| Let 'Em See
Something In Writing by Stephanie Lash on 11/19/99 of National Journal's Technology Daily Topic: Press Coverage | |
| I Hurricane Floyd was creeping its way up the coast to New York City when the Advisory Commission on Electronic Commerce held its last meeting mid-September. Sensing impending travel catastrophes coupled with a mass exodus down the shoreline to Washington after the session's adjournment, the group appeased a eleventh-hour call from Utah Gov. Michael Leavitt, R, to request proposals from the public on how to best deal with the prospect of taxing e-commerce. And this week, after around 30 proposals were submitted to the commission, a different kind of storm began to brew. Consumer advocacy groups, local government organizations and commission-watchers unleashed a flurry of press releases and media events to announce their proposals, which were due to the commission on Nov. 15. Many of the submissions, which were called to meet a set of 18 criteria ranging from "meeting constitutional muster" to "radically simplifying the sales tax system," responded to Leavitt's plan. Also due on that date were comments to be considered for the report-drafting subcommittee's issues and options paper, which will serve as a compilation of ideas on the topic of electronic commerce and taxation for the entire commission to consider while it drafts its final recommendation. "What I think we're seeing is a tremendously positive development," said Jim Lucier, a Prudential analyst who worked with Americans for Tax Reform's Grover Norquist as he lobbied while the legislation creating the commission was being drafted. "Instead of constantly squabbling, you have important groups within the commission working hard to get majority positions." Because infighting has plagued the commission from its beginning, a majority may be the most difficult endeavor many of these groups have worked for. The 19-member commission needs a two-thirds majority vote to approve any recommendation, and the group already has shifted into pro- and anti-tax factions, with only a few still undecided. The proposals are making their rounds among the commission-members, and the next meeting is Dec. 14. While there are a host of groups that have submitted their propositions it appears that three are getting the majority of the commission's attention (and one, specifically, because it was drafted by the group's chairman, Virginia Gov. Jim Gilmore). Following is a synopses and analysis of the three plans that have the best chance of succeeding: Title: Streamlined Sales Tax System for the 21st Century (Zero-Burden Plan) Sponsor: National Governors' Association, National Conference of State Legislatures, National Association of Counties, U.S. Conference of Mayors, Council of State Governments, International City County Management Association. While the remaining member of the "Big Seven" local organizations, the National League of Cities, has backed the proposal's intent, it is waiting until its annual meeting in December to vote on supporting it officially. Description: The idea centers around establishing a "trusted third party," or tax clearinghouse, to collect and remit sales taxes based on the purchaser's tax jurisdiction. When an online order is placed, the seller would notify the clearinghouse and credit card company to determine the jurisdiction of the buyer. The third party would notify the seller of the appropriate tax amount, the credit card company would collect the funds and then remit the tax to the clearinghouse. The clearinghouse would then distribute the funds to the states and localities and would be paid by a percentage of what it collects. The third parties would be licensed by the state and the necessary software required of each vendor would be paid for by the state. History: The plan was drafted after a series of marathon meetings by the local organizations that argue they are jeopardized because of lost sales tax revenues from e-commerce. Organizers of the proposal, which is being touted by Gov. Leavitt, say that regardless of the commission's final decision they will begin pushing the system to state legislatures for adoption. Under the Internet Tax Freedom Act, no new taxes may be applied to e-commerce, but existing taxes, such as sales and use taxes, are not covered. The sponsors say they do not need the commission's go-ahead in order to implement the system, which would be optional by state and would not require all 50 states' involvement to function. Comments: The plan is widely criticized by anti-tax advocates and those who believe that taxing e-commerce will stifle its growth. Others say that the pro-tax movement is only supported by the national government organizations and not their members, with Leavitt being the notable exception, and criticize it for not receiving many other individuals' support. But the organizations argue that unless states and localities have the right to determine revenue-raising activities, control of local services like education and law enforcement ultimately will be given to the federal government. "Thomas Jefferson would roll over in his grave" if that happens, Leavitt said. Title: E-Freedom Coalition Proposal Sponsors: The E-Freedom Coalition's membership involves over 20 organizations, including Americans for Tax Reform, Citizens Against Government Waste, Competitive Enterprise Institute, Consumer Alert, Heritage Foundation, Progress and Freedom Foundation and State Policy Network. Description: The group supports a ban on collection of sales taxes on electronic commerce and the repeal of the 3 percent federal excise tax on telecommunications. It also would ban discriminatory Internet taxation and taxes on Internet access. The group endorses slashing local telecommunications taxes and wants to see interstate telecom property taxes reduced and controlled with federal protections. History: The E-Freedom Coalition unveiled its proposal at a joint press conference with legislation by House Budget Committee Chairman John Kasich, R-OH, that would ban Internet sales taxes. Kasich's Internet Tax Elimination Act, H.R. 3252, would make permanent the three-year moratorium on discriminatory Internet taxes passed in the Internet Tax Freedom Act. Fellow Ohio Republican John Boehner joined Kasich in sponsoring the measure. Comments: Americans for Tax Reform's Norquist has led the anti-tax movement on the commission. Stan Sokul, an independent consultant for the Association for Interactive Media was also on hand to support the proposal. Advocates are promoting the plan by saying it would protect consumers' privacy by not collecting personal information from users to determine tax jurisdictions. Title: No Internet Tax Sponsor: Virginia Gov. Jim Gilmore, R, chairman of the Advisory Commission on Electronic Commerce Description: Gilmore's proposal is almost identical in ideology to the E-Freedom Coalition plan. He maintains Congress should ban all sales and use taxes on e-commerce and protect businesses from state income and business activity taxes simply because of their virtual presence in a state. Gilmore also has proposed the elimination of the 3 percent federal excise tax on telecommunications and has called for the federal government to give states $1.7 billion each year for the lost revenue from the repeal of sales taxes on e-commerce transactions. He also has proposed that states be allowed to use federal welfare money to purchase computers and Internet access for needy families. History: Gilmore's outline was submitted to the policies and options paper that the commission is preparing, not under the call for proposals suggested by Leavitt. But because he is the chair of the commission and had maintained that he would remain neutral, Gilmore's actions have received criticism from many on the state and local side of the debate. But he has defended his actions. "After hearing dozens of experts on an entire range of e-commerce issues, I felt it was time to put forward my vision. It can be summarized in three words: No Internet Tax," Gilmore said in a recent speech. Observers have speculated that Gilmore's plan could be meshed with the E-Freedom Coalition's to come up with a proposal agreeable to both parties. And suggestions such as the welfare provision even have appeased pro-tax groups, which have said solutions such as those may be the most agreeable for a consensus statement. Comments: The National Association of Counties and other local groups remain opposed to the plan's provisions calling for the federal government to allot funds to localities. "The fact remains that Gilmore's proposal means county officials will be even more dependent on state and federal governments to fund their local services," said NACo's Executive Director Larry Naake. "This isn't my idea of returning more control and authority to the local citizen." — |
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