John McCain

Mr. McCAIN

Mr. McCAIN. Mr. President, tonight we will mark a historic occasion-- the 20th anniversary of the International Republican Institute. I am honored to chair the Institute's board of directors, and to have been involved for 14 years with an organization that has done so much for so many. Its staff of experts, under its leadership in Washington, has for two decades fanned out across the globe, bringing the benefits of their experience and education to those who hunger for democracy. For 20 years IRI has worked to advance democracy, promote freedom and self- government, and support the rule of law and human rights. In doing this, IRI embodies the fundamental values on which the American political system is based, and which we must encourage around the world. Why do we spend energy, money, time and expertise to promote freedom and democracy abroad? We do it because we know that, as Ronald Reagan said in 1982 when he cited the Universal Declaration of Human Rights, ``freedom is not the sole prerogative of a lucky few, but the inalienable and universal right of all human beings.'' In America, we enjoy the fundamental right to be free. But we also know that we will never enjoy our rights in the fullness of security until all of humanity is also free. The promotion of democracy and fundamental human rights is thus an inextricable element of American foreign policy. We use our power not simply to enhance our security, but to promote our values--for the good of others. For 20 years IRI has monitored elections, trained political candidates, promoted government reform, helped organize civil society, and increased political participation. Its mission is vital, and IRI has performed it with success in over 75 countries. Anyone who reads the newspapers can see how critical this mission is today. Iraq is the biggest democracy project in a generation, and IRI is active on the ground, making a difference on a daily basis. Beyond Iraq, there is a growing recognition that the lack of freedom in the Greater Middle East offends not only America's national values, but also threatens our security. In other regions too--Central Asia, Southeast Asia, and others--freedom is lacking. When we confront these situations, the diagnosis is easy. The hard part is taking action. IRI takes action. Promoting democracy is a huge task--one IRI does superbly--and calls will only increase for it to do more. I am confident it is up to the job. For 20 years the individuals who make up the International Republican Institute have made a positive difference in the world. While these are not the type of people to rest on their laurels, we should all recognize that these laurels are well deserved.

Mr. McCAIN

Mr. McCAIN. Mr. President, this amendment excludes from the definition of tax on Internet access transactional taxes such as gross receipts or gross revenue fees, constitutes an end run around Internet tax freedom, and eviscerates the moratorium itself. If we allow this to exclude payments made for use of the public right-of-way, including access line fees, franchise fees, et cetera, this amendment should be rejected. I move to table the amendment, and I ask for the yeas and nays.

Mr. McCAIN. Mr. President, this substitute, which I will describe in more detail in a minute, is, I hope, a fair and true compromise between the opposing sides in this debate. At least I hope it is viewed by a majority of the Senate as such. I also understand there are very strongly held views on this issue. This is not the first time we have been to the Senate floor on this issue. This is the third time we have had debate and votes on it, and each time it becomes more difficult because we are talking about a lot more money, a lot more involvement, a lot more taxes and, of course, as technology evolves, of greater importance to America, whether it be economically, whether it be entertainment, or politically. The rise of the Internet in political campaigns in America today is one of the most recent phenomena. I hope since we have, at least according to a letter I received from Senator Alexander, boiled down our differences to four major differences--I in no way understate the importance of those differences, but there are only four--perhaps we could propose amendments and vote on those four differences and, in the meantime, continue our dialog in trying to reach a reasonable compromise. I would like to point out it does no one any good for us to leave this issue in limbo. If we are going to allow taxation of the Internet in a broad variety of ways, then the Senate should decide to do so. If we are going to adopt this compromise, then the Senate should do so. The House, as we know, long ago passed legislation. This particular legislation, before I offered a substitute amendment, was reported out of the committee 10 months ago. I hope all will act together in good faith and try and resolve it. By the way, those four major differences, as defined in the letter to me from Senator Alexander, are definition, voice over IP, duration, and grandfather clause. I hope we can address each of those either, as I said, in the form of negotiation or in the form of amendments which would be up or down. I have been told the majority leader says we are going to complete action on this bill by Thursday night late. The Democrats have a retreat beginning on Friday which we all respect. I hope we can get a lot done so we do not find ourselves here at a very late hour on Thursday night. Mr. President, I offer this amendment to the Internet Tax Nondiscrimination Act which offers, I believe, a true and fair compromise. On one end of the spectrum are those who do not believe the tax moratorium should be extended, and on the other end are those who want to make it permanent. This proposal, I believe, offers a middle- ground alternative to this debate and addresses the concerns State and local governments have expressed, while retaining some--many have said too few--aspects of the bill that was favorably reported by the Commerce Committee last year. Before I summarize the substance of the amendment, I would like to spend a moment addressing a couple criticisms that have been raised about the compromise proposal. First, I have heard a few Members talk about how consideration of S. 150 is moving too fast and that Members and their staffs have not had adequate opportunity to consider the substance of this matter. With all due respect to my colleagues who believe this has been a less than deliberative process, I can think of few debates recently in which Members have had more time to prepare and negotiate. We voted the bill out of the Commerce Committee in July of last year. The Finance Committee, after requesting a sequential referral, discharged the bill without amending it. Throughout this time, Members, including Senators Dorgan, Hollings, Allen, Wyden, Sununu, and many others who have spoken on this floor about this matter, continued to negotiate the substance of the legislation. During that time, we heard from State and local groups such as the National Governors Association and the National Association of Counties. They had several opportunities, and did, to provide significant input. We are here after almost 1 year of considering this matter, not because we have not discussed the issue thoroughly enough. Nor are we here because we have not properly defined Internet access or otherwise adequately dealt with the specifics of the Internet tax moratorium. We are debating this measure because the two opposing sides will not budge from their positions. To be clear, the compromise amendment will not likely move those who are firmly on one side or the other. As Senator Voinovich said yesterday, for some Members the philosophical divide in this debate may be ``too deep to bridge.'' Its purpose is only to offer a compromise that other Members can vote for knowing that it strikes a reasonable balance between those who want a permanent and broad Internet access tax moratorium and those who want no moratorium at all. Second, some Members who do not want to reinstate the Internet tax moratorium have expressed their view that the amendment is not a true compromise; that it does not go all the way to meeting their concerns about State and local revenues. I must respond to them by saying the amendment is a compromise precisely because it does not completely satisfy one side or the other. However, the amendment does protect a significant portion of the $20 billion in tax revenues from telecommunications services that States and localities claim they could lose as a result of S. 150. In fact, even using the most aggressive revenue loss estimates available, it appears what is at stake is not more than 3.5 percent of total State and local tax revenues from telecommunications services. In my opinion, that is not just a compromise but a very generous concession to those who want to defeat the Internet tax moratorium. To criticize this proposal at this point as somehow not enough is just an empty exercise in moving the proverbial goalpost of this debate. It seems to me the goalpost continues to move so much that it would not surprise me to hear at the end of this week that some Members actually support a Federal law requiring States to tax Internet access. I remind my colleagues that this debate is about striking a balance between S. 150, the Allen-Wyden bill, and S. 2084, the Alexander-Carper bill. Clearly, this amendment goes a long way to compromising with the opponents of the Internet tax moratorium. Again, I have to repeat this because it is a crucial point: This body does not typically operate by capitulating 100 percent to one side or the other on a particular matter that is before it. In its normal course of business, the Senate compromises, and that is exactly what this amendment does. Simply put, the amendment offered today is truly a reasonable compromise that addresses a host of concerns the States and localities have raised over the past 10 months. Throughout the negotiation process, State and local groups have asked for a temporary extension to the Internet tax moratorium. Specifically, they have asked for a 2-year extension of the moratorium. The compromise amendment would extend the moratorium for 4 years. Why 4 years? If we do it for 2 years, we would almost automatically be back revisiting the issue immediately when one looks at the process we have just been through. I think 4 years is a great deal less than permanent and not much more than 2 years, as the opponents of this legislation have alleged. Another concern we have heard from State and local government is extending the Internet tax moratorium would somehow impact traditional telephone services. This amendment would ensure that State and local revenues from traditional phone service would not be impacted in any way, shape, or form. Again, the amendment would accommodate a concern raised by States and localities to the full satisfaction of State and local authorities. State and local governments have also expressed concern that this bill would hamper their ability to tax voice services provided over the Internet. This amendment addresses that matter by setting forth a broad definition of services, including voice services that are provided over the Internet that would not be considered Internet access and therefore not be subject to the Internet tax moratorium. Once again, I believe this provision should fully address the concern of State and local governments. The list of concessions made to State and local government interests in the amendment is extensive. For example, the compromise amendment would clarify that the Internet tax moratorium does not apply to nontransactional taxes such as taxes on net income, net worth, or property value. The amendment would clarify that otherwise taxable services would not become tax free solely because they are offered as a package with Internet access. The amendment would grandfather for 3 years, from November 1, 2003, the States that were taxing Internet access in October 1998. It would grandfather for 2 years, from November 1, 2003, the States that began to tax--according to many, improperly-- Internet access after October 1998. It would ensure that universal service would not be affected by the moratorium. It would ensure that 9-1-1 and e-9-1-1 services would not be affected by the moratorium. Finally, it would ensure that regulatory proceedings that do not relate to taxation would not be impacted by the Internet tax moratorium. I want to point out again, there are really 10 compromises offered in this: the 4-year moratorium, the 3-year phaseout of the grandfather clause, the 2-year grandfather of taxes on DSL, and voice over IP carve-out. It clarifies taxes covered. It clarifies the House's language on DSL. It provides a clear and uniform accounting rule. The universal service fees are unaffected. As I mentioned, e-9-1-1 taxes are unaffected, and nontax regulatory powers are unaffected. I hope we can move forward if there is not agreement. Meanwhile, we continue to discuss the issue.

Mr. McCAIN. Mr. President, I now withdraw the pending substitute amendment No. 2136.

Mr. McCAIN. Never.

Mr. McCAIN. I suggest the absence of a quorum.

Mr. McCAIN. I yield the floor. I thank the Chair.

Mr. McCAIN. So we are debating the Domenici second-degree amendment to the Daschle amendment to the substitute or to the original S. 150.

Mr. McCAIN. Mr. President, I regret that I was not here at the time the Democratic leader offered his amendment. But, of course, it would not have mattered really much whether I was here. I wonder, since we have seen a singular lack of progress in the last few months, particularly in the last few weeks--literally every piece of legislation, with the rarest exception, has been loaded up with extraneous amendments and has had to be brought down. Of course, I have only been here for 18 years. That is not a long time compared to some. But I have to say, I am unaccustomed to this kind of procedure where in good faith we brought this bill to the floor, in good faith we voted cloture on the motion to proceed, and then the Democratic leader stands up and proposes a totally, completely, absolutely extraneous amendment, an entire piece of legislation, the Energy bill, which has been hard fought in this body many times, as an amendment on the Internet tax moratorium bill, without warning, without saying what he was going to do, without having the courtesy to inform me as the chairman of the committee and the manager of the bill. If he had, I would have thought, well, maybe we ought to not bring it up. The temperature is 85 degrees in Phoenix today. It is not raining there like it is outside. Why don't we just go home? Why don't we go home, relax with our constituents and our families and friends, rather than go through this charade of telling Americans that we are legislating. There was an old line in the cold war era. The Russians said: We pretend to work and they pretend to pay us. Well, we pretend to work and we are still getting paid. We are not working. We are not doing anything. I say to my friend the minority leader and to my friend from Nevada-- and they are my friends--what is this all about? You know very well that if an Internet moratorium is passed, an energy bill will not be part of it. Now we are going to go through the parliamentary charade of having somebody offer a second-degree amendment and somebody else will do a substitute, and then somebody else will offer a second-degree amendment. What am I supposed to tell my constituents, the taxpayers, we are doing here in Washington? If I had a townhall meeting and said, yes, we had an Internet tax moratorium bill, a bill that is vitally important to both sides as far as whether taxation is going to be imposed on transactions over the Internet, which some 70 or 80 percent of the American people engage in now--billions of dollars--we are going to decide in a parliamentary fashion whether those transactions should be taxed or not taxed, and if so, under what circumstances--this is the third time we have revisited this issue. Ten months ago we passed it. The Senator from Tennessee will tell me how many hundreds of hours he has devoted to this issue. The Senator from Virginia will tell me how many hundreds of hours he has devoted to it. What do we do? We take up the bill. We have debated it for barely 2 days. And what do we have? The Energy bill as an amendment to the Internet tax moratorium bill. What am I supposed to tell my constituents? I will tell you what they are going to say: We don't get it. That is what they are going to say: We don't get it. Yes, it is important to me, Senator, whether the State and local governments can tax the things I buy on the Internet. Some people say they should; some people say they should not. But can't you guys and women get together and make a decision on it so I will be relieved of this lack of knowledge as to what the future holds? What about all those people who are starting businesses that do business over the Internet? What about them? I am sorry, sir, we can't address this issue because we have to take up the Energy bill. I certainly wouldn't say it is all about ethanol. I certainly wouldn't say it is about a product that we have created a market for which has absolutely, under no circumstances, any value whatsoever except to corn producers and Archer Daniels Midland and other large agribusinesses. Here we go now. Here we go. The Democrats have a retreat on Friday, so we are not going to be here on Friday. No, we are not going to work 5 days this week. Actually, 3, excuse me. And here we go, now we are going to spend late this afternoon jockeying back and forth. I am sure there may be a headline in South Dakota that says: Senator Daschle fights for ethanol. I bet there will be a whole lot of press releases, too, and maybe even the distinguished Senator from North Dakota will be fighting for ethanol, too. Meanwhile, we are not addressing the issues that the American people care about. Right now they care about whether we are going to tax the Internet. I urge my colleagues to tell us, all I want to know is, are we going to spend between now and when we go out of session at the beginning of October in this kind of back and forth? My side is also guilty, I freely admit. Are we going to spend that time between now and the beginning of October, when we will break to take the electioneering from the floor of the Senate out to our respective States, and do this or are we going to seriously legislate as the American people sent us here to do? Obviously, I am upset because this is a bill I have been working on for a long time, an issue I have been involved in for many years. Obviously, I am upset by it. I apologize if I have offended any of my colleagues. But at the same time, this has been going on now for months. This is not the first time we have done this. This is about the 50th time, again, on both sides of the aisle. So why don't we make a decision. We are going to attach the minimum wage or we are going to attach lawyers' fees or medical malpractice or one of these; we are going to attach them all back and forth. And we will be able to force votes on it, but unfortunately, we don't legislate. Why don't we make a decision? Why don't the leaders and all 100 of us get together and decide what we are going to do and what we are not going to do. At least the taxpayers may find some comfort in the knowledge that at least we would tell them what we are doing. I would imagine that as we speak we will have some amendment and then a second-degree amendment, and we will fill up the tree, which probably very few living Americans understand, including Members of this body, but we will consult the Parliamentarian as to how the mechanics work. I suggest the absence of a quorum.

Mr. McCAIN. Mr. President, could I ask what the parliamentary situation is?

Mr. McCAIN. Mr. President, I ask unanimous consent that the order for the quorum call be dispensed with.

Mr. McCAIN

Mr. McCAIN. Mr. President, I yield back my time.

Mr. McCAIN. Mr. President, I reserve 5 minutes for the Senator from Virginia when he arrives. I yield the floor.

Mr. McCAIN. Mr. President, how much time do I have remaining?

Mr. McCAIN. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. McCAIN. Mr. President, I appreciate the letter from the Senator from Tennessee. My understanding is, he has four major concerns. I hope to work with him to resolve these concerns. If not, I hope we will see amendments and let the Senate work its will as to whether those concerns are valid in the view of a majority of the Senate. I look forward to seeing and debating and voting on these amendments.

Mr. McCAIN. Mr. President, I yield myself 1 minute.

Mr. McCAIN. Mr. President, I yield 2 minutes to the Senator from Oregon.

Mr. McCAIN. Mr. President, how much time remains?

Mr. McCAIN. Mr. President, I yield 3 minutes to the Senator from Oregon.

Mr. McCAIN

Mr. McCAIN. I thank the Senator from California. I appreciate her patience and hope she is able to speak, as I know she has strong beliefs on this issue. Over 5 years ago, Congress took appropriate action to pass the Internet Tax Freedom Act which encouraged the growth and adoption of the Internet by exempting Internet access from State and local taxation and by protecting e-commerce transactions from multiple or discriminatory taxes. As my colleagues know, since then the Internet has grown from a tool used by a relatively small percentage of our population to a broadly utilized communications, information, entertainment, and commercial medium as well as an important vehicle for political participation. To keep promoting the growth of the Internet, many of my colleagues have made efforts to extend the Internet tax moratorium. Regrettably these efforts have stalled. Six months ago, we left unfinished business before the Senate. At the time, many of us were prepared to vote to extend the Internet tax moratorium. Unfortunately, a vote never took place because of disagreement over what components of Internet access should be free from taxation and how long the moratorium should last. As a result, the moratorium expired and State and local governments are now free to impose new taxes on the Internet. Today, we return to the consideration of S. 150, the Internet Tax Nondiscrimination Act, which would permanently extend the moratorium on the taxation of Internet access. After 10 months of negotiations, there is still no clear consensus in the Senate over what types of Internet access services should be tax free, nor is there any clear consensus over how long the moratorium should last. One thing is clear, though: There is broad agreement that the Internet tax moratorium should be reinstated. It is also clear that the Members who have been involved in this long negotiation process have listened closely to the concerns of State and local governments. For example, to address issues raised by opponents of S. 150, Senators Allen, Wyden, Sununu, Ensign, Warner, Smith, Leahy, Grassley, Baucus, Hatch, Boxer, Chambliss, Lincoln and I--a strongly bipartisan effort--offered a substitute amendment that would have narrowed the scope of the moratorium and clarified its effects on State and local revenues. This time around, we will go a significant step further by offering a compromise amendment written to address the core concerns expressed by State and local governments over the extension of the Internet tax moratorium. Before I get into the details of the amendment, let me be crystal clear about one thing: This compromise will not make everyone 100 percent happy. There are several aspects that will accommodate State and local governments, but the legislation also contains components that are favored by industry and ultimately benefit consumers. So there continue to be disagreements. The Members who sit on the edges of this debate bell curve will continue to oppose anything that falls short of their desired outcome. However, any practical person who reads the amendment objectively will have to agree. What we are offering constitutes a reasonable middle ground in the debate between those who want to make the Internet tax moratorium permanent and broad and those who want to make the moratorium brief and narrow. Throughout the negotiation process, State and local groups asked for a temporary extension to the Internet tax moratorium. Specifically, they have asked for a 2-year extension of the moratorium. The substitute amendment would extend the moratorium for 4 years from November 1, 2003. This alone is an extraordinary concession, especially considering the fact that the House of Representatives, in a strongly bipartisan effort, passed a permanent extension of the moratorium last year, and there remains significant support in the Senate for such a measure. President Bush has expressed his strong support for a permanent extension of the moratorium. Nevertheless, I hope my colleagues who favor a permanent moratorium will support this proposal in an effort to reach an acceptable compromise between industry and consumers and State and local governments. Another concern we have heard from State and local governments is that extending the Internet tax moratorium would somehow impact traditional telephone services. That certainly was never the intent of the original legislation, as has been made clear by the Commerce Committee's report accompanying the bill. The report reads: The modified definition [of Internet access] would not affect the taxability of voice telephony over the public switched telephone network (so-called ``plain old telephone service'' or ``POTS''). The matter is further clarified in this amendment. Simply put, this legislation would not impact in any way, shape, or form the revenue generated by State and local governments from traditional phone services. Again, a concern of State and local governments was accommodated to the full satisfaction of State and local authorities. State and local governments have also expressed worry that this bill would hamper their ability to tax voice services and other services that run over the Internet. For example, the National Governors Association has stated that one of its main concerns is that this legislation will prohibit states and localities from taxing telephone services as they migrate to the Internet. The Senators from Tennessee and Ohio today have also emphasized that this is one of their three core concerns in this debate. In an attempt to respond to the concern about the migration of telephone services to the Internet, Senators Allen and Alexander agreed in principle to carve voice over Internet Protocol, VOIP, telephon services out of the scope of the Internet tax moratorium. Unfortunately, their negotiations over the precise definition of VOIP telephone services were not successful. The amendment that I offer bridges the gap in this matter by setting forth a broad definition of services--including voice services--that are provided over the Internet that would not be considered Internet access and would therefore not be subject to the Internet tax moratorium. My compromise would further narrow the definition of Internet access, while ensuring that services incidental to Internet access--such as e-mail and instant messaging--would remain tax-free. Once again, this provision fully addresses the concerns of state and local governments. Mr. President, the list of compromises goes on and on. For example, my amendment would clarify that the Internet tax moratorium does not apply to nontransactional taxes such as taxes on net income, net worth, or property value. My amendment would clarify that otherwise taxable services would not become tax-free solely because they are offered as a package with Internet access. The amendment would grandfather for three years from November 1, 2003, the States that were taxing Internet access in October 1998. My amendment would grandfather for two years from November 1, 2003, the States that began to tax--according to many, improperly--Internet access after October 1998. The amendment would ensure that universal service would not be affected by the moratorium. And finally, my amendment would ensure that 911 and E-911 services would not be affected by the moratorium. Each of the compromise provisions is included in direct response to State and local government concerns about S. 150. And so my amendment will ensure that the $20 billion in telecommunications taxes that is collected annually by State and local governments will largely remain protected. Any statement to the contrary would be patently false. Mr. President, my amendment goes a long way to meeting the concerns of the States and localities. However, before those on the other side of this debate start to protest, I would remind them that what I am proposing is truly a compromise between the interests of State and local governments on the one side and industry and consumers on the other. This legislation therefore doesn't--and, as a compromise, can't--adopt the State and local governments' position wholesale. For that reason, the legislation would make Internet access 100 percent tax-free for all States in its fourth year. Some question whether it's wise for Congress to make Internet access tax free, but this body has a long history of giving tax incentives and other economic support to industries and commercial activities that we believe help our society. The Internet is clearly a technology that also merits strongly the support of Government, as it is a source of and vehicle for significant economic benefits to our country. Contrary to statements that have been made on the floor, yes, the railroads were assisted; yes, highways are assisted; yes, our airlines continue to be subsidized; and yes, we need to assist this new incredible technology that is changing America and the world. In the case of the Internet tax moratorium, however, we are not talking about subsidies. We are merely talking about a national policy of taking a hands-off approach to the continued growth of the Internet. The Internet is now accessed at home by 75 percent of the population-- an estimated 204 million people in the U.S.--up from 64 percent in 2002, and 26 percent in 1998 when Congress rightly decided to implement the ban on taxes on Internet access. That's an impressive 3 times what the Internet use rate was just over 5 years ago. And though the Internet tax moratorium has obviously had its intended effect of contributing to the growth of the Internet, our job is not yet done. Today, the Internet offers the promise of broadband access services, which provide higher bandwidth connections that permit faster data transmissions and thus facilitate and enhance services such as streaming audio and video. Nevertheless, many of the households with Internet access have only basic dial-up access, and have not migrated to broadband services. In fact, the Pew Internet Project estimates that only 24 percent of American households have broadband access, while most homes still connect through dial-up modem connections. In fact, the United States is falling behind many other developed countries such as Japan, South Korea, and Canada in our deployment of broadband services--and many experts even call the broadband services that we have ``broadband on training wheels'' because they do not provide the speeds provided by the broadband networks of other nations. Clearly, there remains a strong need to ensure that taxes on Internet access will not pose a hurdle to the continued adoption of basic dial- up access or to the migration from basic Internet access to broadband Internet access. Keeping the Internet tax-free translates into lower costs for consumers, and lower costs give our citizens freer access to important online services like telemedicine and e-learning.

Mr. McCAIN. Mr. President, I thank the Senator from Mississippi. I thank him for his involvement in this issue. As everyone knows, he is a genius at working his way through difficult and thorny issues. I appreciate his involvement in seeking to try to resolve differences between the two sides--at least to a point where we can move forward. I look forward to his continued assistance as we address this issue.

Mr. McCAIN. Madam President, I thank all of my colleagues for their vote. It is certainly a signal that a majority of Senators want to move forward and address this issue. I believe many believe they would like to get involved as well. If the opponents are going to talk for a while, after that is over, since we are in 30 hours of postcloture debate, if it is sought to be used, it is my intention to propose tomorrow the amendment which I described earlier. I hope we can then move forward with amendments and debate and votes. I yield the floor.

Mr. McCAIN. I am glad to.

Mr. McCAIN. Mr. President, may I ask the Senator from California if she would like to take 5 minutes. I know she has been patiently waiting.