Ron Wyden

Mr. WYDEN

Mr. WYDEN. I am happy to yield.

Mr. WYDEN. Mr. President, with respect to the architecture the Senator from North Dakota has described, people have already paid once. So this question of what is going to be done with respect to various aspects of the architecture is an interesting discussion for us to be pursuing in the Senate, and all of these various components and pieces of equipment, but people have already paid once. And with respect to Internet access, about which we have been concerned, it is almost like a carton of milk: You paid for the carton of milk once; you should not pay again if you are going to pour it on your cereal or something else. The Senator from North Dakota has raised a question about funding for what is called the backbone of the communications system. But at the end of the day, the bottom line is, people have already paid once. What we want to do with this legislation is to say, on the question of Internet access, nothing about sales taxes and the like. The Senator from North Dakota knows once we get over this, we will have the next issue, which is the question of the streamlining of sales taxes. But with respect to the architecture the Senator from North Dakota has raised, the consumer has already paid once with respect to Internet access.

Mr. WYDEN. Of course.

Mr. WYDEN. First, Mr. President, I say to the Senator from North Dakota I very much support what the Senator is trying to do in terms of procedure. It is time to vote. As the Senator has said, whether 15 minutes or half an hour, people ought to get on to the task of voting. After 8 years of discussing this eye-glazing subject of Internet taxes, we always cringe at the prospect of wading once more into this incredibly arcane area, so I will take a few minutes to talk about the definitions question with respect to Internet access. This is clearly the big hangup. The Senator from North Dakota is here. He has been exceptionally cooperative, even though we have had different views on the subject over the last 8 years. I will take a couple of minutes to describe what the central concerns are with respect to working out the definition of the Internet access. The concern on my part is, as the Alexander language is written today, in effect it will hide taxes on Internet access, No. 1; and, No. 2, it opens the door to multiple State and city taxes on the individual component parts the American people think of as Internet access. No Senator wants to do this. There is no Member of the Senate who gets up in the morning and says, I want to have thousands of new Internet taxes. However, the way the definition of the Alexander language is written today, it will, in fact, open up the opportunity to tax wireless Blackberry services, spam-filtering systems, Web hosting, and the like. I will take a minute to touch on both of these concepts, the question of hiding the Internet taxes and the question of opening the entire Net to taxing the individual components. We will have to work through those two in order to do as the Senator from North Dakota has suggested--get this done as we have done on several occasions. With respect to the hiding of taxes, it comes in the overall bill the consumer receives. We already see this in jurisdictions, for example, that tax DSL. Right now, I believe we are discriminating against the future. Right now cabling, in effect, gets a free ride. DSL gets taxed in a number of jurisdictions. This has special impact for my friend from North Dakota and me because DSL, of course, is the way we will get broadband into rural areas. The way that tax shows up, of course, is in the overall bill. It is just in the overall bill. So unless we get equity for DSL relative to cable, what is going to happen in America is the Internet tax will be hidden in the overall kind of bill, and the consumer will just see, in Oregon and North Dakota and everywhere else, a higher bill for broadband than they would see right now for cable, and that would be continued. So we absolutely, in the area of definitions, have to have technological neutrality. That is what we began with 8 years ago when we said everything that happens online is the same thing that is going to happen offline. To get the technological neutrality this time, we have to say that DSL does not get hammered and cable gets a free ride. Here is an example. I want to offer this to my colleagues because I think it also highlights again our concern with respect to the definitions in the Alexander language and how it opens the opportunity for additional taxes. The Alexander language stipulates there be no tax on services used to ``connect the purchaser of Internet access to the Internet access provider.'' But nowhere in that language is the term ``connect'' defined. Does it mean that Internet access ends where a computer hooks into the phoneline? Does it mean where the phoneline reaches the central office or where the line makes its first point of presence on the Net? So the term ``connect'' without any definition is simply uncharted territory, and it would again, in my view, allow States and cities to tax Internet access, again, through a kind of hidden approach that is going to keep the consumer from doing what I and the Senator from North Dakota have always tried to do in the consumer protection area: give consumers access to information and make sure there is truth in billing so they can actually choose between various technologies that best assist them. With respect to the question of the Alexander legislation opening up the door to multiple State and city taxes on the individual components people think of as Internet access, we now have 391 separate taxes on telecommunications administered in 10,000 jurisdictions. The fact is, States tax different technology platforms for Internet access in different ways. So we have a cable modem platform, we have a traditional landline, we have a wireless dial-up in DSL, and, of course, satellites. The Alexander proposal says that DSL is not Internet access but a telecommunications service, and, in effect, we would then see DSL further taxed. I think that would eliminate the competitive playing field that has always been the point of this exercise for now 8 years. To me, to just force people, particularly in rural areas--in the rural areas I care about and the Senator from North Dakota cares about--to face this discrimination against broadband is particularly troubling. So I know this is exceptionally complicated material, and Senators have been barraged by all sides on this over the last few days. I have tried to outline how the revenue projections we have discussed over the last 8 years, with the States and localities saying they were going to lose vast amounts of revenue, have not come true. I have talked about how this is an effort, in this iteration of the Internet tax freedom bill, to essentially update our original law with respect to technology. But it is, as the Senator from North Dakota has correctly said, a question of definitions. So this concept, as I have outlined with respect to the Alexander language, in terms of how you would connect the purchaser of Internet access--without that being defined means you can expose jurisdictions to multiple forms of taxation. Then there is the question of hiding the Internet tax, which is what the Alexander proposal will do, because companies do not eat these costs; the companies end up passing them to the consumer. So what will happen, all over this country--in North Dakota and Oregon and across the country--is that people who order broadband, who essentially look to DSL for their broadband services, will just get a higher bill. They will get a higher bill than people who order broadband through cable. That is regrettable. It certainly violates the principle of technological neutrality. I repeat, I think the Senator from North Dakota has been very constructive on this issue. We have gone through this water torture exercise now since late 1996, and I am very much prepared to do this once again. But clearly, with respect to these definitions, we have some major issues that have to be worked through. I also point out, as the chairman of the Commerce Committee did yesterday and Senator Allen has as well, in 10 separate areas, as we worked even for the managers' amendment, we have made efforts to compromise on the definitions question. We have exempted a whole host of areas all of the sponsors felt should not be subjected to taxation. With respect particularly to voice over, the exciting area where phone calls are going to be made over the Internet, we have made it clear in this legislation, in the substitute the chairman of the Commerce Committee is offering, that we would not change the status quo. I have heard from California and others that somehow this is going to dramatically change the question of taxation for phone calls over the Internet. The McCain language clearly stipulates--clearly stipulates-- that in that area California and others have been so concerned about, there are no changes. So I look forward to working with the Senator from North Dakota. I commend him for taking yet another crack, as he has done for 8 years with me, on this subject that I have been comparing to sort of prolonged root canal work. But we are going to get this done, and hopefully it will be this week.

Mr. WYDEN

Mr. WYDEN. Madam President, as we move to conclusion of the debate on the question of Internet taxes and votes tomorrow, as has happened so often over the last 8 years that we have dealt with this issue, a lot of Senators have asked for some examples of how all this would work because it is obviously an extraordinarily complicated issue, and the terminology is pretty dense. What I wanted to do was give Senators a sense of what we are talking about. Of course, under the McCain proposal, Senator Allen and I would simply say, with respect to Internet access, it is tax free. You have already paid for it. It is like buying a carton of milk. You have already paid for it once. You should not have to pay for it again when you pour it on your cereal. That is essentially what the McCain compromise would do. The proposal offered by the Senator from Tennessee takes a very different kind of tack. I wanted to give a very specific example of how it would work and why I am opposed to what he has been advocating. The Senator from Tennessee, in his proposal, stipulates that there would be no taxes on services used ``to connect a purchaser of Internet access to the Internet access provider.'' That certainly sounds like a laudable goal and something everyone should support. But because the Senator from Tennessee nowhere defines what the word ``connect'' means, I am of the view that proposal alone means that scores of jurisdictions in our country would be able to subject a simple message, sent by a Blackberry via DSL, to scores of taxes. I want to walk through exactly why I believe that. Let us say, for purposes of discussing an example, you send a Blackberry message via DSL from Providence, RI, to Portland, OR. You type your message in and you hit send. The first connection--again, I am citing that because it is the language of the Alexander proposal--is with a cell tower in Providence. This would then be connected to a Verizon local phone line somewhere in the Northeast. Then it would be connected to a switch, again somewhere on the east coast. The message at that point is connected to AT&T at a network in one of their many facilities on the east coast. AT&T would then shoot the message across scores of States and connect it at a Qwest switch in Portland, in my home State. That Qwest switch then connects the message to a cell tower in Portland. And then, finally, it connects it to the friend in Portland. The way that message is sent could involve as many as 100 different connections--the concept that is not defined in the Alexander proposal. But depending on how the word ``connect'' is defined--and it is not laid out anywhere in the proposal of the Senator from Tennessee--you could have hundreds of jurisdictions imposing taxes on the one message I have just described as being sent on a Blackberry from Providence, RI, to Portland, OR. The reason why that is the case is the Alexander proposal states no taxes would be applied on services used to connect a purchaser of Internet to the Internet access provider. But in the example I just gave, what you would have is scores of jurisdictions across the country saying they are not the exempted connection. They would say they are not the exempted connection, and then they would be off to the races, in terms of imposing these special taxes. So we are going to have a chance, I think tomorrow, to extend this debate a bit longer. I think people are going to be pretty close to ecstasy to have this debate wrap up, given how long it has gone. But I want to take a minute and try to recap what I think are the central kinds of questions. From the very beginning, those who have been involved in this effort have tried to promote technological neutrality. We have come back again and again to say all we would like is to make sure that what happens in the offline world is applicable to the online world. We have said it does not make sense today to discriminate against the future, which is broadband delivered through DSL. Certainly, that would be the case if cable gets a free ride and DSL gets hammered. I am of the view the message you get today under the Alexander proposal--instead of that message, ``you've got mail,'' the message will be ``you've got special taxes,'' and you will have those special taxes because terms like the one I have described this afternoon are not defined. As I have talked about in the last couple of days, we have pointed out the revenue estimates, which are always so dire in terms of lost revenue on the part of the States and localities, and time after time-- and we have debated this in the last 8 years--those revenue projections have not come to pass. I know Senators and their staffs right now are being bombarded by some officials from State and local governments, saying they are going to lose enormous amounts of money, and this is going to drain their revenue base, and it will have calamitous financial ramifications. But as you listen to those projections--and I know they are pouring into Senators' offices--we have heard those arguments again and again, and they have not come to pass. I point out, for example--and I will quote--in 1997, the National Governors Association said the Internet Tax Freedom Act ``would cause the virtual collapse of the State and local revenue base.'' The chairman of the Commerce Committee worked with myself and Senator Stevens and others, and we passed the legislation. The Governors said that revenue base was going to collapse. But in the next year, local and State tax revenues were up $7.2 billion. That is one example from over the last 8 years and the journey we have had in the debate over this legislation. The same thing happened in 2001. Those who opposed our legislation said: The growth of e-commerce represents a significant threat to State and local tax revenues and they might lose tax revenue in the neighborhood of $20 billion in 2003. According to the National Association of State Budget Officers, State sales tax collections rose from $134.5 billion in 2001 to $160 billion in 2003, an increase of more than $25 billion in 2 years. We heard again and again this would be devastating to mom-and-pop stores on Main Streets, and pretty much the Main Streets of Maine and Oregon would shrivel up because of the special fix that was provided for sales online. Over the entire period this law has been on the books, the number of sales online has gone up something like 1.5 percent. It has been a tiny fraction of our economy. The fact is, the major development over the 8 years we have had this legislation on the books is we have essentially seen most of our businesses go to ``bricks and clicks.'' If you walk on the streets of Maine, or the streets of Oregon, our smallest businesses so often are able to expand their sales because they have a significant online component, and people from all over the world can shop at a small store in Maine or Oregon. I think as the Chair will note, these small stores don't have big advertising budgets. They cannot send people all over the world to market their products. Because of the Internet, they are in a position to have a global marketplace. So major development in this field, rather than wiping out Main Street stores, has helped them. Senator Leahy brought in a small merchant from Vermont who talked to us specifically about the extraordinary gains they have been able to make as a result of the convenience provided by Internet shopping, which will certainly be harmed if the Alexander legislation were to pass. I imagine we will continue to pummel this subject a bit more tomorrow. Having been involved in this issue for 8 years, I think it is fair to say the decision the Senate makes on this subject will say a whole lot about the future of the Internet. We learned this morning, as the chairman of the Commerce Committee pointed out, we are already lagging behind in terms of broadband investment. That is the wave of the future. I think small towns in Maine and in Oregon--when we talk about access, for example, to the Net and new technology, it is not going to come about through cable, because cable is going to be very reluctant to make those major investments in small towns, such as those that the distinguished Presiding Officer represents, and my small towns. It is going to come about essentially through broadband, delivered via DSL, and the fact is, today, DSL in many jurisdictions is singled out for special and discriminatory treatment. If we were to not update the law, that would be a trend that would be sure to accelerate. So I think this is going to be an extremely important vote tomorrow. This is a law that has worked. I will wrap up with this one comment I have mentioned to colleagues, as we have talked about this over the years. I have not found a single jurisdiction anywhere that can point to an example of how they have been hurt by their inability to discriminate against the Internet. That is all we have sought to do over the last 7 years. We said treat the Internet as you treat the offline world. When we started, that was not the case. If you bought a paper the traditional way in a number of jurisdictions, you would pay no taxes. If you bought the online edition of that very same paper, you would pay a tax. That was not technologically neutral. So we passed the first Internet tax freedom bill to deal with that kind of example. For over more than 5 years, this is a law that has worked. Under the McCain compromise that we will vote on tomorrow, we would simply be updating that law to incorporate the kinds of technologies that evolved over the last few years. I wanted to make sure tonight that people understood with a specific example of a message that would go from Providence, RI, to Portland, OR, how the vagueness in terms of the definitions in the Alexander legislation would, in my view, subject a simple message sent by BlackBerry via DSL to scores of new taxes. I cannot believe any Senator would want that to happen, and that is why I am hopeful we will get support for the McCain compromise and be able to move forward to final passage of the legislation. I yield the floor, and I suggest the absence of a quorum.

Mr. WYDEN

Mr. WYDEN. I want to make sure I understand this. Cable already pays a franchise fee when the streets are torn up in order to offer cable. My understanding of this amendment is that now there would be a new special tax for right-of-way for the very same service. In effect, my reading of this is that cable would be taxed twice. They already get hit with a franchise fee and now your right-of-way provision would allow for a new special fee, which troubles me, again, because it has been our point all along through Internet access that you have already paid once. Could my colleague from Texas clarify? Otherwise, I would have to strongly oppose this.

Mr. WYDEN. Will my colleague yield?

Mr. WYDEN

Mr. WYDEN. Mr. President, Chairman McCain, I and others who have worked on this effort to try to find common ground thought it was important early on to begin efforts to find some areas of agreement that would bring the sides together. Let me outline 10 particular areas of compromise we have essentially offered in the managers' proposal. I, for example, strongly believe there should be a permanent ban on multiple and discriminatory taxes on Internet access. But in the name of trying to find a compromise, now we have a 4-year moratorium. We have a 3-year phaseout of the grandfather clause. This was something that was important to the States. We have a 2-year grandfather of taxes on DSL. Again, as I talked earlier, that is the technology of the future. A fourth compromise reflects the concern about voiceover. What we have done is clarified that our legislation is not going to affect taxation of voice communication services utilizing the voiceover Internet protocol. We have clarified the taxes that would be covered, addressed a number of concerns the States had with respect to income and property taxes. We want to make sure those taxes, those opportunities for State and local revenue are protected. We clarified the House language on DSL which was something State and local groups complained was too open-ended and vague. With respect to the bundling of services, States and localities asked for a clear and uniform accounting rule. We protected universal services. We protected e-911 taxes, and we also made clear nontax regulatory powers would not be affected. I thank the chairman for this time. I only wanted the Senate to know that as you tried to bring both sides together, there were 10 specific areas of compromise that were offered. I thank him for the time.

Mr. WYDEN. Mr. President, again, I want to make it clear to the Senator from Tennessee, I am anxious to work with him. But what we have seen, essentially, in this iteration of the debate, is a dusting off of the same arguments we have heard on the floor of the Senate in the past, that somehow this is going to result in extraordinary losses of revenue. For example, in 1997, we were told by a number of the organizations at the State and local level that this was going to produce massive losses of revenue. In fact, the exact quote is: Our efforts, the efforts of Senator McCain and I, and others, in 1997, would lead to a collapse of the State and local revenue system. The very next year, the year after we passed our first moratorium on multiple and discriminatory Internet taxes, we saw revenue go up $7 billion. So we have had essentially all of these dire projections, these calamitous projections year after year--and I put them all in the Record--and they have not come to pass. The reason they have not come to pass is that nobody is talking about the Internet getting a free ride. All we have said, from the very beginning, is that under this legislation you have to treat the online world like you treat the offline world. When I came to the floor of the Senate with the distinguished chairman of the Commerce Committee on this more than 7 years ago--and folks probably found this subject even more difficult then than they do now; I know that is hard to believe--we said: Look, if you buy the newspaper--essentially ``snail mail''--you are not paying any taxes, but if you buy the newspaper in the interactive edition, you pay a tax. That was discriminatory. All we have tried to do over the last 7 years is essentially keep that principle in place and allow it to evolve with the technology. So for 7 years this has been about technology neutrality and dealing with these questions of State and local finance. The States have not lost money as a result of our making sure that you are not going to see multiple and discriminatory taxes on Internet access. Mr. President, I yield the floor.

Mr. WYDEN. What concerns me is that both the 1998 definition and the proposal of the Senator from Tennessee essentially discriminates against the future because the future is about broadband, particularly for rural areas, for job creation, and highly skilled jobs. If you use the 1998 definition, or essentially the Senator's proposal for just Internet access--I emphasis that is all we are talking about, Internet access--what you will have is a situation where folks could get Internet access through cable and those folks end up essentially getting a free ride. But if you get the Internet access and future DSL, you are going to get taxed. That is why Senator McCain and I and others would like to essentially continue the 7-year path we have had which is to promote technological neutrality--not to advantage one technology against another. On the question of Internet access, which is what the President talked about yesterday where he said he doesn't want to see Internet access get taxed, that is what is in the McCain proposal. That is what I was trying to do. Unfortunately, that is not in the Senator's proposal or in the 1998 definition. What will happen is this country will have the technology policy that discriminates against the future and discriminates against the field in which it is going to create highly skilled jobs. By the way, cable isn't going to be serving those rural areas. It is going to be broadband and DSL which serves them. I very much appreciate the Senator from Arizona yielding me this time. We have clarified an important concept. Both in the 1998 definition that the Senator from Tennessee said he would be for or his compromise, in my view, would have the Senate taking a position with respect to the future of the Internet and with respect to the future of technology that would not be in the public interest. I thank my colleague from Arizona for yielding me the time. I wrap up by way of saying I am going to continue to work with the Senator from Tennessee who has been very thoughtful and generous with his time. We can find a common ground. I yield the floor.

Mr. WYDEN. I believe this time should be taken from the time allocated to Chairman McCain.

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

Mr. WYDEN. Mr. President, I want to ask the Senator a question because I have the sense that the Senator from Tennessee thinks we ought to just use the 1998 definition of Internet access. Is that correct? Is that what the Senator from Tennessee is saying?

Mr. WYDEN. I appreciate the Senator yielding. He has been very gracious.

Mr. WYDEN. Mr. President, will the Senator yield?

Mr. WYDEN. Mr. President, will the Senator yield?

Mr. WYDEN

Mr. WYDEN. I agree fully with the Senator from Nevada. In fact, I submitted a resolution urging the President do that. In fact, my resolution mirrors the resolution that was drafted by our former colleagues, Spence Abraham and John Ashcroft, that passed in 2000 when President Clinton was faced with the same kind of situation. I am very hopeful that the Senate will take up that resolution and do exactly as the Senator from Nevada has said. I also point out that it was very striking, even before this debate about Mr. Woodward's book, that the Saudi Foreign Minister said recently when they cut production--and he was quoted on the news services saying that he was not even contacted by the Bush administration. He heard that the Bush administration was disappointed from the press, but he was not even contacted by the Bush administration. If ever there were an administration that had earned some chips with the Saudis, given all that our country has done, this is an administration that has done so. I think the points made by the Senator from Nevada are extremely important. Mr. President, I believe my time has expired. I yield the floor.

Mr. WYDEN. The Senator from Nevada is correct. The fact is the Federal Trade Commission is AWOL on this issue. It has sent letters to all of us in the West saying they are concerned about the issue, but they have not been aggressive in standing up for the consumer. I pointed out today that the oil companies ought to be rewarded financially when they take actions that benefit the consumer, not when they gouge the consumer. The consumers today are, in effect, getting fleeced from this unfair subsidy that is in the Tax Code when a profitable refinery goes down. The Senator from Nevada is absolutely correct. The Federal Trade Commission, in my view, is just going through the motions. I think they hope somehow this issue is going to pass. All of us in the West--a part of the country where there is a very tight supply situation--understand this problem is not going away. I intend to join with the Senator from Nevada in trying to put the heat on the Federal Trade Commission.

Mr. WYDEN. I will be happy to yield.

Mr. WYDEN. Mr. President, most American companies make their profit by selling the best product at the best price. But too often in the oil industry it just doesn't seem to work that way. For example, oil companies can even get a subsidy from the Federal taxpayers for shutting down a profitable oil refinery by deducting the cost of that shutdown from their taxes. I come to the floor today because I hope Congress will put a stop to the perverse incentives that reward oil companies when they reduce the supply of gasoline and gouge our consumers at the pump. In my view, the Tax Code simply should not reward companies that shut down a refinery to reduce the supply and drive up the price of gasoline. My own view is that Congress ought to be providing incentives to oil companies that increase their production, as long as they comply with the applicable environmental law. I think we are all pleased when we see corporate profits go up, and we are all pleased when the stocks of those companies go up as well. But what I am troubled about with respect to what is going on in the oil industry--and we are going to see profits up again this week, and I gather some have already been announced--is that too often our consumers are getting hosed. I have been traveling about Oregon over the last few weeks. I have watched as gasoline prices hit over $2 per gallon in some towns. In Eugene, Springfield, Medford, and Ashland--a number of our communities--the average price has been $2.06 per gallon. Each penny of that cost is coming out of the pockets of working Oregonians. It is, of course, helping to increase oil company profits. What I am troubled about is that the taxpayers at the same time are subsidizing practices that are detrimental to their interests. There has clearly been a pattern of extraordinary profits in the oil industry. A prime example was ExxonMobil, which last year announced an all-time record earnings of $21.5 billion. That is not just the highest earnings ever recorded by an oil company; that is the highest by any company in history. Again, I want it understood that I like to see our companies make profits. I like it when their stock prices are high. What I don't like is when the consumer has to subsidize anti-competitive practices that are detrimental to their interests. That has certainly been the case with respect to refineries, when an oil company gets an actual subsidy from the Federal taxpayers for shutting down a profitable refinery by deducting the cost of the shutdown from their taxes. This matter has special implications out in the West. I see my friend from Nevada on the floor. He made an excellent presentation with respect to how his State is affected by gasoline prices. All of us in the West are going to be hit, and hit very hard, by Shell's decision to close its Bakersfield refinery. In that instance, there seems to be no evidence that Shell has gone out and aggressively tried to find a buyer. Independent analysts have made it clear there is a substantial amount of oil in the area. I will tell you, for those of us in the West, looking at that refinery closure in Bakersfield, that deal smells. It just doesn't add up to have a profitable refinery going down at a time when the company doesn't look as if it is moving aggressively to find a buyer. There is oil in the area and, as I have pointed out, the taxpayer subsidizes the closures of these profitable refineries. Yet the Federal Trade Commission has refused to act. I hope to be on the floor very shortly with a bipartisan effort to address the anti-consumer practices. At a minimum, let us not have the taxpayers of America subsidizing anti-competitive practices in the oil industry, such as the shutdown of profitable refineries.

Mr. WYDEN

Mr. WYDEN. I thank my colleague for an excellent presentation. Is it not correct that in the late 1990s we heard the same kind of arguments we are hearing today, that the States and localities would be bereft of revenue, and there would be financial calamity? Is it not correct in 1997, 1998, the National Governors Association said the State and local revenue system would collapse, and that very next year revenue went up something like $7 billion? Was that not the history all through this debate over the last 6 or 7 years, that we have had the projections from State and local officials that there would be disastrous financial consequences, and then you and I and Senator Sununu would look a short time later, and every single time revenue went up; is that correct?

Mr. WYDEN. Would the distinguished Senator from Virginia yield for a question?

Mr. WYDEN

Mr. WYDEN. Mr. President, this week the Senate will spend most of its time on the question of taxation of the Internet. Having been the principal sponsor of the legislation on this subject in the Senate twice, I would be the first to say this subject inherently is about as interesting as prolonged root canal work. But at the same time, I think it is fair to say the decisions the Senate makes with respect to this subject will say a whole lot about the future of the Internet. For example, the decisions will determine, to some extent, whether e- mail and spam filters and Google searches and Web sites and instant messaging are singled out for discriminatory tactics. The Senate is going to have to make some decisions about whether Internet access through cable is tax free, but consumers who choose DSL Internet access would get taxed. I wanted to take just a few minutes this afternoon to go through some of the history with respect to this issue, and particularly suggest that I think the key, as the Senate takes up this subject, is to keep in mind two principles that have been important to me. First has been the question of technological neutrality. I think it is absolutely key that as the Senate looks to make technology a policy that we ensure there is fair treatment and true competition among all of the various technologies that drive decisions in this field. I say to the President pro tempore of the Senate, I can recall when we were looking at this legislation initially, and the Senator from Alaska was enormously helpful to me. What we found out was, for example, early on, if you bought the Wall Street Journal in some States and you got the interactive edition, you paid a big tax, but if you bought it the traditional way, through snail mail, for example, there was no tax. That, it seemed to me, was not technologically neutral. That did not ensure we would have competition in the greatest possible way to benefit the consumer, and that was very much at the heart of my concern as I authored in the Senate the first internet tax freedom bill. The second concern that was foremost in my mind was the question of how this would affect our States and localities with respect to revenue. At that time, we had a number of Governors, mayors, county officials, and others expressing tremendous concern with respect to revenue. I have always tried to take those concerns very seriously. That is why I wanted to outline some of what was said during the years when those early bills were debated because I think we are going to have a repeat of those discussions. To some extent, some of the State and local officials who raised concerns about the revenue impact of what we did during the first two iterations of the internet tax freedom bill have dusted off the arguments and, in effect, brought them to the Senate again. To go through some of the history, if I might, back in 1997, the National Governors Association, an organization I tremendously respect, said the Internet Tax Freedom Act would ``cause the virtual collapse of the State and local revenue base.'' But the record shows that the following year, State and local sales tax revenues were up $7.2 billion. Let me repeat that. We were told in 1997 that we would have a virtual collapse of the State and local revenue base. The following year, we saw a significant increase in local and State tax revenues. In 2001, when we dealt with the issue again, opponents said: The growth of e-commerce represents a significant threat to State and local tax revenues and they might lose tax revenue in the neighborhood of $20 billion in 2003. Once again, the record shows otherwise. According to the National Association of State Budget Officers, State sales tax collections rose from $134.5 billion in 2001 to $160.4 billion in 2003, an increase of more than $15 billion in just 2 years. We saw this pattern continue in 1998 as well when the National League of Cities said: A tax-free Internet would place Main Street retailers at competitive disadvantage and would doom the sales tax. But e-commerce still only represented 1.6 percent of total retail sales in 2003, while brick-and-mortar retail sales grew from $2.6 trillion in 1998 to $3.4 trillion in 2003, according to the Commerce Department. In three instances with respect to projections by the National Governors Association, the National Association of State Budget Officers, and the National League of Cities, as the Senate dealt with the two iterations of the tax freedom bill, when this body was told that tremendous amounts of revenue would be lost, in each instance, as I have just documented this afternoon, actual revenues collected went up rather than revenues going down. The reason I have taken the time to go through that is I am sure during the course of this week, we are going to hear the same kinds of projections. We are going to see State and local officials come and say if the Senate reauthorizes this law that has been reauthorized twice, pretty much Western civilization is going to come to an end. They are going to say they are going to be in dire straits with respect to the funds they are going to need for critical services and that they will find all form of financial calamity. I am very interested in addressing those concerns. I have great empathy for the challenge of funding State and local services, but I just want the Senate to know, and why I am focusing on this point at the start of the debate, that again and again over the last 7 years, as this debate has gone forward, the Senate has been given these projections about calamitous losses to our States and localities if the internet tax freedom bill is passed, and as I have pointed out, in instance after instance, revenue has gone up rather than down. I think it is fair to say that all of these technologies, in the issue of whether someone gets internet access over DSL or whether they obtain it through cable, are complicated. That is why I, Senator Allen, Senator McCain, and others who have worked on this issue have tried to spend time talking to all concerns. Frankly, we have made a number of changes in an effort to try to accommodate the issues brought up by those who do not share our view. For example, we have in several instances tightened definitions of Internet access that have been raised. We have agreed to a request for new statutory language on what is called bundling, where various technologies are bundled together. We have added language to protect a host of taxes for States and localities, such as property and income taxes that have never been affected by the original legislation, but because there was concern on the part of States and localities, we wanted to drive home our intent not to have these areas taxed. We have also agreed to a request for provisions to protect universal service, regulatory proceedings, and we also agreed to deal with some requests from States for what is called grandfathering so as to protect existing sources of revenue. At the end of the day, we want to make sure that consumers who now hear the message ``You've got mail'' don't get a message, ``You've got special taxes.'' That is what this issue has always been about. It is clear from the history of this legislation that we do not want the Internet to get preferential treatment, nor do we want it singled out for discriminatory treatment. That is what I sought to do when we began this debate late in 1996. I pointed out, for example, how a newspaper that was purchased online would be taxed, but a newspaper that was purchased in the traditional way would not be taxed. That is not technological neutrality. That is what the sponsors of this legislation are seeking to protect. The alternative that several of our colleagues are interested in would take a very different approach. That alternative would essentially break up Internet access into individual components so that if they chose to do so, States and localities could tax each one of those components. Under that, for example, Internet consumers could be subjected to close to 400 separate telecommunications taxes, administered by something like 10,000 different jurisdictions. In effect, each piece of e-mail, the filtering systems that families use to block pornography and spam and each Web site, each blackberry message conceivable is exposed to tax by scores of jurisdictions. Each town that chooses to do so could tax the e-mail flowing through its phone or cable lines even if the e-mail was not being sent from or to someone in the jurisdiction. I think it is fair to say if even a modest portion of the jurisdictions that could impose these taxes chose to do so, we would be talking about a massive increase in the cost of Internet access to every consumer in America. What I think this is really all about is that the States and localities essentially see the Internet as the last cash cow in the pasture. In effect, they have been barred by the courts from going after phone sales. They have been barred by the courts from going after mail order. So now along comes the Internet, and the Internet is being seen as an enormous cash opportunity. The fact is, Internet sales in 2003 are still only 1.6 percent of total retail sales. They grew at a far more modest rate than brick and mortar sales grew over the last few years, but that is not even the central point. All of us understand the value of the Internet as a tool for businesses and communication and to improve health care and extend cultural opportunities. The Chair and I share a State with mostly small towns and folks who have to go great distances, and the Internet is one of the best tools, if not the ideal tool, for compensating for major distances from commercial centers and major population centers. So I hope my colleagues will think through the history I have outlined with respect to the revenue protections and the question of whether vast amounts of revenue are going to be lost because I think the record shows those dire projections to State and localities have not come to pass. I hope my colleagues will also see the principle of technological neutrality that I sought 7 years ago still is a sound one and one that the Senate ought to preserve. It does not make sense to me to say, for example, that cable Internet access ought to be tax free and then stick it to consumers who choose DSL Internet access. So we are going to be dealing with these issues over the course of the week, but I wanted to take a few minutes to make clear that we are going to be protecting the States and localities from property and income taxes and telecommunications carriers. They are concerned about it. We agreed to their proposal to deal with what is called bundling to make sure that Internet service providers cannot hide from tax services that would otherwise be subject to bundling. We narrowed the definition of Internet access so as to try to find common ground. States and localities were concerned about sweeping up all telecommunication services into Internet access so that no telecommunication service could be taxed. The changes in definitions that we made narrowed the definition and ensured that the Senate would still keep up with the significant technological developments in the field. The bill ensures that all platforms, whether dial-up, digital subscriber lines, cable mode, satellite, wireless, or any other technology platform, as well as the components used to provide Internet access, would be covered by the moratorium. So I think we are going to have an important debate this week. I expect to spend a fair amount of time on the Senate floor as we discuss it. This has never been a partisan issue. I have worked on this legislation with Chairman McCain and with Senator Allen over the last few years since he has come to the Senate. I think ultimately the decisions that the Senate makes are going to say a whole lot about where the Senate wants Internet to go in the future. I cannot believe the Senate wants to subject e-mail, blackberries, and a variety of technologies to scores of new and discriminatory taxes. That is what this debate has always been about: should the Internet be subject to discriminatory taxation. If a jurisdiction, for example, taxes brick And mortar sales, they can tax sales online and through the Internet in exactly the same kind of fashion. I hope the Senate can find common ground on this legislation this week and continue a law that has worked. I am proud to be able to have been a part of this consideration over the last 7 years, and I hope we can pass reauthorization for a third time so as to promote true competition between all technologies in a fashion that ensures that this idea of technological neutrality we had 7 years ago is preserved, and to do it as we have sought to do so that the dire revenue projections we will hear this week about States losing vast amounts of money will not come true as they have not come true over the last 7 years. I yield the floor, and I suggest the absence of a quorum.

Mr. WYDEN

Mr. WYDEN. Mr. President, I ask unanimous consent to speak for up to 15 minutes in morning business.

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