Originally created 04/10/00

Republicans embrace low Internet tax burden



WASHINGTON -- House Republicans rushed Thursday to embrace a federal commission's report urging that taxes not block growth of the Internet and that lawmakers repeal the 102-year-old telephone tax while extending a moratorium on new Internet taxes.

Republicans on a House Commerce subcommittee praised the chairman of the 19-member Advisory Commission on Electronic Commerce, Gov. Jim Gilmore, R-Va., for achieving a majority view even though its report largely fell short of the two-thirds vote needed for a formal recommendation to Congress.

"I heartily endorse the majority proposals," said Rep. Tom Bliley, R-Va., chairman of the full Commerce Committee. "If there's one recurring theme in that record, it is that taxation and regulation could kill the goose that's laid the golden egg."

Added Rep. Christopher Cox, R-Calif.: "We cannot apply the tax policies developed for a smokestack industry to the new economy."

The commission's six business members and those with a clear anti-tax position, including Gilmore, approved a majority report asking that Congress:

--Permanently ban any tax on Internet access and repeal a handful of state taxes already on the books.

--Repeal the 3 percent telephone excise tax enacted in 1898 to finance the Spanish-American War.

--Extend for five more years the moratorium on new or discriminatory Internet taxes, which expires in October 2001.

--Encourage state and local governments to streamline sales tax systems so that eventually one rate would apply in every state.

--Define in law when a business has physical presence, or "nexus," in a state for sales tax purposes.

Gilmore told lawmakers the proposals would cut taxes for millions of middle-class people, preserve an economic boom driven by the Internet and enable more people to gain access to the Internet.

Gilmore called the report "a lasting legacy, a new way of thinking for a new century."

Several of the proposals have already been introduced as bills in Congress and have strong bipartisan support, especially repealing the telephone tax. But many Democrats said the Internet tax panel failed to recognize the potential that state and local governments could eventually lose billions of dollars in sales tax revenue if growing electronic commerce becomes a tax haven.

"We can't predict the weather three or four years from now by looking out the window today," said Rep. Ed Markey, D-Mass. "If we're going to exempt one part of the economy from taxation, we're talking about raising taxes in another part of the economy."

Other Democrats, joined by retailers and organizations representing state and local government, criticized Gilmore for presenting the commission report as a consensus document when most key points never got the two-thirds vote for recommendations envisioned by Congress.

Rep. Anna Eshoo, a California Democrat who represents Silicon Valley, said the report "blurs" the issues and ignores the minority position. "There is a mixed view in the country out there," she said.

Bliley, however, said the critics were arguing about "process" and that it was "hard to sympathize" with them because commission opponents of the report -- including all three Clinton administration appointees and Gov. Mike Leavitt, R-Utah, chairman of the National Governors Association -- abstained during many of the panel's crucial votes last month.

"I suspect what's really going on here is a hidden agenda, an agenda to tax the Internet," Bliley said. "Consumers expect tax relief from this Congress. They should get it."

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On the Net:

Advisory Commission on Electronic Commerce: http://www.ecommercecommission.org

Congress: http://www.thomas.loc.gov