Internet Tax Nondiscrimination Act

INTERNET TAX NONDISCRIMINATION ACT

Mr. WYDEN. Madam President, I thank the chairman of the Commerce Committee, Senator McCain, for beginning the discussion in the kind of tone I think we want to have for this debate. We have on the floor a number of Senators who have been the most interested in this issue. I tell them I think they represent the most thoughtful people not just in the Senate but in public life. We obviously have differences of opinion, but I think we are going to have an important debate, in a thoughtful fashion. The decibel level has certainly gotten pretty high in recent days on this issue.

I am very appreciative to the Senate Democrats who are supportive of the position Senator Allen and I have put together, particularly Senators LEAHY, BOXER, LINCOLN, and BAUCUS, all of whom joined as original sponsors of the managers' effort.

I wish to spend a few minutes tonight—I know other colleagues are anxious to talk—to describe how we got to this point and why I believe the approach Senator Allen and I are taking is a wise one.

About 7 years ago, after I came to the Senate, I began to think about how the Senate could write the rules of electronic commerce so as to be fair to all sides while at the same time allowing this tremendously exciting medium, the Internet, to flourish.

We were seeing early on problems with respect to how the Internet was regulated around the country. We saw discrimination. We saw in some jurisdictions, for example, if you bought the newspaper the traditional way, the snail-mail route, you would end up not paying a tax, but if you bought the online edition of that paper, you would pay a tax. That, it seemed to us, was a discrimination against technology. So about 7 years ago, I said the bedrock of our effort ought to be technological neutrality. The Internet should not get a preference, nor should the Internet be discriminated against.

I went to Senator McCain and Senator Leahy of Vermont, really known as the Senate's Mr. Internet. He was up on these issues when I think a lot of people thought a monitor was a television set. The two of them joined me in a bipartisan effort to pass this law that has now been on the books for more than 5 years.

When Senator Allen came to the Senate, he and I teamed up for a number of years on this issue, and, of course, other Senators who have come to this body.

I say in beginning the debate, many of those who now oppose the extension of the law we are proposing are using the very same arguments they made 5 years ago that have not been borne out. For example, we were told years ago that the States would not be able to collect various taxes—property taxes, corporate taxes, and other kinds of taxes. We were told that all across America, Main Streets would shrivel up and die because of Internet sales. We were told that States would lose an enormous amount of revenue. I want to respond to each one of those arguments tonight.

First, with respect to loss of revenue, not one jurisdiction has come forward and given an example of how they are hurt by their inability to discriminate against electronic commerce. All the bill says is you cannot discriminate against electronic commerce, and not one State has come forward and given an example of how they have been hurt by their inability to discriminate against electronic commerce.

Not one independent study has been done in the last 5 years indicating that the States would lose revenue as a result of this bill.

Finally, with respect to this question of Main Street and the retail stores, what we have seen is during the period this law has been in effect, Internet sales have gone from 1 percent to 2 percent. I think it is fair to say our legislation has not exactly emptied the malls of America. In fact, in most of our malls, it is still pretty hard to find a parking spot.

As we go at this issue, it is important to look at the record, and particularly it is interesting to note it in the context of what was discussed tonight.

I have noted that a number of our colleagues, particularly from the rural areas—the Dakotas and other areas—have talked about the importance—and I share their view—of building the network out; of using funds, whether it be tax credits or Government moneys, to facilitate broadband to rural areas. Their effort is one that I support. But think about the consequences of our saying tonight on the floor of the Senate: Let's use Government dollars to help companies build out the network, promote broadband in rural areas. We will say that tonight, but tomorrow we will end up sticking it to consumers with new taxes with respect to Internet access.

In effect, the policies we are talking about promoting tonight with Government dollars—and many Senators are on legislation to offer tax credits to promote broadband to rural areas which would, in effect, be negated by the effort some are offering to allow for these taxes on Internet access.

Senator Allen and I have spent many months trying to work with the State and local governments to address their concerns. We have had months of negotiations, and those negotiations all went on before our distinguished colleagues—the Senators from Tennessee, Ohio, and Delaware—came into the debate.

I note that in the effort to try to find common ground, Senator Allen and I agreed to a number of requests that were made by State and local officials. We agreed, for example, to the request from State and local officials for new statutory language further tightening the definition of "Internet access."

We agreed to the request for new statutory language on what is called bundling, which is, in effect, where you have Internet access bundled with information technology services other than Internet access, and it is important to separate the two for taxable purposes.

In addition, we agreed to the requests from State and local officials for new statutory language protecting a variety of other taxes, such as property and income taxes, that were never affected by the original legislation we authored, but we thought in the name of trying to find common ground, we would add that as well.

We have agreed to a request for a savings clause on universal service and a variety of regulatory proceedings.

Finally, we have agreed to allow States grandfathered so as to protect existing treatment under their State laws of these services 3 more years of Internet access taxes.

I say as we begin tonight, Senator Allen and I in 2 months of negotiations agreed to five requests from State and local officials to try to find common ground on this matter, and I ask tonight, what has been offered in return? What have been offered in return are essentially these projections that say vast sums are going to be lost to the States if this legislation that Senator Allen and I have proposed is extended.

I just ask Senators to note the language associated with these projections. The language is always, this bill could cost such-and-such; and the sum is, of course, a very large number. Never is it presented in terms of any kind of independent study that this law has, in fact, cost revenue or would cause revenue to be lost in the future.

After Senator Allen and I made these five separate concessions in an effort to find common ground, we now have these various projections that, for all practical purposes, we are trying to convince the Senate that Western civilization is going to end if we urge that this law be updated.

I know colleagues are anxious to talk, and I certainly want to give them that opportunity. I close with one last point as we begin this discussion.

I think colleagues know the technology sector has taken a real pounding in the last couple of years, but what we have seen in the last few months is that the technology sector is beginning to have a resurgence. We have begun to see, both with respect to the stock market and capital investment in the sector, the technology area is really beginning to come back.

I say to my colleagues in the Senate, I think that if, in fact, the Senate unravels the law of the last 5 years, fails to allow us to update this law, the progress that has been seen in the technology sector in the last few months could well unravel.

If, in fact, the more than 7,000 taxing jurisdictions in this country are allowed to take a bite out of the Internet, and we have the Internet access area broken down into its subparts and all of them are taxed, I think that could derail the very impressive progress we have seen in the technology sector in the last few months.

Let us not put in place a regime of multiple and discriminatory taxes on electronic commerce, if for no other reason than it would send a horrendous message to this sector where finally in the last few months we are beginning to see some resurgence.

I see my good friend from Virginia on his feet. I want to tell him how much I appreciate his cooperation. When I began this effort, he was a Governor and was supportive of our efforts then. I am pleased to have had a chance to team up with him as a member of the Commerce Committee.

I also say, because we have Senators who do not share the view of Senator Allen and myself—Senator Voinovich, Senator Alexander, and Senator Carper—that my door continues to be open to all Senators, including Senators who do not share our view, in an effort to try to find common ground.

Senator Allen and I thought the five concessions we made during 8 weeks of negotiations were part of an effort to be sensitive to the concerns of State and local bodies. Obviously, we have not done that to the satisfaction of all and our door remains open to all Senators.

I yield the floor.