Facing intense lobbying pressure from retailers, Senate Commerce Chairman John McCain (R-AZ) postponed a scheduled markup of S. 2255, which extends the current moratorium on new and discriminatory Internet taxes until 2006. The measure did not include provisions that would address sales and use tax issues or provide for a level tax playing field for all retailers.

"The McCain bill didn't address the concerns of the retail industry," said Sarah Whitaker, Director for Government Relations at NRF. NRF opposes any extension of the moratorium.

McCain said he might wait until the House of Representatives acts on the issue before proceeding with his measure. The Senator also said he could offer the bill as an amendment to other legislation being considered by the Senate.

The scheduled markup coincided with the arrival of Governor James Gilmore (R-VA), Chairman of the Advisory Commission on Electronic Commerce (ACEC), on Capitol Hill to deliver the Commission's report to House and Senate leaders. The report did not receive the necessary two-thirds supermajority, as mandated by law, but Gilmore chose to submit the results of the ACEC's study as a simple majority report. Forty-two of Gilmore's fellow governors signed a letter to Congress urging them to reject the report.

"We intend to take the report seriously," said House Speaker Dennis Hastert (R-IL). The Speaker also indicated the House would act quickly to extend the current three-year moratorium, despite the setback in the Senate.

NRF supports equitable application of state sales and use taxes across all channels of distribution. NRF staff worked closely with members of the ACEC to prevent a two-thirds majority, and will continue to work with pro-equity Members of Congress to achieve a level playing field.

If you have any questions, please contact Scott Cahill or Sarah Whitaker at (202) 783-7971.

Playing off continued public resentment toward the current tax system, the House Committee on Ways and Means (W&M) used the week prior to April 15 to hold a three-day summit on various tax reform proposals this week, including a full day committed to discussion of a proposed National Retail Sales Tax (NRST). NRF Taxation Committee Chairman Del Threadgill, Vice President of Taxes at J.C. Penney Company, Inc., testified before the Committee to highlight retail industry concerns and release the findings of an extensive two-year NRF Foundation/PricewaterhouseCoopers (PWC) study on the NRST. NRF and John Wilkins, author of the PWC model, were two of only 17 witnesses to testify against a proposed NRST. Committee Democrats opposed the NRST proposal, while several Republicans questioned the balance between long-term benefits and short-term consequences, citing the NRF/PWC study. Committee Chairman Bill Archer (R-TX) supports adoption of a consumption-based tax system.

On Monday, several national newspapers, including The Washington Post and USA Today, attended a press briefing on the NRF/PWC study at NRF headquarters. NRF staff, Threadgill, and NRF Tax Reform Subcommittee Chairman Dick Pines of Sears answered reporters' questions for more than two hours on the controversial tax plan. As disclosed in last week’s Washington Retail Insight, a proposed NRST would disproportionately impact retailers, derail the economy in the short-term, and require a tax rate of between 24 and 65 percent. What brought even more credibility to the NRF/PWC study, which was alluded to several times during the hearing, was the release of a Congressional Joint Committee on Taxation estimate Monday afternoon that substantiated NRF’s findings by estimating that a NRST rate of 59 percent would be likely.

While a NRST is unlikely this Congress, proponents have raised more than $70 million dollars in an effort to build momentum for reform over the next several years. Prior to Tuesday’s hearing, NRST proponents spent $1.9 million on paid media in 34 separate Congressional districts, urging taxpayers to call their representatives and replace the income tax with a NRST. NRF was able to effectively target W&M Committee members with letters and phone calls this time. However, if NRST proponents keep this issue in the public eye, retailers will need to launch a full-scale grassroots campaign or face the prospect of becoming the nation’s primary tax collector. The extensive NRF/PWC report is available for purchase from the NRF Bookstore at (202) 626-8177.

If you have any questions, please contact Scott Cahill at (202) 626-8168.

Last Friday, President Clinton signed the "Senior Citizens Freedom to Work Act of 2000" into law. The bill, which was passed unanimously by the House and Senate, abolished the cap that reduced Social Security benefits for beneficiaries between 65 and 69 by $1 for every $3 of income earned above $17,000 a year.

"This bill not only means that our seniors will be able to enjoy extra income and personal fulfillment that comes with work without being penalized, it means companies with labor shortages will have a fresh supply of experienced workers, increasing our ability to grow without inflation," Clinton said.

The law is retroactive to December 31, 1999, raising the income of 800,000 workers this year. While the bill will not cost anything in the long run, it does increase Social Security outlays by an additional $22 billion over the next decade as more seniors begin to receive large checks.

The Senate Wednesday passed a bill by a 95-0 vote to create an exemption to the Fair Labor Standards Act (FSLA) so stock options do not have to be calculated into overtime pay.

Under the bill, stock options would be treated as an employee benefit, not as a form of compensation, and therefore would not require companies to recalculate overtime payments for their employees.

A similar measure is pending in the House Education and the Workforce Workforce Protections Subcommittee. The bills were drafted in response to a recent advisory letter by the Labor Department. However, after the protests generated by the letter, Labor Secretary Alexis Herman came out in support of the measure.

NRF will work with members of the House of Representatives to ensure swift passage of H.R. 4109. If you have any questions, please contact Katherine Graham at (202) 626-8195.

Washington Leadership Conference - June 13-14, Washington, DC
For registration information, contact Emily Wild at (202) 626-8131.

Retail sales increased a robust 1.4% in March 2000 from the previous month, and 10.5% from the same period a year ago.

Washington Retail Insight is published by the National Retail Federation, 325 7th Street, NW, Suite 1000, Washington, DC 20004. Please contact Mike Epstein at (202) 783-7971 or e-mail with comments, suggestions, or for subscription information.