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Public Statements

Internet Tax Freedom Act Amendments Act of 2007

Floor Speech

Location: Washington, DC

INTERNET TAX FREEDOM ACT AMENDMENTS ACT OF 2007 -- (House of Representatives - October 16, 2007)


Mr. WATT. Mr. Speaker, I yield myself such time as I may consume.

H.R. 3678 is an excellent example of what can occur when we work together on both sides of the aisle to deal with highly complex issues, and I am evidently not alone in this observation.

This bipartisan legislation is supported by industry groups such as the Don't Tax Our Web Coalition, government organizations such as the National Governors Association, the Federal Tax Administration, the National Conference of Mayors and the National Conference of State Legislatures, and supported by a wide range of labor and union groups.

In sum, H.R. 3678 temporarily bans State and local taxes on Internet access, while minimizing the effect on State and local government ability to raise needed revenue and treat businesses fairly. The bill is pro-consumer, pro-innovation and pro-technology. It amends the Internet Tax Freedom Act in four key respects.

First, it extends the moratorium on State and local taxes on Internet access for 4 years until November 1, 2011. The 4-year time frame will allow Congress to make any adjustments to the moratorium, if necessary, in light of development in the States or in technology, as Congress has done each time it has extended the original moratorium in 2001, in 2004, and in this bill. It will also allow sufficient time for business planning, while ensuring that everyone continues to have the benefit of access to the Internet tax free.

Second, the bill extends for 4 years the grandfather provisions to preserve the legality of taxes imposed prior to the 1998 act, consistent with passed extensions. The bill also phases out new grandfathers that some States claim were created in the 2004 extension, while allowing States that issued public rulings before July 1, 2007, that are inconsistent with the foregoing rules to be held harmless until November 1, 2007.

Third, the bill clarifies the treatment of gross receipts taxes which certain States have enacted in recent years in lieu of or as a supplement to general corporate income taxes. Like the general corporate income tax, these gross receipt taxes apply to nearly all large businesses, not just to Internet access providers. The bill clarifies that this form of general business tax is treated in the same fashion as a corporate income tax and is not covered by the moratorium as long as it is broadly imposed on businesses and is not discriminatory in its application to providers of communication services, Internet access, or telecommunications.

Finally, in response to a number of concerns regarding the definition of Internet access in the current law, the bill clarifies the term to mean a service that enables a user to connect to the Internet. This new definition will not only prevent all tax-exempt content bundling but will also include closely related Internet communication services, such as e-mail and instant messaging. In addition, the bill amends the definition of ``telecommunications'' to include unregulated, nonutility telecommunications, such as cable service.

I want to particularly thank Judiciary Committee Chairman Conyers, Ranking Member Smith, as well as Subcommittee Chairperson Sánchez and Ranking Member Cannon for their cooperative efforts in helping us get to this point in the process.

H.R. 3678 is a good, strong bill that provides much-needed clarity to the communications and Internet industries, and strikes the right balance in addressing the needs of States and local governments, while helping keep Internet access affordable.

I urge my colleagues on both sides of the aisle to join me in supporting this bill.

Mr. Speaker, I reserve the balance of my time.


Mr. WATT. Mr. Speaker, I yield myself such time as I may consume to close the debate and to address some of the issues that have been raised. I hope my colleagues will stay around, since they want to know the rationale for the 4-year extension versus the permanent extension, and listen to the rationale, because there is both ``practical rationale'' and there is ``substantive rationale.''

Let me deal with the practical reasons first. This moratorium that currently exists will expire the last day of this month if we do not act. The Senate has not done anything yet, and in many ways has made it clear that a permanent moratorium would be ``dead on arrival'' in the Senate. If the Senate is not going to act on a permanent moratorium, for the House to pass a permanent moratorium, send it to the Senate, have the Senate reject that permanent moratorium, runs the risk that time will run out before the month's end and the moratorium will run out before the month's end.

Mr. Speaker, I have heard the argument that we ought to make this permanent because this is stifling innovation. That strikes me as being like the argument that we ought to not tax anything because people are going to quit making money because there are taxes on the money that they make. I don't know anybody who, over all these years of threats that people have said to me people are going to quit making money if you don't quit taxing their money, I don't know anybody who has fallen prey to that kind of shortsighted attitude. I don't know anybody in the technology industry or in the innovation industry who has fallen prey to this notion that we are going to stop innovating just because there is a temporary moratorium on Internet access taxation as opposed to a permanent moratorium.

The last time I checked, the definition of ``politics'' was that politics is the art of compromise. We are doing what is necessary to move a bill. We can stand here and rail against the idea of a good bill on the idea that we want a perfect bill, or we can pass this bill, which I presume all these people who are railing against it not being permanent are planning to vote against the temporary extension when we get to a vote on it.

Mr. Speaker, I have heard this referred to as partisan politics. This is not partisan politics. We heard two Democrats get up and say they support a permanent moratorium. You have heard a number of Republicans say they support a permanent moratorium. There are people who don't support a permanent moratorium. A bunch of them are over there on the Senate side, and they have already made it clear if we deliver a bill over there, it's not coming back over here. So this is not partisan politics; it is practical politics. Understand the difference between partisan politics and practical politics.

Now, I have told you the political reasons why this is a temporary moratorium. Let me tell you the substantive reasons that this is a temporary moratorium. I just want to go back and read what I said in my opening statement. Every time we have extended this moratorium, we have revised this moratorium. The last time we did it, we had left out a whole bunch of people in the telecommunications world who thought that they should have been included in the definition of the moratorium. If we had made it permanent, perhaps we would have just left it as faulty, not corrected it. The fact that this is not a permanent moratorium doesn't mean that we can't go back 2 years from now, 4 years from now, 1 year from now, next month, and do something different.

Mr. Speaker, this is really not the end of the world that this is a temporary moratorium. This is the beginning of the world. We changed the moratorium in 2001, in 2004, and we will probably change it again, because every time we think we know the outer limits of the Internet, somebody comes along with something else that they can do on the Internet.

If we made this permanent, as if we had all the answers about what the moratorium, what the Internet's capacity is going to be, presumably that would be the end of the discussion, because we would have made this permanent, gone on to other issues, and not been thinking about revisiting this and addressing whatever shortcomings we might have 4 years from now, as opposed to sometime in infinity out in the future.

Mr. Speaker, I, for one, am not on the permanent moratorium bill. I stand here with integrity telling you that I think it would be a serious mistake to make this a permanent moratorium on Internet taxation, because we don't have a clue standing here today what the capacity of the Internet is. Four years from now everything in life may be being done on the Internet. We might have a virtual world out there and then we may not be able to tax anything under the moratorium. So we need to continue to look at this on a regular, systematic basis.

This is not a cavalier decision that we have made. It is a practical, substantive, smart decision that we have made. I would request that my colleagues get off of this kind of ``letting the perfect be the enemy of the good'' notion, support this bill, and let's move on and extend this moratorium for 4 additional years. It is a good bill.


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