Internet Tax Freedom Act

INTERNET TAX FREEDOM ACT

Mr. WYDEN. Mr. President, the Senate knows, 5 years ago I was the sponsor in the Senate of the Internet Tax Freedom Act. This is law that was designed to ensure that the Internet be free of discriminatory taxes on Internet commerce and a variety of Internet activities. And it was designed to encourage the growth of the Internet.

The law has unquestionably worked. There is absolutely no evidence of anyone who has been harmed by the inability to discriminate against electronic commerce.

For many months now, Senators of both political parties have been working together to try to ensure the law that expires shortly would be reauthorized, and Senators have been working on a cooperative and bipartisan basis to go forward and reauthorize this law that has worked.

I had been under the impression that we were just about ready to bring this bill to the floor, but in the last few days a proposal that I find truly alarming has been brought forward by some of the State and local officials. I come to the floor this morning to make sure the Senate is actually familiar with the language that is being brought forward.

Mr. President, I ask unanimous consent that this legislation I am going to discuss be printed in the RECORD.

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Mr. WYDEN. Mr. President, what some State and local officials now seek to do is to change the definition of "Internet access," which, under current law, cannot be taxed. In doing so, what it would do is give States and localities explicit permission to tax what Internet users do once they get on line. That would mean you could have games, music, magazines, newspapers, information services, financial services, research services, or other products of services, in effect, facing a barrage of new taxes.

The phrase "you've got mail" would be replaced with "you owe taxes." That is what this proposal would mean to 142 million Americans with household Internet access. Under this proposal, the consumer 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.

Those who are making this proposal are not going to come out publicly and talk about their ideas for taxing e-mail. There isn't a headline in the language that I have put into the Congressional Record today that says: Watch out, our plan is going to tax e-mail. But there is no question that a clear reading of this legislative language will mean just that. Consumers could be taxed every time they check a bank statement online. They could be taxed for paying their bills online. They could be taxed each time they check the sports scores online or listen to the weather on streaming radio. Every time a consumer turns to
Google research service, they could be taxed for each key stroke. If that happened, no question, some in my office would just go bankrupt.

As the Chair knows, being so instrumental in working with me and members of the Senate Commerce Committee, this law has worked. It has been a bipartisan law based on the simple proposition that you would treat activity online just as you treat activity online. Some made dire predictions about the law originally that States and localities would be denied the opportunity to gain revenue for essential services. It has been clear that they have been proven incorrect. Internet commerce is now just a small part of our economy. In fact, what we have seen is a merger of what I call bricks and clicks, traditional commerce with Internet commerce. We have not seen problems under current law.

But by redefining the definition of Internet access, as the proposal does that I have put into the Congressional Record today, in effect you give a green light to State and local authorities all across the country to tax services that are integral to Internet access, including e-mail.

I believe this proposal would make wider the digital divide in this country. I think the new taxes would restrict growth in the Internet. The American consumer needs to know exactly what some of these taxing authorities are really up to. What they really want is either to stop the ban on Internet access taxes from becoming permanent or they are looking for statutory language which would stick consumers with hundreds of millions of dollars in new taxes each year.

In my view, either option would be unacceptable to a majority of Senators. I hope, as the negotiations originally proceeded in the Commerce Committee and now in the Finance Committee, that there would be an effort to make the ban on discriminatory taxes on Internet commerce permanent and, in particular, let us ensure that the hard hit American consumer is protected from unfair tax schemes such as those I have outlined this morning.

I yield the floor.