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Throughout the past several years, we have heard that catalog and Internet companies say they are willing to allow and collect sales tax on interstate sales (regardless of traditional or Internet sales ) if States will simplify

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   Further, the bill would authorize States to enter into an Interstate Sales and Use Tax Compact through which members would adopt the streamlined sales and use tax system. Congressional authority and consent to enter into such a compact would expire if it has not occurred by January 1, 2006. The bill also authorizes States to require all other sellers to collect and remit sales and use taxes on remote sales unless Congress has acted to disapprove the compact by law within a period of 120 days after the Congress receives it.

   We introduce this bill because we do not think there is adequate protection now. It is very important we do not build electronic loopholes on the Internet , an ever-changing Internet , one that is growing by leaps and bounds, one that is finding new technology virtually every day. What we know as the Internet today is not what we will be using by the time the moratorium is finalized. More and more people are using the Internet everyday.

   Mr. President, I recognize this body has a constitutional responsibility to regulate interstate commerce. Furthermore, I understand the desire of several Senators to protect and promote the growth of Internet commerce. Internet commerce is an exciting field. It has a lot of growth potential. The new business will continue to create millions of new jobs in the coming years.

   The exciting thing about that for Wyomingites is that our merchants do not have to go where the people are. For people in my State, that means their products are no longer confined to a local market. They do not have to rely on expensive catalogs to sell merchandise to the big city folks. They do not have to travel all the way to Asia to display their goods. The customer can come to us on the Internet . It is a remarkable development, and it will push more growth for small manufacturers in rural America, especially in my State. We have seen some of the economic potential in the Internet and will continue this progress. It is a valuable resource because it provides access on demand. It brings information to your fingertips when you want it and how you want it.

   I was the mayor of a small town, Gillette, WY, for 8 years. I later served in the State house for 5 years and the State senate for 5 years. Throughout my public life I have always worked to reduce taxes, to return more of people's hard-earned wages to them.

   I am not here to argue in favor of taxes. There were times in Gillette when we had to make tough decisions. I was mayor during the boom time when the size of our town doubled in just a few years. We had to be very creative to be sure that our revenue sources would cover the necessary public services--important services like sewer, water, curb and gutter, filling in potholes, shoveling snow, collecting garbage, and mostly water. It is a tough job because the impact of your decision is felt by all of your neighbors. Hardly any of these problems is solved without money. When you are the mayor of a small town, you are on call 24 hours a day. You are in the phone book. People can call you at night and tell you that the city sewer is backing up into their house. I was fascinated how they were always sure that it was the city's sewer that was doing it. Therefore, it is important that we do not cut towns out of a historic source of revenue. They provides services you really depend on. Remember you cannot flush your toilet over the Internet .

   The point is that the government that is closest to the people is also on the shortest time line to get results. I think it is the hardest work. I am very concerned with any piece of legislation that mandates or restricts local government's ability to meet the needs of its citizens. This has the potential to provide electronic loopholes that will take away all of their revenue. The Internet Tax Moratorium and Equity Act of 2000 would designate a level playing field for all involved--business, government, and the consumer.

   If the loophole exists, I can share a method for local retailers to avoid sales tax collection too--but creating this loophole will lead to others--pay attention here. Sales tax collection and federal and state income tax could be in the same boat, if sole tax collection is no longer necessary on Internet sales purely by virtue of the sale over the Internet . Why shouldn't an employee whose check is written on the Internet and transmitted directly to his bank account not owe any income tax ? Both would be Internet tax loopholes--tax collection exemptions forced by an all-knowingly federal government.

   I do strongly support this bill. The current system of collecting revenues for those towns and states should be preserved--preserved on a level playing field for all involved. I do not think we have all the answers, or we would not be asking for this bill. So whatever we do, we have to have a bill that will preserve the way that small business and small towns function at the present at the present time. Our bill is critical for towns, small businesses, and you and me. I urge my colleagues to support it.

   I yield the floor.

   Mr. GRAHAM. Mr. President, earlier this year, the Senate began consideration of the Elementary and Secondary Education Act reauthorization. As its name suggests, that legislation governs how Federal dollars that go to the States for education will be spent. It is a very important bill, and I regret that the Senate was unable to complete consideration of it.

   As important as the ESEA reauthorization bill is, however, it is not the most significant education bill that Congress will deal with in the next two years. In fact, the most important education bill Congress will consider won't mention schools or students. It won't reference classroom size or teacher salaries.

   In 1998, Congress passed the Internet Tax Freedom Act. That bill imposed a three year moratorium on specific state taxes applicable to the Internet . The legislation didn't affect the states' ability to impose sales tax on Internet purchases, nor did it fix the unfair advantage ``e-tailers'' currently have over their main street competitors with respect to their responsibility to collect sales and use taxes.

   As a result of two Supreme Court rulings, a state is prohibited from requiring out-of-state retailers from collecting sales tax on purchases made by its residents if the business has no presence in the state. The sales tax still applies, it just has to be collected directly from the purchaser. For a variety of reasons, very little of this tax is ever collected.

   The Internet Tax Freedom Act created the Advisory Commission on Electronic Commerce which was supposed to come up with a solution to this problem. Instead the Commission was hijacked by a small group who opted to demagogue this issue to further their ``anti-tax'' agenda. The result was a year-long study of an issue with little in the form of useful recommendations.

   The House has passed a five year extension of the moratorium put in place by the Internet Tax Freedom Act. The Senate also may soon consider a proposal to extend the temporary ban imposed in 1998. The game plan of the forces supporting this extended moratorium is clear: delay, delay, delay. Keep extending the moratorium until there is a sufficiently large political constituency to permanently block the collection of sales taxes on purchases made over the Internet .

   This is not a hidden agenda. Governor Gilmore, Chairman of the Advisory Commission on Electronic Commerce stated it clearly when he said that ``I believe America should ban sales and use taxes on the Internet permanently, for all time. If we secure tax freedom on the Internet through 2006, tax freedom on the Internet will become an entitlement for the American

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   inevitability. No tax collector will be welcome on the Internet after 2006.''

   Let me be clear: this is not about whether purchases made over the Internet are subject to sales tax . They already are. The question is whether Internet sellers should have the same responsibility to collect the sales tax as their Main Street competitors.

   If we answer this question with a ``no,'' funding for education will suffer. Why? Because states have the fundamental responsibility for financing public education in our country For most states, sales tax revenue is the primary means by which states fulfill this responsibility. Because many states rely on sales taxes for their general revenue, the equation is simple--no collection of sales tax on the Internet means less money for new schools, teacher salaries, or textbooks. Six states--Florida, Nevada, South Dakota, Tennessee, Texas and Washington rely on sales taxes for more than half of their total tax revenue.

   Over the next four years, Internet sales are expected to grow by nearly $500 billion. If state and local governments are prohibited from collecting sales taxes on those new sales , they stand to lose close to $17.5 billion in revenue. Florida's share of that lost revenue could be $1 billion. When asked why he robbed banks, Willie Sutton replied, ``that's where the money is.'' Today, the money is increasingly on the Internet .

   There is another reason to fix this issue: fairness. No one would seriously consider a proposal that barred state and local governments from collecting sales and use taxes from retailers who operate from green buildings. That would be unfair to those businesses that aren't located in green buildings. Proposals to arbitrarily benefit the Internet , however, somehow receive a great deal of attention and support.

   Our position should be clear: no more delays. No more moratoriums until Congress agrees to a process whereby states can simplify their sales tax systems and receive the authority they need to require remote sellers to collect their sales taxes.

   The legislation we are introducing today takes the first positive step in this direction. The bill extends the current moratorium on Internet access taxes and multiple or discriminatory taxes on the Internet , a prohibition that virtually all agree should be imposed.

   More importantly, however, it establishes a process whereby states can cooperatively create a model sales and use tax system. Sales tax laws must be made significantly more uniform across the states, and the administration of the tax must be substantially overhauled and simplified. The goal of this legislation is to develop a simple, uniform, and fair system of sales tax collection. It will reduce the burden on remote sellers and protect state and local sovereignty.

   Once states have adopted this simplified system, they would then have the authority to require remote sellers to collect and remit sales and use taxes to the state.

   Previous attempts to require remote sellers to collect sales and use taxes have been criticized on the grounds that it was unreasonable to require businesses to keep track of the nearly 7,500 state and local governments levying sales and use taxes. That is a suspect criticism, particularly for those. Nevertheless, this bill dramatically simplifies the system for businesses by establishing uniform definitions and fewer rates.

   The streamlined sales and use tax system envisioned by this legislation follows the guidance offered by the Advisory Commission on Electronic Commerce. The attributes of this streamlined system include:

   A centralized, one-stop, multi-state registration system for sellers;

   Uniform definitions for goods or services that would be included in the tax base;

   Uniform and simple rules for attributing transactions to particular taxing jurisdictions;

   Uniform rules for the designation and identification of purchasers exempt from tax ;

   Uniform certification procedures for software that sellers may rely on to determine state and local taxes;

   Uniform bad debt rules;

   Uniform returns and remittance forms;

   Consistent electronic filing and remittance methods;

   State administration of State and local sales taxes;

   Uniform audit procedures;

   Reasonable compensation for tax collection by remote sellers;

   Exemption for remote sellers with less than $5 million in annual sales for the previous year;

   Appropriate protections for consumer privacy; and

   Such other features that member states deem warranted to promote simplicity.

   Critics of this legislation will argue that it is anti-technology, and that the Internet must be protected from this threat. That is not true. The sponsors of this bill yield to no one in their support and enthusiasm for a vibrant information technology era. But that support does not necessitate special breaks for companies doing business over the Internet .

   A more appropriate characterization for this legislation is that it will both assure fairness to all sellers and protect states' abilities to collect the resources necessary to make the education investments that will pave the way for the next technological breakthrough--the next Internet . I hope my colleagues will join us and support this approach.

   By Mr. COVERDELL (for himself and Mr. TORRICELLI):

   S. 2776. A bill to amend the Internal Revenue Code of 1986 to encourage charitable contributions to public charities for the use in medical research; to the Committee on Finance.

   THE MEDICAL RESEARCH INVESTMENT ACT OF 2000

   Mr. COVERDELL. Mr. President, today I rise to introduce bipartisan legislation, the Medical Research Investment Act, or MRI Act, and privileged to be joined today by Senator TORRICELLI. The American people are unique in the world in their spirit of volunterism and charitable efforts. Unfortunately, the Federal Tax Code quite often gets in the way.

   Congress has made impressive strides to increase resources for medical research. Last year we passed and enacted an increase of $2.7 billion in funding for the National Institutes of Health. This fourteen percent increase means this Congress is well on its way to doubling the Federal support for medical research, as we promised. At the same time, however, we should not diminish the critical role of private donations. This is why the MRI Act is so necessary.

   While researchers have indeed made impressive breakthroughs in finding cures. The fight is far from over. For instance, 16 million Americans live with diabetes mellitus. In fact, I met today a courageous child, Caity Rigg, who suffers from Juvenile diabetes and requires four shots of insulin a day just to survive. Diabetes is the leading cause of kidney failure, blindness, and amputations, and is a major factor for heart disease, stroke, and birth defects. It shortens average life expectancy by 15 years and costs the nation in excess of $100 billion annually.

   Cardiovascular diseases, heart attacks and strokes, claimed nearly 1 million lives in the United States in 1997. A third of these deaths were premature. In 1996, a third of all hospitalization expenditures were made to Medicare beneficiaries for hospital expenses due to cardiovascular problems.

   This year approximately half a million Americans will die of cancer--more than 1,500 people per day. It is the second leading cause of death in the United States, and since 1990, approximately 13 million new cases have been diagnosed. In 2000, over 1 million new patients will be stricken.

   The MRI Act makes very simple, but very significant changes. First, it encourages charitable gifts of cash or property for medical research by increasing the limitations on deductibility from the current 50 percent cap to 80 percent of adjusted gross income. Individuals could give 30 percent for medical research and 50 percent of income for other purposes. Or they could give as much as 80 percent of income for medical research alone. Not only would this benefit medical research, but it presents the opportunity for other charities to similarly receive greater support. Further, those who can give more than 80 percent in a year

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   Second, the MRI Act allows medical research to benefit from incentive stock option, or ISO's, giving by ending disincentives for taxpayers who contribute stock from ISO's to medical research. Current law taxes such transactions at a rate of almost forty percent if stocks are not held for more than a year. Because of the tax on their gifts, many taxpayers find they must sell $140 in stock for every $100 they wish to donate because of the taxes on their gifts. In addition to this change, no ordinary income, capital gains or alternative minimum tax would be imposed on medical research gifts.

   Accordingly to an estimate by Price Waterhouse Coopers, the MRI Act would release more than 1 billion in new donations to medical research over the next 5 years. For many research efforts, it could mean the difference between finding cures or not. Our proposal enjoys broad support from the medical research community.

   Alliance for Aging Research, American Association for Cancer Research, ALS Association (Lou Gehrigs's Disease), American Society of Cell Biologists, Cancer Treatment Research Foundation, Coalition of National Cancer Cooperative Groups, Cure for Lymphoma, Friends of Cancer Research, International Foundation for Anticancer Drug Discovery, Juvenile Diabetes Foundation for Parkinson's Research, Oncology Nursing Society, Prevent Blindness America, Research to Prevent Blindness, and Society for Women's Health Research.

   In closing, I encourage my colleagues to join us in supporting the MRI Act and look forward to its consideration. I ask unanimous consent that a copy of my proposed legislation appear in the RECORD.

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