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This letter was sent to each member of the United States House of Representatives.
May 9, 2000 Honorable Dennis Hastert Honorable Richard Gephardt
Dear Speaker Hastert and Representative Gerphardt: We write on behalf of the National Conference of State Legislatures to urge you to oppose H.R. 3709, the Internet Nondiscrimination Act, which is scheduled for a vote by the House on Wednesday, May 10, 2000. H.R. 3709 as reported from the House Judiciary Committee will extend the current moratorium on state and local taxes on Internet access for an additional five years, even though the current moratorium does not expire until October 1, 2001. The amended version of H.R. 3709 also will repeal the grandfather clause of the original Internet Tax Freedom Act which protects the ability of those states collecting a tax on Internet access to continue to do so. This means that the states of Connecticut, Montana, New Mexico, Ohio, South Carolina, South Dakota, Tennessee, Texas, Washington and Wisconsin will face an immediate reduction in current revenues. The Committee's willingness to report this legislation on extending the moratorium for five years and repealing the grandfather clause, without any public hearings or research to determine the impact of such action, on state and local governments and telecommunications service providers is disappointing. Is the United States House of Representatives prepared to define just what "Internet access" will be in five years, two years or even next year? Today, we know Internet access generally refers to the $19.95 (+/-) consumers pay for their monthly access to the "net" through America Online, Mindspring, Microsoft and so on. However, as we witness the convergence of technologies and the merger of industry giants, what we call "Internet access" may soon cover a number of other technologies and services. For example, telephony technology is quickly improving to allow consumers to actually make telephone calls and speak over the Internet. Today you can download free software to allow you to make long distance calls while online at no additional cost other then the fee paid for Internet access. As states would be prohibited from imposing any tax on Internet access until at least 2006, even if it included phone service, state and local revenues will decline; and traditional phone companies will be at a competitive disadvantage to Internet service providers. Congress, therefore would be in the position of picking winners and losers in the "new economy," maybe H.R. 3709 should be re-titled "The Anti-Main Street Act of 2000." We also are concerned that as the industry mergers continue, consumers will soon be receiving their telephone, cable television and Internet service from the same vendor. The vendor could bundle all these services for one price under the banner of Internet access. If states and local governments are prohibited from ever taxing Internet access, then states and localities would have to find new revenue sources to make up for the loss from not being able to tax telephone and/or cable services. By approving this legislation, we believe Congress would be trampling on one of the major tenets of federalism, the rights of sovereign states to decide their own taxation policy. The Congress elected in 1994 made a pledge to restore the balance to federalism and in 1995 overwhelmingly approved the Unfunded Mandates Relief Act. We find it incredulous that the members of this Congress, many of whom were elected in that historic election, would today seek to overturn that commitment and very possibly force onto state and local governments one of the largest and most egregious unfunded federal mandates. We join our colleagues from across the country in respectfully requesting that you oppose this legislation. We believe that the members of Congress and the information technology industry representatives who advocate extending the moratorium beyond its current expiration have failed to demonstrate a single justification based on sound public policy to necessitate action at this time when the moratorium is still in effect for another seventeen months. Sincerely, Senator Steven Rauschenberger, Illinois
Representative Matthew Kisber, Tennessee
Senator Joanne Emmons, Michigan
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