand the value of the Internet as a tool for businesses and communication and to improve health care and extend cultural opportunities. The Chair and I share a State with mostly small towns and folks who have to go great distances, and the Internet is one of the best tools, if not the ideal tool, for compensating for major distances from commercial centers and major population centers.
So I hope my colleagues will think through the history I have outlined with respect to the revenue protections and the question of whether vast amounts of revenue are going to be lost because I think the record shows those dire projections to State and localities have not come to pass.
I hope my colleagues will also see the principle of technological neutrality that I sought 7 years ago still is a sound one and one that the Senate ought to preserve. It does not make sense to me to say, for example, that cable Internet access ought to be tax free and then stick it to consumers who choose DSL Internet access.
So we are going to be dealing with these issues over the course of the week, but I wanted to take a few minutes to make clear that we are going to be protecting the States and localities from property and income taxes and telecommunications carriers. They are concerned about it. We agreed to their proposal to deal with what is called bundling to make sure that Internet service providers cannot hide from tax services that would otherwise be subject to bundling. We narrowed the definition of Internet access so as to try to find common ground.
States and localities were concerned about sweeping up all telecommunication services into Internet access so that no telecommunication service could be taxed. The changes in definitions that we made narrowed the definition and ensured that the Senate would still keep up with the significant technological developments in the field.
The bill ensures that all platforms, whether dial-up, digital subscriber lines, cable mode, satellite, wireless, or any other technology platform, as well as the components used to provide Internet access, would be covered by the moratorium.
So I think we are going to have an important debate this week. I expect to spend a fair amount of time on the Senate floor as we discuss it. This has never been a partisan issue. I have worked on this legislation with Chairman McCain and with Senator Allen over the last few years since he has come to the Senate. I think ultimately the decisions that the Senate makes are going to say a whole lot about where the Senate wants Internet to go in the future.
I cannot believe the Senate wants to subject e-mail, blackberries, and a variety of technologies to scores of new and discriminatory taxes. That is what this debate has always been about: should the Internet be subject to discriminatory taxation. If a jurisdiction, for example, taxes brick And mortar sales, they can tax sales online and through the Internet in exactly the same kind of fashion.
I hope the Senate can find common ground on this legislation this week and continue a law that has worked. I am proud to be able to have been a part of this consideration over the last 7 years, and I hope we can pass reauthorization for a third time so as to promote true competition between all technologies in a fashion that ensures that this idea of technological neutrality we had 7 years ago is preserved, and to do it as we have sought to do so that the dire revenue projections we will hear this week about States losing vast amounts of money will not come true as they have not come true over the last 7 years.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. LEAHY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LEAHY. Mr. President, what is the parliamentary situation? Are we still in morning business?
The PRESIDING OFFICER. The Senate is in morning business.
Mr. LEAHY. I thank the Chair.
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