Keith Chu (202) 224-3789
Wyden Floor Statement on Internet Tax Legislation
As Prepared for Delivery
I want to address two events from the last several days, both of which have the potential to reshape the way Americans use the Internet for communication and commerce.
The first came last week, when the House voted on a bipartisan basis to permanently extend the Internet Tax Freedom Act. I wrote that law, which is commonly known as ITFA, along with former Congressman Chris Cox in 1998. ITFA is one of the most popular tax policies in the country, and I believe it’s past time for the Senate to follow the House’s lead and send a permanent extension to the President’s desk.
The second important matter came up yesterday, when a bill called the Remote Transactions Parity Act was introduced in the House. What this proposal comes down to is essentially a brand new national sales tax managed by a privatized tax-collecting bureaucracy that voters never approved. I see this online tax hike as a major threat to the Internet that has flourished under ITFA.
I want to address both of these issues today, beginning with the importance of the permanent Internet Tax Freedom Act. Ever since Congress first passed ITFA, it has been a key tool in helping the Internet grow unencumbered by taxation. It prohibits the kind of discriminatory taxes some in Congress are too fond of -- the kind of taxes that I believe would hurt innovation and punish the millions of citizens and businesses who use and depend on the Internet every day.
ITFA saves families in Oregon and elsewhere hundreds of dollars a year. That’s because without the law, access to the Internet would very likely be subject to the same level of punishing taxation that is currently imposed upon cigarettes and alcohol. There is no sense in discouraging innovation and communication online in that way. But you already see that with wireless services not protected by ITFA, which are taxed at onerous rates. Inflicting those taxes on Internet access is a burden that the Senate absolutely cannot heap onto the public.
Unfortunately, the Congress has become too reliant on stop-and-go governing, so the Internet Tax Freedom Act has been extended several times on a temporary basis. Some members in the Senate and House want to tie ITFA – which saves people money – to a controversial proposal that would drive up the cost of using the Internet the way Americans do today.
That’s where the second issue that I’d like to address comes in. The House proposal called the Remote Transactions Parity Act has taken a lot of different forms over the years. An older version that died in Congress was called the Marketplace Fairness Act. The idea used to be to turn every business that operated online – big or small – into a tax collector for the thousands of tax jurisdictions across the country. With every new iteration of this online tax hike bill, you see a new set of problems rearing its head.
Now this proposal has gotten even bigger and more unwieldy. This new House proposal would build a massive, privatized tax-collecting bureaucracy. And that new bureaucracy would take a big cut of every online sale before a single dime of sales tax gets distributed back to states or local communities.
Let me address for a moment how this hurts Oregon. My home state has no sales tax, but under this proposal, this murky tax-collecting middle-man is going to get involved anytime someone in Virginia or Michigan or California makes a purchase online from an Oregon company. This proposal will unfairly siphon money away from Oregon, yet Oregonians will get nothing in return from these newly-empowered national tax collectors.
In effect, there will be a new national sales tax overseen by a privatized middle-man. And that raises serious questions about whether taxpayer dollars should be going to a for-profit tax collector. It could put sensitive data about businesses and their customers in the crosshairs of hackers and criminals. This would be the biggest federal intrusion into state commerce in decades.
The online tax hike bill also creates a major new hurdle for small businesses that want to find consumers online. That would be a particularly harsh blow to companies in rural parts of Oregon and elsewhere. It would suddenly be a whole lot harder to compete with a retailer in a crowded city when the cost of doing business online takes a jump.
Finally, it creates a fundamentally tilted playing field against U.S. employers who must pay this national sales tax. The Internet spans national borders, but sellers from China, Canada, and Europe will not and cannot be subject to this tax, and they will profit at the expense of American jobs.
In my view, you have at hand two radically different pieces of legislation. The first, the permanent Internet Tax Freedom Act, lowers costs for consumers and protects the Internet as a bulwark for free speech and commerce, promoting American companies and American ideals. The second, the Remote Transactions Parity Act, would raise costs for Americans, hurt small and rural businesses, and punish states like Oregon that have kept their taxes low.
These pieces of legislation should not be tied together under any circumstances. It’s my view that the path forward is clear. The bipartisan proposal to permanently extend the Internet Tax Freedom Act has sailed through the House, and now the ball is in this chamber’s court. I believe that a permanent law protecting Internet access from taxation is long overdue, and the proposal for an online tax hike should not get in the way. So I encourage my colleagues to join me in working to pass a permanent Internet Tax Freedom Act as soon as possible.
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