Speeches & Floor Statements

Remarks Of Sen. Alexander - Internet Tax Non-Discrimination Act Of 2003

Posted on November 4, 2003

Mr. President, the distinguished occupant of the chair and I are new members of the Senate. There are a great many privileges to being here, and one is the congeniality to new members of the Senate. One is the seriousness of the issues with which we deal these days. One is the great traditions in the Senate. But there is a very special privilege of being here, and being here tonight, which I realize, and that is this: Every single one of us as Americans someday, sometime, while sitting at home or at our job, may suddenly realize something about our government that really stirs us up and we wish we could say something and do something that somebody would hear. We are angry about it, we are upset about it, we want to say something about it. I have a privilege as a member of the Senate of being able to do just that tonight. Nothing used to make me more upset as the governor of Tennessee for the eight years I was governor than when members of Congress would get together and come up with some great idea and pass a law and tell us to do it, and then send us the bill requiring us to pay for it even though they were printing money up here, and we were balancing budgets at home. The distinguished occupant of the chair was mayor of a great city for eight years, I believe, the same amount of time as I was governor. I know he must have felt the same way. It might have been the case in terms of storm water runoff. Somebody in Washington, like the Environmental Protection Agency, in that case may have said sometimes when it really rains hard, the water gets mixed up with the sewage and it runs into the river, so we need to fix that situation. Great idea, but who is going to pay the bill? I tell you who pays the bill. In Minneapolis, you have to raise the property tax, or in Nashville, you have to raise the sales tax. Or in Maryville, Tennessee, you have to fire some teachers, so you have enough money to do the storm water runoff. I remember back in the mid-1970s, about the time I was getting into politics, the members of Congress decided we needed to help children with disabilities. We are all for that. That is a wonderful idea. But at the time, the federal government was paying, as it is today, about 7 percent of all the costs of elementary and secondary education in America. Most of that is paid for by Minnesota and Tennessee taxpayers through income taxes, and sales taxes, and property taxes that are raised at home. The Congress said, "Help the children with disabilities," but they didn't pay the bill. So what happens? I meet with the Shelby County School Board in Memphis. What do they say to me? We have this huge, terrific cost and these orders from Washington and regulations about what to do, and then we have to take money we raise, that we would otherwise be spending for other purposes, and deal with the good idea from Washington, D.C. I have heard many members of this body talk a little bit about No Child Left Behind and the new provisions in that bill, wondering whether those are unfunded federal mandates, a Washington word that if you boil it down to plain English means: We will do it up here in Washington; we will claim credit for it, but you pay the bill. On Thursday, thanks to the generosity of the majority leader in a very busy week, the Senate has agreed to consider whether we will impose yet one more unfunded federal mandate on state and local governments, and I refer specifically to the proposal to extend the ban on state and local authority to tax access to the Internet. In advance of that vote, which will occur in the next few days, I want to discuss three basic considerations with my colleagues. Number one - some of my colleagues have seemed surprised when I suggested the proposed ban on state and local Internet taxation is an unfunded federal mandate. Let me say exactly in these remarks why the proposed ban on state and local ability to tax Internet access is an unfunded mandate, plainly in violation of the Unfunded Mandates Reform Act of 1995, which was passed by this body with 91 votes. And 63 senators who voted to ban unfunded federal mandates in 1995 are still members of this body. Second, I want to discuss a strange case of amnesia that seems to have enveloped this distinguished body, a strange disease that has caused many members to forget, as I mentioned a few moments ago, that in 1995, at the beginning of the 104th Congress, the new Senate majority leader, Bob Dole, went down to Williamsburg, Virginia, and promised Republican governors that, "The first bill in the Senate, S. 1, is going to be unfunded mandates." This is especially surprising because the second plank of the Contract with America that was enacted in this Congress was the ban on unfunded mandates. It was at the heart of the Contract with America. It was at the heart of the Republican revolution in 1994. I was campaigning across this country in 1994. Nothing I found made local officials and citizens madder than Washington politicians who pass unfunded mandates, claiming credit without facing the costs. The third thing I would like to discuss is an amendment I might be proposing. I am filing tonight an amendment I call the Unfunded Federal Mandate Reimbursement Act. If a majority of the Senate should decide that banning state and local taxation of the Internet is important enough to create an unfunded federal mandate — that is, claim the credit up here, but make it be done down there — then my amendment would provide a way for Congress to pay the bill for that by authorizing our Department of the Treasury to reimburse Tennessee and Minnesota and other state and local governments each year for the cost of this new mandate. Let me say briefly what we are talking about and what we are not talking about. We are not talking about the issue of whether to authorize states to require out-of-state companies, such as L.L. Bean, that sell by catalog or Internet, to collect the same Tennessee sales tax that Friedman's Army Surplus Store in Nashville would collect when it sells me a red-and-black plaid shirt. That is an entirely different piece of legislation. The senator from Wyoming and others have sponsored that legislation. The senator from North Dakota is a part of that. We are not talking about making it easier to collect sales tax from Internet and catalog companies. What we are talking about is whether Tennessee and other states can collect a sales tax from an Internet service provider when it connects my computer to the Internet, just as it collects sales tax from the telephone company when it connects my telephone or from the cable TV company when it connects my cable. Tennessee has been collecting this tax since 1996. Nine other states and the District of Columbia also collect a tax on Internet access. The Knoxville News Sentinel had an excellent article on Sunday putting this into perspective. I ask unanimous consent that the article be printed in the Congressional Record. Now let me go to my first point Mr. President — why this proposed legislation is an unfunded mandate. The proposed legislation is an unfunded mandate because it would make it illegal for these states to continue to collect state and local Internet access taxes. The Congressional Budget Office estimates that these losses would amount to $80 million to $120 million a year. That is not all. The language of the legislation enacted by the House of Representatives, and every version of that language we have seen thus far in this chamber, broadens the ban on taxation on Internet access and increases the size of the federal unfunded mandates, extending to some degree to other telecommunications services, which is why I suppose we have begun to see the halls filled with lobbyists from the telecommunications industry as they anticipate the possibility that this Congress might be exempting them from some or maybe all of the taxes that state and local governments put on telecommunications. Now, there are many estimates about how much this would cost state and local governments. I have a study that was prepared in November of 2001 by Ernst & Young for the Telecommunications State and Local Tax Coalition. This study by Ernst & Young says that telecommunications providers and consumers of telecommunications services paid a total of $18.1 billion in state and local taxes in 1999. I am not suggesting this ban on Internet taxation would eliminate all of the $18 billion of state and local taxation on telecommunications, but virtually everyone agrees that it would eliminate some. Every time we, in our wisdom, tell a state or a city that it cannot use this tax, all we are doing is increasing the chance that Minnesota or Tennessee will increase some other tax, or fire some teachers or lay off some employees or close some parks. We have to balance budgets where we come from. If we knock out a substantial part of the ability to state and local governments to tax the Internet and some part of the telecommunications industry, we are only increasing the possibility in Tennessee of raising the property tax, of raising the sales tax, of raising the tax on medicine, of raising the tax on food or, in our state, making it more likely that we will have sooner or later an income tax. That is just one estimate. Another estimate by the Multistate Tax Commission reported on September 24, 2003: "The Internet tax moratorium passed by the U.S. House of Representatives on September 17, would end up reducing state and local revenue collections by at least $4 billion, and as much as $8.75 billion by 2006, rather than the $500 million estimated cost under the legislation's narrow original focus." The sponsors of the Internet tax ban in the Senate, Senators Allen, Wyden and others, have been working with state and local officials and with other senators to try to reduce the amount of loss to state and local governments. The House bill, which is also before the Senate, would cost Philadelphia, Nashville, Minneapolis, and our states up to $4 billion according to this study. So which taxes are they going to raise to replace it? Which teachers are they going to fire, from which school? Which park are they going to close? We are substituting our judgment for theirs. There are other more specific estimates. We have been hearing from states. The governor of Tennessee called me. He is a Democrat. I am a Republican. That does not matter so much because I respect the office. I had lunch with another former governor of Tennessee, one of my predecessors. He is a Democrat as well. He agrees with us, too. The Tennessee Department of Revenue says the managers' amendment will cost us $358 million a year. That is what the improved version of the House bill will cost one state, according to our state revenue department. Then other states have been writing me, and writing their senators. They say the Allen-Wyden amendment will cost Kentucky $40 million to $50 million, maybe $200 million. The new governor of Kentucky is being elected, I guess as we speak. He will have a surprise on his hands perhaps when he finds out that he has some taxes to raise or some services to cut because we, in our wisdom, want to dictate that. Iowa, $45 million to $50 million; Maine, $35 million; New Jersey, $600 million; Ohio, $55.7 million; South Dakota, $34 million; Tennessee, $358 million, as I said; Washington State, $33 million. These are what the state governments are telling us the new and improved Senate version of the Internet tax ban would cost state and local governments. Those are some of the estimates we have heard about. Now, to my second point, why is this so important? Why should we just not let it go on through? Well, maybe one of the advantages of having been around a little while is I have seen and heard some things that I remember, such as 1994, I remember the Contract with America. Surely we all remember the 300 Republicans who stood on the steps of the Capitol. This was in September of 1994. This was just before something that was to happen that had not happened in half a century. It was a resurgence in the country that elected a Republican Congress. What fueled all of that? What fueled that, according to the Heritage Foundation, in a candidate's briefing book that they did in 1996, looking back at 1994, chapter 14: With frustrated Americans focusing their anger increasingly on Washington and gridlock, many political candidates in 1994 successfully ran against Washington, appealing to voters to throw the bums out, replace them with individuals more honest and devoted to the public welfare. Then they began to list the items of the Contract with America, one of which was to stop unfunded mandates. At about the same time, the Heritage Foundation was making a list of the unfunded mandates in this country that had given rise to all of this anger and frustration among the American people. I will not read them all but it reports, for example, that the National Conference on State Legislatures had identified 192 unfunded mandates on the states, including Medicaid, regulations governing the use of underground storage tanks, the Clean Water Act, the Clean Air Act, the Resource Conservation Recovery Act, the Safe Drinking Water Act, the Endangered Species Act, the Americans with Disabilities Act, the Fair Labor Standards Act, only to name a few. Those are all wonderful acts, but what was happening was they were claiming credit up here and those of us who were down there were having to pay some of the bill. The U.S. Conference on Mayors and Price Waterhouse estimated that the 1994 to 1998 cost of these mandates, excluding Medicaid, on 314 cities was $54 billion, or 11.7 percent of all local taxes. The EPA estimates that environmental mandates cost state and local governments $30 billion to $40 billion annually. State and local governments spend $137 billion to ensure safe drinking water. Mr. President, these are good laws. I'd like to have voted for them. I wish I had proposed many of them. But the reason we had to come in here this year and pass legislation sending $20 billion back to the states and to local governments was not just because of the recession. It was because, consistently over the last 20 years, we have undercut the ability of state and local officials to make decisions for themselves about what services to provide and how to pay the bills. One of my most vivid memories is of the distinguished former majority leader of the Senate, Bob Dole, who was elected in 1995 with that new Congress. He had a little copy of the United States Constitution, and he pulled it out when he met with the governors in 1994 in Williamsburg, when they made the AWilliamsburg Resolve@ to stop these unfunded mandates. Senator Dole said he wanted to read to them the 10th Amendment of the United States Constitution: "The powers not delegated to the United States by the Constitution, nor prohibited by it by State, are reserved to the States respectively, or to the people." Senator Dole went across this country during 1995, reading this amendment to Republican audiences and to audiences in general. I know because I was there at many of the same meetings; and I know because I was there, that this is the heart and the soul of the Contract with America and the Republican revolution in 1994. I am surprised that this case of amnesia has come over so many of my colleagues and that we have forgotten about the importance of this. This is a body that is very respectful of one another. It would not be appropriate for me to mention a senator's name. I suppose I could do it within the rules of the Senate and then mention what he said about unfunded mandates in 1995 and apply it to the vote that we will be taking later this week. But let me read to you just a handful of examples of the kind of things that members of this body said on this floor in 1995 when the Senate, by 91 to 9, passed the unfunded mandates bill. One senator said: "In my own state, I repeat to the Senate, local officials, whether it be the Secretary of the State or Labor implementing motor vehicle registrations, or the mayor of the little town where I come from, attempted to meet the needs of the small city. I have heard their appeals and they clearly are tired of the federal government telling them precisely how to do things by regulation when they could do it just as well in different ways at less cost to their people." A Democrat from the South: "I believe there is a tendency, particularly during a time of constrained federal resources, to look to the imposition of obligations on state and local government as a means of accomplishing national objectives which we at the national government are either unwilling or unable to pay for." Another southern senator, this one a Republican: "We worry about how we attract good people into office. It is things like unfunded mandates that drives them out." Another senator from the West: "I served in the legislature, and a good deal of our budget was committed before we ever arrived by federal unfunded mandates." The one other matter that I would like to specifically mention before I conclude is I want to remind, if I may, my colleagues of why this is an unfunded mandate. Several have come up to me and said: This doesn't sound like an unfunded mandate to me. I thought an unfunded mandate was only when you pass a law to do a program, like to help children with disabilities, and then only pay half the bill, which is what we do. That is one kind of unfunded mandate. But another kind of unfunded mandate that is specifically defined by the Budget Act that was amended in 1995 by this Congress is a direct cost that, "would be required to be spent or prohibited from raising in revenues, in order to comply with the federal intergovernmental mandate." Whether we are requiring a new program or whether we are telling the state it cannot do this tax or that tax, it is a requirement we are imposing without paying the bill. In other words, we are claiming credit and asking others to pay the cost. The Uniform Unfunded Mandates Reform Act of 1995 created a very specific procedure for this. This isn't guesswork. It said that when there appears to be an unfunded mandate, that here is how we enforce that. First, the Senate committee of relevant jurisdiction — in this case it would be the Commerce Committee — under section 423 of the Budget Act, submits to the Congressional Budget Office a request for an assessment, identification, and description of any unfunded federal mandate. That was done. The Commerce Committee asked the Congressional Budget Office: Is this ban on Internet access taxation an unfunded federal mandate? And the Congressional Budget Office said: Yes. I ask unanimous consent that a report by the Congressional Research Service be printed in the record. Then there are some other steps that have to be taken. Not only is it defined as an unfunded intergovernmental mandate, there has to be a certain threshold of spending, $50 million adjusted by inflation, which today would be $64 million. So the Congressional Budget Office has given its opinion on that, and they have said yes, it is an unfunded federal mandate. So what the legislation provides, and what I plan to do when this comes up on Thursday, is as the law says. It is not in order for this body to pass an unfunded federal intergovernmental mandate, so a point of order may be raised against its consideration. I plan to raise such a point of order. The point of order may be waived by this body by 51 votes, which I hope it does not do because this body told the world in 1995 that it was through with this business of unfunded mandates. But we will see. I will agree that it sounds good to say we are not going to tax Internet access. I will agree that there may be a federal interest in not taxing Internet access. I agreed when the issue first came up in the 1990's that while the Internet was still an infant, maybe for the first three years, a moratorium would be in order. But if we think it is so important, then we should pay the bill. We should not fall into this bad habit that existed before the Republican revolution of 1994 of assuming that just because we were elected to come to Washington, suddenly we are all wise and that the governors, and mayors, and legislators are not quite as wise and that we, therefore, ought to tell them what to do and that we ought to restrict their ability to do it or not do it based upon what their tax base is. Let them do their job, and we can do ours. I want to end where I began. It is a privilege to be in this body. One of the greatest privileges is to stand up here and say, on the floor of the United States Senate, something I used to think about as governor time after time: Why are those senators and those congressmen assuming I can't do my job here? Why are they passing rules and then telling me to pay the bill, especially when they are printing money, and we are balancing budgets? I think we should draw the line. If we really believe that a ban on Internet access in a segment of the telecommunications interest is so overwhelmingly in the federal interest, then let's pass an unfunded federal mandate reimbursement bill and send a check to the states, every year, for whatever the cost of that is. I remind my colleagues, and I intend to do so as long as I am here, that they were right in 1994 about the Contract with America. They were right when they stood on the steps of the Capitol and promised: No more unfunded mandates. If we break our contract, throw us out. And they were right when they passed by 91 to 9 in 1995 the ban against unfunded federal mandates. And I hope the 63 of my colleagues who are still here remember that vote. Thank you Mr. President.