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Second Meeting: Transcript of March 21

previous transcript (March 20)












      11                      FOURTH MEETING






      17                       Dallas, Texas

      18                 Tuesday, March 21, 2000







       1     MEMBERS:

                    Governor, Commonwealth of Virginia
                  DEAN F. ANDAL
       4            Chairman, California Board of Equalization

       5          C. MICHAEL ARMSTRONG
                    Chief Executive Office, AT&T
                  JOSEPH H. GUTTENTAG
       7            Senior Advisor to the Assistant Secretary
                    for Tax Policy, U.S. Department of the
       8            Treasury

       9          THE HONORABLE PAUL C. HARRIS,
                    Senior Delegate, Virginia House of
      10            Delegates

      11          DELNA JONES
                    Commissioner, Washington Country
      12            Administrative Offices

      13          THE HONORABLE RON KIRK
                    Mayor, City of Dallas, Texas
      15            Governor, State of Utah

      16          GENE N. LEBRUN
                    President, National Conference of
      17            Commissioners on Uniform State Laws

      18          THE HONORABLE GARY LOCK
                    Governor, State of Washington
                  GROVER NORQUIST
      20            President, Americans for Tax Reform

      21          ROBERT NOVICK
                    Counselor, U.S. Trade Representative



       1     MEMBERS (CONT'D):

       2          RICHARD PARSONS
                    President, Time-Warner, Inc.
                  ANDREW PINCUS
       4            General Counsel, U.S. Department of Commerce

       5          ROBERT PITTMAN
                    President and Chief Operating Officer
       6            America OnLine, Inc.

       7          DAVID POTTRUCK
                    President and Co-Chief Executive Officer
       8            Charles Schwab Corporation

       9          JOHN W. SIDGMORE
                    Vice Chairman, MCI WorldCom; Chairman, UUNET
                  STANLEY S. SOKUL
      11            Davidson & Company, Inc.

      12          THEODORE WAITT
                    Chairman and CEO, Gateway, Inc.

      14                       *  *  *  *  *











       1                   P R O C E E D I N G S

       2                                             (10:37 a.m.)

       3               CHAIRMAN GILMORE:  Well, good

       4     morning, ladies and gentlemen, we certainly

       5     do appreciate the flexibility of the members

       6     of the Commission, staffs, and even the

       7     spectators who are here today.  Let me try to

       8     recap where I think we are, and where we will

       9     proceed from for the balance of the day.

      10               When we departed last night, we

      11     were still on Item B2 of the agenda, the

      12     State and Local Caucus Proposal.  As I

      13     understand it, Governor Leavitt, now, correct

      14     me if I'm wrong.  That is still on the

      15     agenda, and you were, I believe, seeking some

      16     extensive time for discussion of that

      17     proposal, or was it withdrawn?

      18               GOVERNOR LEAVITT:  Mr. Chairman

      19     , it is still on the agenda, and as I

      20     understood when we left for recess, it was on

      21     the table.

      22               CHAIRMAN GILMORE:  Very good.



       1               GOVERNOR LEAVITT:  It's on the

       2     table.

       3               CHAIRMAN GILMORE:  Then it is still

       4     on the table.  We can -- we can proceed to

       5     that or we can pass it by.  But in any case,

       6     the plan at this time, we are -- we have

       7     adopted Mr. Pincus' amendment to the

       8     Operating Rules, which means that we are in a

       9     position to offer floor amendments.

      10               Obviously, what has been at work is

      11     informal meetings by small groups in an

      12     effort to try to reach some type of -- of --

      13     well, not a consensus, but in any case, some

      14     enhanced majority, if possible.  And that is

      15     ongoing still.  We are in a position to

      16     present some floor amendments, get some of

      17     that work out of the way.  And if it is the

      18     wish of the Commission, we can move to an

      19     additional recess in a short while and see

      20     whether an additional substantive matter can

      21     be brought forward prior to the end.

      22               With respect to the agenda, what



       1     was scheduled for today was a report, a

       2     meeting of the Drafting Subcommittee and a

       3     report of that Subcommittee just in terms of

       4     the sheer form and format of the final report

       5     and any type of technical language that might

       6     be in it, not substantive language.  We have

       7     not been able to do that because we have not

       8     yet firmly settled on all of the substantive

       9     provisions to be plugged in to that

      10     framework.

      11               The floor resolutions will go on.

      12     Any additional substantive matters can be

      13     taken up this morning.  I will offer, if

      14     necessary, towards the end of the day a

      15     resolution which will allow the Drafting

      16     Subcommittee to work after adjournment of

      17     this meeting today, and an additional final

      18     conference call of the Commissioners would be

      19     in a position to vote the final report after

      20     the Drafting Committee has completed with the

      21     language.  I will offer that amendment.

      22               The alternative -- let's see.  We



       1     will -- we will offer that, but I would like

       2     to state that, having consulted with some of

       3     the Commissioners, the Chairman is on notice

       4     that some of the Commissioners are in a

       5     position where today they would have to leave

       6     around one o'clock.  In light of the fact

       7     that the -- each vote is very material in

       8     terms of where it is, I would anticipate and

       9     advise the members of the Commission that I

      10     would anticipate a motion to adjourn being

      11     made in the one o'clock area.  And if that

      12     happens, we have already done substantial

      13     work of this Commission, we have already

      14     passed a number of majority provisions, there

      15     is on the record one or two supermajority

      16     provisions that will rise to a

      17     recommendation.  And we will simply proceed

      18     from there to the Drafting Committee.  But

      19     there is still time to do any additional

      20     alterations.  It is very clear that we have

      21     worked through the evening, through the

      22     night, and through the morning in an effort



       1     to try to work out accommodations that would

       2     satisfy a larger number of members of the

       3     Commission.  But that remains to be seen.

       4               That, I think, begins to set the

       5     framework of where we are today, and I think

       6     that we can accommodate everything that is on

       7     the agenda.  We are now on the floor

       8     amendment provision.  We also, of course, can

       9     return to the domestic issues, B2, and then

      10     go down and ask whether or not any of the

      11     other amendments wish to be offered by way of

      12     a floor amendment, and then of course any

      13     additional floor amendments.  And that is the

      14     way, in fact, we shall proceed.

      15               I would ask Governor Leavitt

      16     whether it is your desire at this time to

      17     present the State and Local Caucus Proposal

      18     for discussion and for a vote, or whether you

      19     wish to pass it by?

      20               GOVERNOR LEAVITT:  Mr. Chairman

      21     , you had indicated that you saw the prospect

      22     of additional recess to discuss proposals



       1     that had been circulated on an informal

       2     basis.  Do you see that being -- now being

       3     the appropriate time to do that, or when

       4     would you say that -- that's critical to my

       5     decision on how to deal with Domestic Issue

       6     B.

       7               CHAIRMAN GILMORE:  All right.  It

       8     is -- first of all, I believe that there will

       9     certainly be an additional recess.  We're not

      10     getting any information back that now is a

      11     timely time, there doesn't seem to be

      12     anything that seems to be able to move ahead

      13     on that point.  I believe that it is

      14     appropriate to open the floor to floor

      15     amendments; naturally a motion to recess is

      16     in order, but I would suggest that a period

      17     of time now to begin to offer -- to open the

      18     floor to floor amendments, let anyone have

      19     what they want to say on floor amendments,

      20     but we will not close floor amendments unless

      21     it is the wish of the Commission to do so,

      22     but instead will recess and see if there's



       1     any additional floor amendment that needs to

       2     come up in order to try to alter the ultimate

       3     outcome of the -- of the Commission.  Does

       4     that help?

       5               GOVERNOR LEAVITT:  Yes.  Thank

       6     you, Mr. Chairman.  I think my purpose would

       7     be to reserve -- I would like to amend my

       8     proposal with a substitute.  The substitute,

       9     I hope, could be the alternative that's being

      10     discussed quietly and privately among members

      11     of the Commission, to see if there's an

      12     adequate support to move it above the

      13     thirteen-vote level.  If there is not, it

      14     would be my inclination to withdraw that

      15     proposal and to proceed with the rest of the

      16     business.

      17               CHAIRMAN GILMORE:  Then it is my

      18     intention to pass it by, to recess at a later

      19     time to see whether or not an amendment can

      20     be offered that would draw additional votes

      21     or not, and we will return to it, I can give

      22     you that assurance.



       1               GOVERNOR LEAVITT:  Thank you.

       2     If you'd give me that assurance, I'm prepared

       3     to be moved -- to have us move forward.

       4               CHAIRMAN GILMORE:  Then with

       5     respect to the rest of the agenda, the next

       6     -- I will -- again, these are now in the

       7     nature of floor amendments, but I will give

       8     the preference or the priority to those

       9     people who have filed the original formal

      10     motions, and then we will return to any

      11     additional floor amendments.

      12               Number three is Mr. Norquist.

      13     Mr. Norquist, do you wish to offer that

      14     resolution or withdraw it at this time?

      15               COMMISSIONER NORQUIST:  I'd like

      16     the opportunity to speak to it briefly, but

      17     then I'd be willing to... do I get a chance

      18     to do that?

      19               CHAIRMAN GILMORE:  The floor is

      20     yours--

      21               COMMISSIONER NORQUIST:  Okay.

      22               CHAIRMAN GILMORE:  --to address it



       1     briefly, Mr. Norquist.

       2               COMMISSIONER NORQUIST:  Resolution

       3     Number 1 calls for state and local

       4     governments to exempt consumers' personal

       5     computer purchases and Internet access

       6     service from sales and use taxes and calls on

       7     Federal law to discourage such taxation.  And

       8     the reason for this is obviously state and

       9     local governments exempt, many times, food

      10     and other things, and I would argue that in

      11     order to make sure that all Americans, people

      12     of modest means as well as middle class

      13     Americans, to have access to personal

      14     computers at home and access, that it should

      15     be the policy of the country to eliminate

      16     sales and use taxes on those products and

      17     Internet access as a way -- as a way to help

      18     out people with those opportunities.

      19               I think that the recommended tax

      20     cuts in the proposal that's been passed

      21     already is -- is sort of in that, and so I

      22     just offer this as a suggestion to those



       1     people in their own states and localities

       2     that would like help lower income Americans.

       3     The first thing that the government can do is

       4     to stop doing harm in their effort to get

       5     lower income Americans to have the

       6     opportunity to buy computers and have access.

       7     That was the purpose of Resolution 1.  It's

       8     not necessary to have a vote on it.

       9               CHAIRMAN GILMORE:  Mr. Norquist,

      10     having spoken to the resolution and explained

      11     its purpose, but not wishing to bring it to a

      12     vote at this time, the matter is withdrawn.

      13               The next item is Mr. Norquist's

      14     Resolution Number 2, Item 4 on the agenda.

      15     Mr. Norquist.

      16               COMMISSIONER NORQUIST:  Number 2

      17     deals with a question that some people --

      18     that have been brought up in some cases,

      19     saying that if somebody buys something from a

      20     store and they pay a six percent tax, but if

      21     they buy something from, they

      22     don't pay the tax.  As we all know, if you



       1     buy from you pay shipping fees.

       2     And in most cases the shipping fees dwarf the

       3     sales taxes unless you're in some city that

       4     has excessively burdensome sales taxes.

       5               One way to avoid those few cases

       6     where the sales tax is actually larger than

       7     the shipping fee, and that occurs in perhaps

       8     very expensive computers or very expensive

       9     furniture, would be to put a hundred dollar

      10     maximum on the sales tax that applied to any

      11     good or service that was bought.  We've seen

      12     around the country the American people are

      13     not willing to tolerate the present excessive

      14     excise taxes on automobiles.  The people of

      15     Washington State have been very emphatic

      16     about their objection to paying more than

      17     thirty dollars tax on automobiles.  In your

      18     state of Virginia you've led the charge to

      19     reduce those excessive taxes.  But these

      20     excessive taxes still exist for expensive

      21     computers and expensive furniture.  And in

      22     those few cases, you actually do have a



       1     disparity between somebody buying over the

       2     Internet or through a catalog because of the

       3     savings on sales taxes that is actually

       4     larger than the shipping fee.  In most case,

       5     of course, there is no such disadvantage.

       6               But if we put a hundred dollar fee

       7     on the sales tax applicable to any good or

       8     service, we solve that problem.  And so for

       9     those politicians who view this as a concern,

      10     and I share the legitimate concern that some

      11     real -- real -- realtors and real estate

      12     folks have put forward, we can solve this by

      13     limiting the tax rather than by passing

      14     additional taxes.

      15               This is the first time I've

      16     introduced this concept.  I'm not looking for

      17     a vote on it, but I think as we go through

      18     the debate it's an important idea to put

      19     forward.

      20               CHAIRMAN GILMORE:  Is there any --

      21     by the way, if there's any additional comment

      22     on any of these matters, please raise your



       1     hand and make your presence known, and I

       2     will, of course, open the floor to anyone

       3     that wishes to address any of these items.

       4               Mr. Norquist, having stated his

       5     concern and his resolution, has now withdrawn

       6     it.

       7               We will now move to -- by the way,

       8     Mr. Norquist, is it your intention to ask for

       9     a vote on any of these?

      10               COMMISSIONER NORQUIST:  I don't

      11     think so.

      12               CHAIRMAN GILMORE:  Okay.  Then the

      13     next item is Mr. Norquist's filed Resolution

      14     Number 3, which is Number 5 on the agenda.

      15     Mr. Norquist.

      16               COMMISSIONER NORQUIST:  Did we skip

      17     3?

      18               CHAIRMAN GILMORE:  Did I?

      19               COMMISSIONER NORQUIST:  Number 3.

      20               CHAIRMAN GILMORE:  I'm sorry.  Your

      21     Number 3--

      22               COMMISSIONER NORQUIST:  Yeah.



       1               CHAIRMAN GILMORE:  --which is

       2     Number 5 on the agenda.

       3               COMMISSIONER NORQUIST:  Okay.

       4               CHAIRMAN GILMORE:  But go right

       5     ahead.

       6               COMMISSIONER NORQUIST:  My

       7     Resolution Number 3 deals with the digital

       8     divide, which the good news is that the new

       9     consumer research shows that while five and

      10     ten years ago only certain sectors of the

      11     population were buying computers and using

      12     them at home, now both men and women, people

      13     of all ethnic backgrounds and all ages are

      14     moving to where they have access to it.  But

      15     still there's a concern that some lower

      16     income Americans may have less access to

      17     computers and to the Internet.

      18               And so I put together in one place

      19     a series of suggestions on how we can reduce

      20     the government- created digital divide here.

      21     To abolish the three percent Federal excise

      22     tax on telecommunications, to reduce the



       1     excessive state and local telecommunications.

       2     And also, which is a new proposal, which is

       3     to sunset the Gore tax.  Right now the

       4     e-rate, the Gore tax, that's been imposed on

       5     every American, rich or poor, to raise money

       6     for -- ostensibly for wiring schools.  Some

       7     of this money is spent in other ways, but for

       8     -- it's supposed to be spent for the good

       9     purpose of making sure that all public

      10     schools are wired.  What I would suggest that

      11     we do, however, is that we sunset that so

      12     that after five years or ten billion dollars

      13     or whatever the argument is that it would

      14     take to wire all schools, that we sunset that

      15     tax so that our grandchildren aren't paying

      16     the Gore tax a hundred years from now, as the

      17     great grandchildren of people who lived in

      18     1900 are paying for the Spanish-American War.

      19     And so I think to protect the -- on the

      20     digital divide, we should sunset that once

      21     it's accomplished its stated goals.  I would

      22     also suggest that we have an audit to see how



       1     the money was actually spent.

       2               The -- and then lastly, again, to

       3     exempt personal computers and Internet access

       4     service from sales and use taxes.

       5               That is my thoughts on how we can

       6     move to reduce the digital divide, which

       7     unfortunately the government is enhancing.

       8     The good news, of course, being that it is a

       9     shrinking divide by all measures.

      10               The fourth resolution and the fifth

      11     resolution--

      12               CHAIRMAN GILMORE:  Excuse me,

      13     Mr. Norquist, let me go in order.

      14               COMMISSIONER NORQUIST:  Sure.

      15               CHAIRMAN GILMORE:  I presume it

      16     would be your intention to summarize these in

      17     your thousand-page additional addendum that

      18     you intend to offer to the report?

      19               COMMISSIONER NORQUIST:  I will.

      20               CHAIRMAN GILMORE:  As opposed to

      21     offering them for a vote, which we may do.

      22               MAYOR KIRK:  No, Governor, I



       1     think they were -- you said a thousand pages,

       2     not a thousand words.

       3               CHAIRMAN GILMORE:  Oh, I'm sorry.

       4               COMMISSIONER NORQUIST:  I was

       5     accepting mine as a friendly amendment.

       6               CHAIRMAN GILMORE:  I have that in

       7     mind for myself, and I guess I just projected

       8     it over to everyone else.  I'm sorry.

       9               COMMISSIONER NORQUIST:  Yes.  I

      10     will address them in -- in -- in the -- in

      11     the statement.  Four is simply the measure--

      12               CHAIRMAN GILMORE:  And -- excuse

      13     me.  And I might say that Mayor Kirk has

      14     offered an amendment to your resolution,

      15     which we are passing by.  Mayor Kirk, that of

      16     course rends the -- renders the amendment,

      17     probably, not in order since there is no

      18     underlying amendment.  However, if you would

      19     like the floor to address your amendment, I

      20     would offer you the same courtesy.

      21               MAYOR KIRK:  I would -- I

      22     would only thank all of the Commissioners for



       1     taking to heart this issue of the digital

       2     divide, and hopefully in a substantive way

       3     and not in an illusory manner.  It is a real

       4     concern for the poorest of Americans, those

       5     in rural America, those in inner cities that

       6     don't have access to this technology, and I

       7     hope we will continue to encourage states,

       8     cities, government, private philanthropy

       9     groups, others, industry, to work for ways to

      10     make sure that not only that that technology

      11     is there but that, as Ted Waitt brought to

      12     our attention in San Francisco, people also

      13     have access to an income stream.

      14               I mean, if we're -- the issue of

      15     e-commerce and Internet access are two

      16     different issues.  Internet access is easily

      17     solvable by having computer centers, such as

      18     Governor Gilmore's proposed, and having

      19     computers available in libraries and other

      20     public places, but as Mr. Waitt and others

      21     have noted, access to e-commerce is really

      22     more of a credit card economy than it is just



       1     an issue of access to the Net.  So we need to

       2     look at all of the factors related to that:

       3     Raising people's conditions, providing jobs

       4     in inner cities where we need them,

       5     particular at a level that people have a

       6     livable wage that gives them an income stream

       7     that they can participate in this new economy

       8     that we are all so protective of.

       9               CHAIRMAN GILMORE:  As Chairman, I

      10     have also offered amendments regarding

      11     closing the digital divide, certainly based

      12     upon the substantive actions I've taken in

      13     the Commonwealth of Virginia before the

      14     Virginia Legislature, and proposed that that

      15     they be made nationwide.

      16               But in the interest of preserving

      17     as much time as possible so that we can

      18     continue to work on potential amendments to

      19     some of the substantive businesses, I will

      20     not speechify any further on this matter.

      21     But I am very concerned about the digital

      22     divide and have offered substantive



       1     resolution as well.

       2               Mr. Norquist, your next is

       3     Resolution Number 4, which is Item 6 on the

       4     agenda.

       5               COMMISSIONER NORQUIST:  Right.

       6     Item 6, my Resolution 4, calls on not taxing

       7     Internet access; that is part of what has

       8     already been passed, and I appreciate the

       9     broad support that that has had all over the

      10     -- during the course of this year from this

      11     Commission.  I think we actually had eighteen

      12     members put themselves on record as -- as --

      13     as for that in San Francisco.

      14               I put it forward in case it wasn't

      15     going to be in the consensus document; I'm

      16     glad that it is.

      17               Resolution 5--

      18               CHAIRMAN GILMORE:  Excuse me,

      19     Mr. Norquist.

      20               COMMISSIONER NORQUIST:  Yeah.

      21               CHAIRMAN GILMORE:  But Governor

      22     Locke has, in fact, filed an amendment to



       1     your Resolution Number 4.  You do not plan to

       2     -- you withdraw the amendment--

       3               COMMISSIONER NORQUIST:  Right.

       4               CHAIRMAN GILMORE:  --is that

       5     correct?

       6               COMMISSIONER NORQUIST:  Uh-huh.

       7               CHAIRMAN GILMORE:  Governor Locke,

       8     it being withdrawn, your amendment is at this

       9     point not in order, but nevertheless if you

      10     wish to speak to it, you have the floor.

      11               Governor Locke also recognizes that

      12     his amendment is likewise withdrawn.

      13               Number 7, Commissioner Norquist,

      14     your Resolution Number 5, on the agenda

      15     Number 7.

      16               COMMISSIONER NORQUIST:  Right.

      17     This calls for eliminating the three percent

      18     telecommunications tax that was put in to

      19     fund the Spanish-American War, which several

      20     people have noted the war is over.  I am glad

      21     that in the consensus document that we've

      22     already passed here, the call for abolition



       1     of this tax is included.  I think that one of

       2     the greatest successes of this Commission has

       3     been to highlight in the minds of both

       4     Congress and the American people that this

       5     three percent telecommunications tax, you

       6     know, originally put in as a tax on rich

       7     people to temporarily fund a temporary war

       8     has really outlived its usefulness and

       9     creates a disadvantage for particularly lower

      10     income people who shouldn't be charged with

      11     that.  But it's also an old tax that needs to

      12     go away.

      13               And it is because this tax has

      14     lasted more than a hundred years that I think

      15     we need to get Congress to focus on

      16     sunsetting the Gore tax.  And I just had

      17     discussions with Mr. Tauzin, who is on the

      18     Commerce Committee on the House, and he has

      19     actually introduced legislation to sunset the

      20     Gore tax, which I think -- I just wanted to

      21     make sure people understood there is on going

      22     effort in Congress to do that, as well as to



       1     get rid of the three percent

       2     telecommunications tax.  But I think that

       3     your leadership on this, and this Commission,

       4     has really raised the visibility of this tax

       5     and has made it less likely to survive

       6     another hundred years.

       7               I withdraw the amendment because

       8     it's already in the consensus document.

       9     Thank you.

      10               CHAIRMAN GILMORE:  The Business

      11     Proposal which has -- has been adopted eleven

      12     to, I think, one on this Commission contains

      13     language regarding the Federal telecom tax.

      14     I know that there are on going discussions

      15     continuing regarding this matter that our

      16     Federal authorities, Mr. Pincus, the Federal

      17     authorities are not here.  But nevertheless,

      18     Mr. Pincus is, I know, concerned about this

      19     issue and we're in discussions on it.

      20     Nonetheless, it remains at this time a part

      21     of the adopted document already previously

      22     offered the Commission.  Therefore you



       1     withdraw?

       2               COMMISSIONER NORQUIST:  Well, and I

       3     would simply note that in San Francisco when

       4     we did an unofficial poll here, we had the

       5     support of everybody except the three

       6     Administration officials and Mr. Lebrun.

       7     Everybody else was for it, and I think that

       8     shows the broad consensus in the country for

       9     getting rid of it.

      10               CHAIRMAN GILMORE:  Thank you.

      11               COMMISSIONER NORQUIST:  And I

      12     withdraw it here because it's already in the

      13     consensus document.

      14               CHAIRMAN GILMORE:  Thank you,

      15     Mr. Norquist.  Number 8 on the agenda was a

      16     recommendation filed by Commissioner Sokul,

      17     your Number 1, Mr. Sokul.  You have the floor

      18     if you wish to address it, or if you wish to

      19     offer it for a vote.

      20               COMMISSIONER SOKUL:  Okay.  Thank

      21     you.  We've spent a lot of time talking about

      22     the complexity and the burdens that are



       1     placed upon businesses by state and local tax

       2     systems, and we've really focused on legal

       3     burdens.  We haven't focused a lot on illegal

       4     burdens or unconstitutional burdens that are

       5     passed and challenged by business when the

       6     states pass an unconstitutional law.  And

       7     this is a real problem.  And I -- I put this

       8     forward because, when we talk of

       9     simplification and the need for uniformity,

      10     there is never going to be uniformity if

      11     fifty different state court systems are

      12     deciding Federal constitutional issues.  We

      13     need to get the constitutional questions into

      14     the Federal court system, which are designed

      15     for national uniformity, providing national

      16     uniformity.  This situation goes back to the

      17     Depress -- Depression Era statute, the Tax

      18     Injunction Act, and I wanted to -- I realize

      19     that the Commission probably feels that this

      20     issue is maybe a little bit irrelevant, maybe

      21     very irrelevant, but if you're ever going to

      22     have true uniformity and national standards,



       1     this has to be addressed.  And I recognize

       2     that we haven't delved into this dark

       3     underbelly of state tax practices, and I'm

       4     not going to force the Commission to do it

       5     today at this late date, so I won't offer

       6     this amendment for a vote.

       7               CHAIRMAN GILMORE:  Mr. Sokul,

       8     having addressed his amendment and at least

       9     one of the dark underbellies that we're

      10     addressing here in this meeting, withdraws

      11     his recommendation at this time, having

      12     addressed it.  The next item, Mr. Sokul, is

      13     your Recommendation Number--

      14               COMMISSIONER SOKUL:  Yeah.

      15               CHAIRMAN GILMORE:  2, Number 9 on

      16     the agenda.

      17               COMMISSIONER SOKUL:  Yeah.  This

      18     next resolution I offered, I filed this, you

      19     know, thirty days ago, and my intention when

      20     I was filing that for my -- was -- was based

      21     upon my hopefully- flawed crystal ball this

      22     that Commission wasn't really going to



       1     ultimately coalesce around any proposal, and

       2     that once things kind of crashed, I did feel

       3     there was a broad consensus on this panel on

       4     the need for simplification.  And so I

       5     offered this resolution so that at the end of

       6     the day, potentially we could all unify at

       7     least around this principle, which I do

       8     believe nineteen members of the Commission

       9     agree with.

      10               Events have sort of overtaken my

      11     initial analysis, so I don't think this is

      12     needed anymore, and I withdraw this as well.

      13               CHAIRMAN GILMORE:  Simplification

      14     has been addressed and the proposal already

      15     adopted.  It is also under further

      16     discussions also with respect to further

      17     discussions that are going on in order to try

      18     to resolve some of the issues on the

      19     Commission, and therefore Mr. Sokul, having

      20     spoken to the resolution, withdraws Number 9,

      21     including, by the way, I think an amendment,

      22     substitute amendment you had put in--



       1               COMMISSIONER SOKUL:  Yeah, I--

       2               CHAIRMAN GILMORE:  --as well?

       3               COMMISSIONER SOKUL:  Yeah, I had--

       4               CHAIRMAN GILMORE:  Same thing?

       5               COMMISSIONER SOKUL:  --changed my

       6     initial resolution which asked Congress to

       7     get involved, to one that simply noted

       8     findings and -- because I knew hat some

       9     people were nervous about Congressional

      10     involvement, so.  I withdraw them both.

      11               CHAIRMAN GILMORE:  The next

      12     document is Recommendation Number 3 from

      13     Mr. Sokul, the need for improved economic

      14     data.  That is Number 10 on the agenda.

      15     Mr. Sokul, do you wish to offer this for a

      16     vote?

      17               COMMISSIONER SOKUL:  Um--

      18               CHAIRMAN GILMORE:  The floor is

      19     yours -- the floor is yours.

      20               COMMISSIONER SOKUL:  Yeah, let me

      21     -- this resolution calls upon Congress to

      22     increase its activity and start caring more



       1     about the economic data that's available.  I

       2     -- I think that I'm not alone among

       3     Commissioners in thinking that the data that

       4     we have -- have had to discuss these issues

       5     has been sparse and often speculative.  And I

       6     know that the Commerce Department probably

       7     would like to have a few words to say on

       8     this, because I know they're making progress

       9     in trying to come up with some firm

      10     e-commerce numbers.  So I don't... I will

      11     just withhold it at this time, and when they

      12     come back maybe they can agree to it being --

      13     but I don't want to force a vote on it right

      14     now.

      15               CHAIRMAN GILMORE:  It may not be

      16     objectionable, but nonetheless it is not

      17     offered for a vote at this time.  If any

      18     member of the Commission wishes to offer it,

      19     make a motion, otherwise we will pass it by.

      20     At least pass it by at this time.

      21               COMMISSIONER SOKUL:  Right, I just

      22     don't want to close it out without having



       1     Commerce an opportunity to--

       2               CHAIRMAN GILMORE:  You may

       3     introduce it as a new floor amendment under

       4     the new rule at any time before the

       5     adjournment of the meeting, Mr. Sokul, if

       6     that is your desire.

       7               The next item is Commissioner

       8     Sokul's Recommendation Number 5, which is

       9     Number 11 on the agenda.  Mr. Sokul.

      10               COMMISSIONER SOKUL:  Yeah, this --

      11     this resolution I'd like us to vote on. I

      12     think this resolution involves -- it's

      13     entitled The Need for Increased Attention to

      14     the Privacy Issues, Implications of Internet

      15     Taxation.  It's a brief resolution, I think

      16     it's self-explanatory, it doesn't draw any

      17     conclusion one way or another.  It just does

      18     something which I think is important, and it

      19     highlights to Congress that when you're

      20     talking about Internet taxation, pay

      21     attention to privacy as well.  I mean, we've

      22     talked about it a bit in terms of digital



       1     goods.  How are you ever going to tax and

       2     enforce a tax on digital goods without

       3     significant invasions of consumer privacy?

       4     And I think that the same holds true with

       5     respect to trying to enforce use taxes.  And

       6     this is not just an issue for the public,

       7     it's an -- it's an issue for e-commerce as

       8     well, the businesses involved, because if the

       9     public feels their privacy is going to be

      10     invaded, they will not utilize e-commerce.

      11               CHAIRMAN GILMORE:  Mr. Sokul, I'm

      12     going to give you some additional time to

      13     address your -- your amendment as we move to

      14     debate, but Governor Locke, having offered an

      15     amendment to this provision, I'm going to ask

      16     him to introduce his, we will debate his and

      17     then yours in order, and then we will--

      18               COMMISSIONER SOKUL:  Sure.

      19               CHAIRMAN GILMORE:  --move to a

      20     vote.  Governor Locke, is it still your wish

      21     to offer an amendment to Mr. Sokul's Item

      22     Number 11 on the agenda?



       1               GOVERNOR LOCKE:  Yes, it is,

       2     Mr. Chairman.  I'll move the adoption of my

       3     amendment to Mr. Sokul's resolution.

       4               CHAIRMAN GILMORE:  By the way, do

       5     we have a second to Mr. Sokul's resolution on

       6     privacy?

       7               It is so seconded.  Is there a

       8     second to Governor Locke's amendment to

       9     Mr. Sokul--

      10               COMMISSIONER JONES:  Second.

      11               CHAIRMAN GILMORE:  Seconded by

      12     Delna Jones.  Governor Locke, offer us, if

      13     you would please, the reason for your

      14     amendment, and speak to it if you would.  And

      15     then we will open the floor on the amendment.

      16               GOVERNOR LOCKE:  I very much

      17     share Commissioner Sokul's concerns about

      18     privacy with respect to all aspects of

      19     electronic commerce, but I really think that

      20     it's important to understand that these

      21     privacy issues are inherent in all aspects of

      22     electronic commerce and not just the tax



       1     administration system.  And that -- so my

       2     amendment really asks Congress to explore

       3     further consumer privacy issues before

       4     determining if any laws are necessary to

       5     protect online privacy.  I think there's a

       6     lot of concern about privacy throughout the

       7     United States on all aspects of, not just

       8     electronic commerce, but all commerce.  And

       9     the Congress is debating these issues, and I

      10     would just ask that -- this amendment, I

      11     think, just provides a little bit greater

      12     clarity saying that the American consumer's

      13     concerned about all issues of privacy, and it

      14     ought to be addressed by Congress.  So it's

      15     really in keeping with Commissioner Sokul's

      16     purpose, but providing a little bit more

      17     clarity on what the Congress should -- should

      18     examine.

      19               CHAIRMAN GILMORE:  Mr. Sokul, are

      20     you prepared to accept this as a friendly

      21     amendment?

      22               COMMISSIONER SOKUL:  I -- maybe.



       1     And I'd like to ask Governor Locke a

       2     question.  If he would delete the paragraph

       3     that begins:  The Commission believes any

       4     system designed to administer taxes should be

       5     developed in a manner that minimizes the

       6     personal information obtained and should

       7     contain sufficient safeguards and security.

       8     If you would just delete that, I could accept

       9     your amendment.

      10               GOVERNOR LOCKE:  Where is that?

      11               COMMISSIONER JONES:  Now,

      12     therefore.

      13               GOVERNOR LOCKE:  Oh, okay.

      14               COMMISSIONER SOKUL:  And the reason

      15     for that is I don't know what minimizes

      16     means, I don't know what safeguards are where

      17     there's a lot of hacking, and let's just not

      18     get into that debate and...

      19               GOVERNOR LOCKE:  That's --

      20     that's fine.

      21               COMMISSIONER SOKUL:  Okay.

      22               CHAIRMAN GILMORE:  Governor Locke



       1     withdraws from his resolution -- or amends

       2     his resolution to withdraw the next to last

       3     paragraph that being -- wish is:  Now,

       4     therefore, be it resolved the Commission

       5     believes any system designed to administer

       6     taxation on electronic commerce should be

       7     developed in a manner that minimizes personal

       8     information obtained from consumers and

       9     should contain sufficient safeguards and

      10     security to protect any personal information

      11     obtained.

      12               That being withdrawn from Governor

      13     Locke's amendment, it now becomes a friendly

      14     amendment.  Mr. Sokul, do you wish to speak

      15     to the overall, it being adopted together now

      16     as one amendment on privacy, do you wish to

      17     have any further discussion before we move to

      18     a vote or before we open the floor for

      19     further discussion regarding privacy?

      20     Mr. Sokul, you have the floor.

      21               COMMISSIONER SOKUL:  No, I have --

      22     I think the points have been made.



       1               CHAIRMAN GILMORE:  Okay.

       2               COMMISSIONER SOKUL:  Unless anyone

       3     else has something to say.

       4               CHAIRMAN GILMORE:  Other discussion

       5     from the Commission members regarding

       6     Mr. Sokul's Number 5, which is, once again,

       7     Number 11 in your -- in your books on the

       8     agenda?  Further discussion?

       9               GOVERNOR LOCKE:  Governor

      10     Gilmore?

      11               CHAIRMAN GILMORE:  Governor Locke?

      12               GOVERNOR LOCKE:  Excuse me.  As

      13     Commission Jones indicated, the next

      14     paragraph should be further modified, then,

      15     to say -- take it -- take out the "further"

      16     where it says be it further resolved, just so

      17     it says be it resolved.

      18               CHAIRMAN GILMORE:  Without

      19     objection, that change is, in fact, offered

      20     by Governor Locke.

      21               Further discussion on this matter?

      22               Is the Commission ready for a vote?



       1     Move to call the question?  Second?

       2               All in favor of calling the

       3     question, say aye.

       4               All opposed, nay?

       5               Ms. Rosenker, call the roll on this

       6     privacy resolution offered by Sokul and

       7     amended by Locke.

       8               COMMISSIONER SOKUL:  Do we need a

       9     roll call?

      10               CHAIRMAN GILMORE:  No, I think the

      11     rules call for that, but it will be quick.

      12               MS. ROSENKER:  Mr. Andal?

      13               Mr. Armstrong?

      14               Mr. Gilmore?

      15               CHAIRMAN GILMORE:  Yes.

      16               MS. ROSENKER:  Excuse me.  Chairman

      17     Gilmore?

      18               CHAIRMAN GILMORE:  Yes.

      19               MS. ROSENKER:  Mr. Guttentag?

      20               COMMISSIONER GUTTENTAG:  Abstain.

      21               MS. ROSENKER:  Mr. Harris?

      22               COMMISSIONER HARRIS:  Aye.



       1               MS. ROSENKER:  Mayor Kirk?

       2               Ms. Jones?

       3               COMMISSIONER JONES:  Aye.

       4               MS. ROSENKER:  Governor Leavitt?

       5               GOVERNOR LEAVITT:  Abstain.

       6               MS. ROSENKER:  Mr. Lebrun?

       7               COMMISSIONER LEBRUN:  Abstain.

       8               MS. ROSENKER:  Governor Locke?

       9               GOVERNOR LOCKE:  Abstain.

      10               MS. ROSENKER:  Mr. Norquist?

      11               COMMISSIONER NORQUIST:  Aye, for

      12     privacy.

      13               MS. ROSENKER:  Mr. Novick?

      14               Mr. Parsons?

      15               COMMISSIONER PARSONS:  Aye.

      16               MS. ROSENKER:  Mr. Pincus?

      17               Mr. Pittman?

      18               COMMISSIONER PITTMAN:  Aye.

      19               MS. ROSENKER:  Mr. Pottruck?

      20               COMMISSIONER POTTRUCK:  Aye.

      21               MS. ROSENKER:  Mr. Sidgemore?

      22               COMMISSIONER SIDGEMORE:  Aye.



       1               MS. ROSENKER:  Mr. Sokul?

       2               COMMISSIONER SOKUL:  Aye.

       3               MS. ROSENKER:  Mr. Waitt?

       4               COMMISSIONER WAITT:  Aye.

       5               COMMISSIONER ANDAL:  Mr. Andal,

       6     aye.

       7               MS. ROSENKER:  Mr. Armstrong?

       8               COMMISSIONER NORQUIST:  Do you want

       9     to explain to Mr. Kirk what we're voting on,

      10     because he just walked in.

      11               CHAIRMAN GILMORE:  This is the

      12     Privacy Amendment offered by Mr. Sokul and

      13     amended as a friendly amendment by Governor

      14     Locke, and there is a vote on this amendment.

      15     Governor Locke abstained on his own motion.

      16               MAYOR KIRK:  I don't know.

      17               COMMISSIONER ANDAL:  Is the Mayor

      18     of Dallas against friendliness?

      19               MAYOR KIRK:  I'm a very

      20     friendly person, but I'll abstain since I

      21     didn't hear the--

      22               MS. ROSENKER:  Mayor Kirk.



       1               MAYOR KIRK:  --the debate.

       2               MS. ROSENKER:  I'll go back and

       3     call Mr. Armstrong, since you've returned.

       4               CHAIRMAN GILMORE:  Just -- just

       5     announce the vote, Heather, this is a very

       6     immaterial matter.

       7               COMMISSIONER ARMSTRONG:  Aye.

       8               CHAIRMAN GILMORE:  In the big

       9     scheme of things.  Let me have it and I'll

      10     announce the vote.

      11               MR. GRIFFITH:  It's not finished.

      12               CHAIRMAN GILMORE:  It's not

      13     finished?  Oh, I beg your pardon, he's come

      14     back.  Mr. Armstrong.  Have you voted,

      15     Mr. Armstrong?

      16               COMMISSIONER ARMSTRONG:  Aye.

      17               CHAIRMAN GILMORE:  Mr. Armstrong

      18     votes aye, Ms. Rosenker.

      19               And, Governor Locke, your provision

      20     passes twelve to zero, with five abstentions.

      21     Therefore, while it is a majority position of

      22     the Commission, it will not be a



       1     recommendation.  Interestingly enough.

       2               We will now move on to Item 13 --

       3     excuse me, 12.  This is my resolution

       4     regarding Taxpayer, Consumer, and Small

       5     Business Protection From Expanded Sales and

       6     Use Taxes.  I, too, intend to withdraw this

       7     at this time, and address it in the addendum

       8     that I will place into the -- into the final

       9     report of the Commission.  But I will say

      10     that I may contemplate within this, that I

      11     would like the Congress, if not a part of the

      12     Commission report at least part of my own

      13     reference, to address the issue of the use

      14     tax.  If this Commission proceeds to, in

      15     fact, make it difficult or not possible at

      16     this time to do remote collections, then we

      17     have the anomalous situation of the people of

      18     the United States out there being obligated

      19     for use tax of their states, but there is no

      20     collection ability to do that on remote

      21     sellers.  I believe that makes most of the

      22     people of the United States criminals because



       1     they're not paying the use tax.  The only

       2     other thing is for the states to begin to

       3     pound them and make them pay the use tax.  I

       4     do not think that's a proper thing.

       5               In the meanwhile, the use tax in

       6     Virginia raises less than a million dollars

       7     per annum on a forty-eight billion dollar

       8     biennial budget.  It's not that much money.

       9     And my belief is that the people of the

      10     United States would be best served by the

      11     elimination of the use tax as a matter of

      12     interstate commerce by the Congress.  Or even

      13     in the alternative, that the Commission

      14     should recommend to the states that they

      15     reform their use taxes by abolishing them.

      16               But in light of the serious

      17     business of the hour and the work that has to

      18     be done remaining within a recess, I withdraw

      19     this -- this resolution.

      20               Likewise, I have submitted

      21     Resolution Number 2, Item 13, Business

      22     Protection from Expanded Income and Business



       1     Activity Taxes in the Internet System.  This

       2     deals with the issues of nexus within each

       3     state for the purpose of requiring sellers,

       4     remote sellers to, in fact, collect taxes.

       5     That is a central issue that we are dealing

       6     with in our private and informal discussions

       7     among small groups and -- in order to try to

       8     resolve these matters.  And therefore I

       9     withdraw Resolution Number 2, which is Number

      10     13 on the agenda.

      11               Number 14 on the agenda, I have

      12     offered Protection Against Excessive Taxation

      13     of the Internet's Backbone and Telephone

      14     Service.  That also, of course, is a matter

      15     of some discussions, which we will bring

      16     forward hopefully later on this morning.

      17     This is telecommunications simplification.

      18     It being part of the larger issue already

      19     adopted by this Commission, I withdraw that

      20     resolution.  Once again like, I think,

      21     Mr. Norquist, if there was no underlying

      22     adoption of any kind, I had hoped to offer



       1     these as a substitute, but they are now

       2     unnecessary.

       3               Likewise Number 15, Closing the

       4     "Digital Divide."  That is a matter that I

       5     will withdraw at this time, though I may even

       6     want to bring that back up depending upon how

       7     the rest of the meeting goes.  I'm very

       8     concerned about the digital divide and I

       9     believe that active steps can be taken to

      10     make the Internet accessible to everyone in

      11     the United States.  That ought to be the

      12     thrust of our policy.  It is what we are

      13     doing in Virginia, and that is what should be

      14     the national policy, to make the Internet as

      15     available as possible to every person in the

      16     United States to have the benefit of

      17     e-commerce and e-trade and entrepreneurship.

      18     I will withdraw it, however, at this time.

      19               And the last one on the list is 16,

      20     my Resolution Number 5: Taxpayer and Consumer

      21     Protection from Expanded Sales and Use Tax

      22     Collections.  That, of course, deals



       1     naturally with the underlying issue of sales

       2     and goods on the Internet which is the

       3     substance of what has already been adopted

       4     and what is under further discussion.

       5               That deals with those formal

       6     matters.  I understand that we are now in a

       7     position to take a little -- a short recess

       8     and determine whether or not there are any

       9     additional floor amendments that should come

      10     forward for the balance of this meeting.

      11     Without objection, we will recess for twenty

      12     minutes and come back at 11:30.

      13                    (Recess)

      14               CHAIRMAN GILMORE:  Well, there

      15     certainly is an air of expectation, I must

      16     say.

      17               Good afternoon, ladies and

      18     gentlemen.  After many small groups have had

      19     some private discussions, we do not believe

      20     that a consensus at this time is forming,

      21     although discussions even to this minute are

      22     continuing, and we anticipate that some may



       1     continue on into the future.  But we have

       2     arrived at a time at which the Commissioners

       3     will soon be in a position in which they must

       4     go.

       5               Where we are at this point on the

       6     agenda is certain pre-filed amendments to

       7     Operating Rules, which at this time, of

       8     course, can be offered as floor amendments.

       9               GOVERNOR LEAVITT:  Mr. Chairman

      10     ?

      11               CHAIRMAN GILMORE:  And then we will

      12     return back to floor amendments.  Yes, sir?

      13               GOVERNOR LEAVITT:  Previously I

      14     had indicated a willingness to expedite our

      15     business to withdraw my proposal on -- our

      16     proposal on the basis that we could return to

      17     it, and I'm wondering if you'd recognize me

      18     for the purpose of being able to make that --

      19     that -- that proposal.

      20               CHAIRMAN GILMORE:  Governor, I

      21     will, in fact, do that, and we fully intend

      22     to give ample time for it to be addressed.



       1     Where we are at this time on the agenda is to

       2     conclude the pre-filed amendments to

       3     Operating Rules and other Operating Rules,

       4     and then we will return, in fact, I have a

       5     floor amendment of my own, as a matter of

       6     fact, after yours, that we will take up.  And

       7     then at that point I believe we'll conclude

       8     with concluding remarks and then we will be

       9     done, at least for this meeting.

      10               GOVERNOR LEAVITT:  Thank you,

      11     Mr. Chairman.

      12               CHAIRMAN GILMORE:  Ladies and

      13     gentlemen, the first floor amendment

      14     previously filed and as of -- I'm going to

      15     convert this into a floor amendment because

      16     it has some alteration in order to

      17     accommodate some of the thinking that has

      18     gone on through the morning and early

      19     afternoon.

      20               This is an amendment to the

      21     Operating Rules, ladies and gentlemen, for

      22     the purpose of addressing the issue of



       1     transmission of the Commission's report to

       2     Congress.  And the amendment is as follows:

       3     Vote on Final Language of the Report to

       4     Congress.  Now, ladies and gentlemen, we have

       5     -- the Commission, we have at this point

       6     already adopted certain resolutions by

       7     majority vote. There are one or two items

       8     that have, in fact, obtained a two-thirds

       9     vote in a prior meeting.  We will need to

      10     convert this into a drafting, a drafted

      11     document for presentation to the Commission.

      12     That can and will be done.  And then there

      13     will be a need for an additional telephone

      14     conference for the purpose of reviewing those

      15     final language changes and preparing this

      16     document to go to the Congress.

      17               In line with this, I'm going to

      18     offer the following language on a report to

      19     Congress:  Notwithstanding Rule IV.A's

      20     requirement that each Commissioner must be

      21     physically present to vote -- Notwithstanding

      22     Rule IV.A's requirement that each



       1     Commissioner must be physically present to

       2     vote, the vote on the form -- on the form --

       3     the vote on the form and text of the final

       4     language of the report to Congress will be

       5     made during a publicly transmitted telephone

       6     conference call on a date to be selected by

       7     the Chairman, to be organized by the

       8     Commission's Executive Director.  If a --

       9     this prevents us, ladies and gentlemen, from

      10     having to deal with it today while we are

      11     physically present; it buys us an opportunity

      12     to do this without having to do it today.  If

      13     we had been able to draft a final document

      14     today, we would have -- this would not have

      15     been necessary, but now it is.

      16               If a Commissioner is unable to

      17     participate personally in that conference

      18     call, the Commissioner may communicate his or

      19     her vote in writing to the Executive Director

      20     prior to the conference call.  A Commissioner

      21     may cast his or her vote in only one of three

      22     forms:  "yeah," "nay," or "abstain."  The



       1     Commission shall announce the vote of each

       2     Commissioner during the conference call, and

       3     no other business shall be conducted by the

       4     Commission during the conference call.  The

       5     purpose of this vote is to obtain the

       6     Commission's approval of the form and text of

       7     the final language of the report to Congress.

       8     And I'm going to add:  And any other matter

       9     called by a vote of a majority of the

      10     Commissioners serving.  This language is

      11     proposed to accommodate a final interest by

      12     members of the Commission to take one more

      13     stab at trying to improve the status of where

      14     we are today, so that in the event that the

      15     Commissioners decide that they do have

      16     something that improves that and a majority

      17     choose to vote to place it on the conference

      18     call, then it will become a part of the

      19     conference call and will be considered at the

      20     same time that we then examine the text of

      21     the rest of the report.  That is an amendment

      22     to the Operating Rules offered by the



       1     Chairman in order to accommodate the needs

       2     and operations of this Commission.  Is there

       3     a second?

       4               COMMISSIONER PARSONS:  Second.

       5               COMMISSIONER NORQUIST:  Second.

       6               CHAIRMAN GILMORE:  Discussion on

       7     the amendment?

       8               Seeing none, all in favor of the

       9     amendment to the Operating Rules please say

      10     aye.

      11               All opposed, nay.

      12               COMMISSIONER ANDAL:  Nay.

      13               CHAIRMAN GILMORE:  There is one

      14     nay.  Please call the roll, if you would,

      15     Ms. Rosenker.  Even though we obviously know

      16     where we are, but nonetheless, I'm going to

      17     follow the rules.

      18               MS. ROSENKER:  Mr. Andal?

      19               COMMISSIONER ANDAL:  No.

      20               MS. ROSENKER:  Mr. Armstrong?

      21               COMMISSIONER ARMSTRONG:  Yeah --

      22     yes.



       1               MS. ROSENKER:  Mr. Guttentag?

       2               COMMISSIONER GUTTENTAG:  Abstain.

       3               MS. ROSENKER:  Mr. Harris?

       4               COMMISSIONER HARRIS:  Yes.

       5               MS. ROSENKER:  Mayor Kirk?

       6               MAYOR KIRK:  Yes.

       7               MS. ROSENKER:  Governor Leavitt?

       8               GOVERNOR LEAVITT:  Yes.

       9               MS. ROSENKER:  Ms. Jones?

      10               COMMISSIONER JONES:  Yes.

      11               MS. ROSENKER:  Mr. Lebrun?

      12               COMMISSIONER LEBRUN:  Yes.

      13               MS. ROSENKER:  Governor Locke?

      14               GOVERNOR LOCKE:  Yes.

      15               MS. ROSENKER:  Mr. Norquist?

      16               COMMISSIONER NORQUIST:  Yes.

      17               MS. ROSENKER:  Mr. Novick?

      18               COMMISSIONER NOVICK:  Yes.

      19               MS. ROSENKER:  Mr. Parsons?

      20               COMMISSIONER PARSONS:  Yes.

      21               MS. ROSENKER:  Mr. Pincus?

      22               COMMISSIONER PINCUS:  Yes.



       1               MS. ROSENKER:  Mr. Pittman?

       2               COMMISSIONER PITTMAN:  Yes.

       3               MS. ROSENKER:  Mr. Pottruck?

       4               COMMISSIONER POTTRUCK:  Yes.

       5               MS. ROSENKER:  Mr. Sidgemore?

       6               COMMISSIONER SIDGEMORE:  Yes.

       7               MS. ROSENKER:  Mr. Sokul?

       8               COMMISSIONER SOKUL:  Yes.

       9               MS. ROSENKER:  Mr. Waitt?

      10               COMMISSIONER WAITT:  Yes.

      11               MS. ROSENKER:  Chairman Gilmore?

      12               CHAIRMAN GILMORE:  Yes.

      13               The amendment to the rules is

      14     adopted seventeen to one, with one

      15     abstention.

      16               The Chairman now offers a second

      17     amendment to the rules.  There has been some

      18     discussion here, ladies and gentlemen, today

      19     or -- and yesterday about the rule of this

      20     Commission which states a two-thirds vote in

      21     order to transmit a report to the Congress.

      22     As the Chair has ruled, this is in



       1     contravention to the statute, which allows

       2     for a report, in fact demands a report, but

       3     only requires a two-thirds majority for

       4     findings and recommendations.  Again, the

       5     Chair has ruled and has been upheld.

       6     Nonetheless, I'm going to offer an amendment

       7     to correct that situation and make this in

       8     accordance with the statute under which we

       9     are operating.

      10               And the following amendment is

      11     offered:  Upon approval of a final report by

      12     a majority of the Commissioners serving at

      13     the time the report is issued, the Commission

      14     shall transmit the report to the Speaker of

      15     the United States House of Representatives,

      16     the President Pro-Temp for the United States

      17     Senate, the Majority Leader of the United

      18     States Senate, the Minority Leader of the

      19     United States Senate, the Minority Leader of

      20     the United States House of Representatives,

      21     the respective Chairman and ranking members

      22     of the U.S.  House and U.S. Senate Committees



       1     on Commerce and Judiciary, the Chairman and

       2     ranking members of the U.S. House Committee

       3     on Ways and Means, the Chairman and ranking

       4     member of the United States Senate Committee

       5     on Finance, and any other Congressional

       6     committee that requests a copy of the report.

       7               The chairman offers this amendment

       8     to our Operating Rules.  Is there a second?

       9               COMMISSIONER WAITT:  Second.

      10               CHAIRMAN GILMORE:  It is moved and

      11     seconded.  Is there debate on the issue of

      12     the offering of the amendment?  Mr. Lebrun.

      13               COMMISSIONER LEBRUN:  Mr. Chairman,

      14     as I stated yesterday, I do not believe that

      15     the statute which created this Commission

      16     permits us to submit a report with anything

      17     less than two-thirds vote.  Anything we

      18     submit contains findings and is clear that

      19     what was voted upon yesterday also includes

      20     recommendations.  Those are findings, those

      21     are recommendations, the statute clearly

      22     states that requires a two-thirds vote.  And



       1     there's a letter that we received yesterday

       2     from Senators Daschle, Graham, Enzi and

       3     Voinovitch states that's crystal clear that

       4     recommendations and findings require a

       5     two-thirds vote.  We cannot, by an operating

       6     rule, change that statutory mandate.

       7     Therefore, I'm going to vote against the

       8     proposed amendment to the Operating Rules.

       9               CHAIRMAN GILMORE:  I'm going to

      10     read the language of the statute.  Not later

      11     than eighteen months after the date of the

      12     enactment of this Act, the Commission shall

      13     transmit to Congress for its consideration a

      14     report reflecting the results, including such

      15     legislative recommendations -- including such

      16     legislative recommendations as required to

      17     address the findings of the Commission study

      18     under this Title.  Any recommendation agreed

      19     to by the Commission shall be tax -- tax and

      20     technologically neutral and apply in all

      21     forms to remote commerce.  No finding or

      22     recommendation shall be included in the



       1     report unless agreed to by at least two

       2     thirds of the members of the Commission

       3     serving at the time the finding or

       4     recommendation is made.

       5               I so ruled yesterday that that

       6     makes it crystal clear that any finding or

       7     recommendation is included by two thirds

       8     within an overall report, which naturally

       9     would be adopted by this Commission by

      10     majority rule, and it's been upheld.  But of

      11     course, the changing of the rule is not in

      12     contravention of the statute, but would, of

      13     course, conform our rule to the statute.

      14     That is the position of the Chair.

      15     Mr. Lebrun, of course, disagreeing.  Further

      16     discussion?

      17               Call to the question.

      18               GOVERNOR LEAVITT:  I just have

      19     a question, Mr. Chairman--

      20               CHAIRMAN GILMORE:  Second?

      21               GOVERNOR LEAVITT:  I just have

      22     a question.



       1               CHAIRMAN GILMORE:  Governor

       2     Leavitt?

       3               GOVERNOR LEAVITT:  What is the

       4     impact -- what -- what is the impact of a

       5     ruling of the Chair when the rule cannot --

       6     if the rule fails?  Does the ruling of the --

       7     does the rule change -- if the rule change

       8     fails and the Chair has ruled contrary to a

       9     change on the rule, what is the impact of

      10     the--

      11               CHAIRMAN GILMORE:  If the rule

      12     change fails, then our rule is in

      13     contravention of the statute, the Chair has

      14     so ruled and the Chair has been upheld.  This

      15     is a question of whether or not we wish to

      16     conform our rule to the statute.

      17               UNIDENTIFIED MALE SPAKER:  Call for the question.

      18               Second?

      19               COMMISSIONER POTTRUCK:  Second.

      20               CHAIRMAN GILMORE:  All in favor of

      21     calling the question say aye.

      22               All opposed, nay?



       1               All in favor of this resolution, I

       2     will ask Ms. Rosenker to call the roll for

       3     this proposed amendment to the Operating

       4     Rules.

       5               MS. ROSENKER:  Mr. Andal?

       6               Mr. Armstrong?

       7               COMMISSIONER ARMSTRONG:  Yes.

       8               MS. ROSENKER:  Mr. Guttentag?

       9               COMMISSIONER GUTTENTAG:  This time

      10     no.

      11               MS. ROSENKER:  Mr. Harris?

      12               COMMISSIONER HARRIS:  Aye.

      13               MS. ROSENKER:  Mayor Kirk?

      14               MAYOR KIRK:  No.

      15               MS. ROSENKER:  Ms. Jones?

      16               COMMISSIONER JONES:  No.

      17               MS. ROSENKER:  Governor Leavitt?

      18               GOVERNOR LEAVITT:  No.

      19               MS. ROSENKER:  Mr. Lebrun?

      20               COMMISSIONER LEBRUN:  No.

      21               MS. ROSENKER:  Governor Locke?

      22               GOVERNOR LOCKE:  No.



       1               MS. ROSENKER:  Mr. Norquist?

       2               COMMISSIONER NORQUIST:  Yes.

       3               MS. ROSENKER:  Mr. Novick?

       4               COMMISSIONER NOVICK:  No.

       5               MS. ROSENKER:  Mr. Parsons?

       6               COMMISSIONER PARSONS:  Yes.

       7               MS. ROSENKER:  Mr. Pincus?

       8               COMMISSIONER PINCUS:  No.

       9               MS. ROSENKER:  Mr. Pittman?

      10               COMMISSIONER PITTMAN:  Yes.

      11               MS. ROSENKER:  Mr. Pottruck?

      12               COMMISSIONER POTTRUCK:  Yes.

      13               MS. ROSENKER:  Mr. Sidgemore?

      14               COMMISSIONER SIDGEMORE:  Yes.

      15               MS. ROSENKER:  Mr. Sokul?

      16               COMMISSIONER SOKUL:  Yes.

      17               MS. ROSENKER:  Mr. Waitt?

      18               COMMISSIONER WAITT:  Yes.

      19               CHAIRMAN GILMORE:  Chairman votes

      20     yes.

      21               MS. ROSENKER:  Chairman Gilmore?

      22               CHAIRMAN GILMORE:  Yes.



       1               The amendment to the rules is

       2     adopted ten to eight.

       3               The Chairman offers a third

       4     resolution from the floor with respect to the

       5     Operating Rules of the Commission regarding

       6     the report as follows:  Resolution Supporting

       7     Individual Commissioners' Ability to

       8     Separately Submit Their Views in the Report

       9     to Congress.

      10               Whereas the Commission will submit

      11     a report of its findings and recommendations

      12     to Congress by April 21, 2000;

      13               Whereas Congress has directed that

      14     no finding or recommendation shall be

      15     included in the report unless agreed to by at

      16     least two thirds of the members of the

      17     Commission;

      18               Whereas at the request of the

      19     Commission, the report will separately

      20     include the Commissioners' rules, Operating

      21     Rule IV.A;

      22               Whereas the Commission desires to



       1     submit a report that treats the views of all

       2     of its members with equal respect and

       3     deference;

       4               Whereas the Commission desires a

       5     report that is desirable and readable by the

       6     public;

       7               Therefore, be it resolved, pursuant

       8     to Operating Rule IV.A that any Commissioner

       9     may include his or her views in the report to

      10     Congress; and be it resolved that a

      11     Commissioner's views submitted pursuant to

      12     Operating Rule IV.A shall contain no more

      13     than one thousand words; and be it resolved

      14     that each Commissioner's views shall be

      15     submitted to the Executive Director on a date

      16     to be announced by the Chairman.

      17               As I say, this is a very simple

      18     rule, it's the thing that we've been

      19     discussing for quite some time, which is to

      20     allow a one thousand word statement by each

      21     Commissioner in the final report prior to its

      22     submission to Congress so each person will



       1     have a chance to put their views in, whether

       2     they've been in the majority, the minority,

       3     or whatever.

       4               It's so seconded.

       5               MAYOR KIRK:  Just point of

       6     inquiry.

       7               CHAIRMAN GILMORE:  Yes.

       8               MAYOR KIRK:  Would that

       9     rule, as we have it stated, permit several

      10     Commissioners to permit a joint statement

      11     containing...

      12               CHAIRMAN GILMORE:  Yes, it would,

      13     Mayor Kirk.

      14               MAYOR KIRK:  Okay.

      15               GOVERNOR LOCKE:  Would it be a

      16     thousand for the joint--

      17               CHAIRMAN GILMORE:  All in favor--

      18               MAYOR KIRK:  A thousand for

      19     the joint statement, or a thousand per -- I

      20     mean, so if three of us put in, we could have

      21     three thousand?

      22               CHAIRMAN GILMORE:  I'm sorry, I



       1     didn't hear you.

       2               MAYOR KIRK:  Or three

       3     thousand pages?

       4               CHAIRMAN GILMORE:  Pardon me?

       5               MAYOR KIRK:  No, I mean,

       6     could -- if three Commissioners issued a -- a

       7     statement, would that expand to three

       8     thousand words for the three of them?

       9               CHAIRMAN GILMORE:  Certainly.

      10               MAYOR KIRK:  Thank you.

      11               COMMISSIONER POTTRUCK:  Call the

      12     question.

      13               CHAIRMAN GILMORE:  Okay.  The

      14     question has been moved by David Pottruck.

      15     Second?

      16               COMMISSIONER ARMSTRONG:  Second.

      17               CHAIRMAN GILMORE:  Second by

      18     Mr. Armstrong.  All in favor of this

      19     amendment please say aye.

      20               All opposed nay?

      21               Unanimous.

      22               COMMISSIONER NORQUIST:  How do you



       1     count hyphenated words?

       2               CHAIRMAN GILMORE:  We are coming

       3     near the conclusion, we have done those

       4     items.  There are two -- there are two things

       5     left on the agenda.  One is any additional

       6     floor amendments, including the one that I

       7     know that Governor Leavitt wishes to bring

       8     forward, and then I have a digital divide one

       9     as well.  And then at that point we will

      10     offer any concluding remarks by individual

      11     Commissioners, and then I would expect a

      12     motion to adjourn.

      13               I believe, Governor, that my

      14     amendment may be more of a consensus one and

      15     more -- shorter, so let me offer this first.

      16               This is regarding Closing the

      17     Digital Divide to Permit All Americans to

      18     Participate in the Internet Economy.

      19               Whereas, the United States has a

      20     unique national interest in maximizing the

      21     economic and social potential of the Internet

      22     for all Americans;



       1               Whereas the United States and each

       2     individual state and locality are undertaking

       3     efforts to make computers and the Internet

       4     widely accessible for all citizens in

       5     schools, libraries, community centers, and

       6     homes;

       7               Whereas, the personal computer and

       8     access to the Internet will become as

       9     ubiquitous as the telephone and television

      10     over the next decade;

      11               Whereas, in furtherance of this

      12     goal, taxes on individual consumers who log

      13     on the Internet and participate in electronic

      14     commerce should be as low as possible;

      15               Therefore, be it resolved that the

      16     Commission recommends to Congress, one, that

      17     Congress:

      18               1.  Clarify federal welfare

      19     guidelines expressly to permit the states to

      20     spend TANF surpluses (unobligated balances)

      21     to provide needy families access to computers

      22     and the Internet and to provide training in



       1     computers and Internet use.

       2               2.  Encourage states and localities

       3     to partner with private technology companies

       4     to make computers and the Internet widely

       5     accessible to needy families, libraries,

       6     schools, and community centers and to train

       7     needy families how to use computers and the

       8     Internet.  Incentives for these partnerships

       9     may include:  (a) Federal and state tax

      10     credits and incentives for private technology

      11     companies that partner with state and local

      12     governments, (b) federal matching funds for

      13     state and local expenditures.

      14               Ladies and gentlemen, the reason

      15     I'm offering this as part of the digital

      16     divide is to put this Commission squarely on

      17     record on extending the benefits of the

      18     Internet to all Americans.  This is in accord

      19     with a variety of programs that I believe

      20     exist in all the states, and specifically

      21     exist in Virginia.  We have requested and

      22     will request authority that any surpluses of



       1     TANF funds be freed to be used in order to

       2     expand to needy families the ability to, in

       3     fact, utilize the Internet to increase the

       4     quality of their lives, and that is the

       5     reason this is offered.

       6               I so move.  Is there a second?

       7               There is a second.  Is there

       8     discussion?  Mayor Kirk, perhaps you would

       9     care to second--

      10               MAYOR KIRK:  Mr. Chairman, I

      11     would only add what I hope is a friendly

      12     amendment, and I'm pleased to see this and I

      13     second it.  It contains many of the elements

      14     of the amendment I submitted to Commissioner

      15     Norquist's.  I would only add, if you would

      16     accept it as friendly amendment, the very

      17     last paragraph of mine that encourages the

      18     Administration and Congress to continue

      19     gathering data for empirical research to help

      20     inform federal, state, and local policy

      21     makers on measures that will lead to

      22     reduction and elimination of the digital



       1     divide.

       2               CHAIRMAN GILMORE:  I accept that as

       3     a friendly amendment.

       4               MAYOR KIRK:  Thank you, sir.

       5               CHAIRMAN GILMORE:  Mr. Lebrun.

       6               COMMISSIONER LEBRUN:  Mr. Chairman,

       7     I support the resolution and the digital

       8     divide, the effort to delete or to reduce the

       9     digital divide.  Governor Janklow in South

      10     Dakota has been very successful in wiring our

      11     schools for computers and the Internet.  He's

      12     making great efforts to get computers in

      13     those schools.  I think -- I think it's

      14     somewhat ironic, however, that we're not able

      15     to endorse and support a more level playing

      16     field which permits the states to use sales

      17     tax revenue, if that's the decision of the

      18     citizens of that state, to help span that

      19     digital divide.  If South Dakota's sales tax

      20     revenue is decreased, the ability of our

      21     government to provide Internet computers in

      22     the schools and to wire the schools is going



       1     to be reduced.  And so I support the idea and

       2     I'll support this resolution, but I think

       3     it's somewhat inconsistent with some of the

       4     other actions that have been taken by this

       5     Commission.  And if we continue to erode the

       6     sales tax base of states like South Dakota,

       7     I'm afraid it's going to make it more

       8     difficult to span that digital divide.

       9               CHAIRMAN GILMORE:  Any other

      10     discussion?

      11               COMMISSIONER POTTRUCK:  Call the

      12     question.

      13               CHAIRMAN GILMORE:  David Pottruck's

      14     called for the question.  Second?

      15               All in favor of calling the

      16     question say aye.

      17               All opposed nay?

      18               All in favor of this resolution on

      19     the digital divide please say aye.

      20               All opposed, nay.

      21               There are no nays, no need for a

      22     for a roll call.  Thank you very much.



       1     Governor Leavitt, you have a floor amendment,

       2     I believe.  Thank you for your forbearance on

       3     that digital divide motion.

       4               GOVERNOR LEAVITT:  Thank you,

       5     Mr. Chairman.  As we are all aware through

       6     the endless recesses that we have been on,

       7     we've been negotiating hard, and I think all

       8     of us were hopeful that we could come to an

       9     agreement that would allow us to have more

      10     than thirteen votes and hence have a formal

      11     finding that we could advance.  Regrettably,

      12     that has not occurred.  We had hoped we could

      13     join the proposal that was advanced by the

      14     Business Caucus, and I believe could have

      15     reached conclusion favorably in almost every

      16     area, with the exception of the so-called

      17     nexus carve-outs, which very clearly would

      18     have had the effect of creating a special

      19     privilege for those who attempt to create

      20     entity isolation.

      21               At the heart of our discussions is

      22     a very important policy question that may



       1     have more to do with shaping government in

       2     the next decade than any other policy issue

       3     we will deal with as a nation.  And that is,

       4     is the sales tax a viable tool for the 21st

       5     Century?  It may not be.  And if so, what are

       6     our alternatives?  I believe one of the

       7     conclusions of this panel will -- will be,

       8     and one of the positive things that has come

       9     from this is a clear understanding that,

      10     unless it is radically simplified, the

      11     existing system will not be viable.

      12               I think we can also agree that

      13     unless we are -- that there are very few

      14     alternatives.  One of the alternatives will

      15     be for us to cut back on certain services,

      16     certain of which will likely be healthy for

      17     both the public and for government.  But many

      18     of which will not be, such as education and

      19     public -- public safety and roads.

      20               The question we must ask, then, is,

      21     if we're not able to cut back on an unlimited

      22     basis, given the fact that the sales tax



       1     currently makes up nearly half of the

       2     revenues of state and local governments, what

       3     are the options?  Well, obviously, one of the

       4     options will be to look at property taxes or

       5     at sales taxes.  I hope as a public servant

       6     to never be in the position of having to

       7     wrestle with that dilemma.  I have signed

       8     into law this last week my thirtieth tax cut

       9     during my administration; something I've

      10     taken some pride in, and I do not look

      11     forward to a debate and discussion about the

      12     need to increase any tax.

      13               If we are to, however, find that

      14     the sales tax can be made viable, we are

      15     focused, I believe, as a Commission on one

      16     very important policy issue that remains.  If

      17     the sales tax is viable in the 21st Century,

      18     will we have a system that creates permanent

      19     special privilege for a limited group who

      20     will be told, in essence, that they do not

      21     need to contribute to our schools, they have

      22     no necessity to contribute to our roads and



       1     to our law enforcement, but otherwise they --

       2     because others will pay either more or will

       3     pay their share on this particular tax?  Or

       4     in the alternative, will we have a level

       5     playing field?  Now, we all hate taxes.  But

       6     the reality is, if you have to have them, at

       7     very least they ought to be fair.

       8               Now, given the fact that we are not

       9     likely to be able to -- we are not going to

      10     be able to concur with -- because of the

      11     nexus carve-out issue, which we believe would

      12     answer that question, if we were to go

      13     forward with nexus carve-outs and essentially

      14     memorialize the creation of a system that by

      15     its nature is not level and does not treat

      16     people fairly, we believe that would

      17     predispose us to a decision that the sales

      18     tax is not viable.  A conclusion that we

      19     believe is not in the interest of the country

      20     to reach until we have determined whether we

      21     can radically simplify.

      22               Mr. Chairman, I wish to put forward



       1     as an alternative, a paper entitled A

       2     Proposal for Internet Tax Reform.  The author

       3     of this needs to be given credit, David

       4     Pottruck, who has been extraordinary in his

       5     efforts and willingness to work with us in

       6     the development of various proposals and

       7     negotiating long and hard and for many hours,

       8     wrote this document that I believe was very

       9     skillfully written, that captured the belief

      10     of what I think is most of the members of

      11     this group.  I'd like to highlight just a few

      12     phrases that are used in this document.

      13               CHAIRMAN GILMORE:  Governor

      14     Leavitt, let me ask, since it is a document,

      15     do we have copies of it--

      16               GOVERNOR LEAVITT:  Yes, I'd

      17     like to--

      18               CHAIRMAN GILMORE:  --in our papers,

      19     or?

      20               GOVERNOR LEAVITT:  No.  I'd

      21     like to distribute it now.  Given that it is

      22     a floor amendment, we will pass it around the



       1     floor, it won't take long.

       2               Can we do that now?  Has it not

       3     been passed out?  All right, it's being

       4     passed out.

       5               In the interest of time,

       6     Mr. Chairman, I'll just continue my remarks

       7     while it's being passed out.

       8               The essence of this document and

       9     the expression of some general views.  First

      10     that the members of the Commission do not see

      11     the Internet as a target for new taxes, nor

      12     do they want to endorse any action that would

      13     expand the digital divide, i.e., reducing the

      14     availability of the Internet to those

      15     Americans at the bottom of our socio-economic

      16     ladder.

      17               The second general conclusion is

      18     that members of the Commission do not believe

      19     that there exists any compelling reason to

      20     impose taxes exclusively target -- targeted

      21     at electronic commerce.

      22               Third, that there is widespread



       1     belief among the Commissioners that the

       2     current myriad of taxes that are applied to

       3     the telecommunications industry are both

       4     excessive and too complicated.  Specific

       5     discussion is had about the repeal of the

       6     federal excise tax.

       7               The fourth conclusion is that we

       8     have come to -- when it comes to the issue of

       9     privacy that there is enormous sensitivity,

      10     and that any system that is accepted as a

      11     sales tax system for the future must deal

      12     with that issue.

      13               And then finally, dealing with the

      14     question of -- of sales tax on Internet -- on

      15     remote sales.  I think Mr. Pottruck's words

      16     have been extraordinarily well-crafted.  He

      17     states:  Inevitably somewhere down the road

      18     in three, five, or ten years, take your pick,

      19     commerce will be intertwined with cyberspace

      20     and physical worlds will merge and interact

      21     and meet increasing demands of consumers.  If

      22     remote sales over the Internet are taxed



       1     differently than intrastate sales, we will

       2     have a system based on a tangle of legal

       3     maneuvering that will create separations

       4     between local merchants and their Internet

       5     counterparts and a playing field that will be

       6     viewed as inherently unfair.  Such

       7     unfairness, if left to fester, will bring

       8     contempt and noncompliance.  It's hard to

       9     argue that the need -- that there is a need

      10     for an enormous simplification of state and

      11     local taxes that can pave the way toward a

      12     level playing field that does not

      13     discriminate between methods of access.

      14               The report continues, that we found

      15     virtually no Commissioners who thought a

      16     structural increase in the taxes paid by

      17     consumers was the purpose of our work.

      18               There are many other details.

      19     Mr. Chairman, I would submit this as a floor

      20     amendment for consideration as the majority

      21     position or as a position of this -- as a

      22     finding of this -- of this body.



       1               COMMISSIONER SOKUL:  Governor

       2     Gilmore?

       3               MAYOR KIRK:  I second.

       4               COMMISSIONER SOKUL:  Governor

       5     Gilmore, I just have a quick question for

       6     Governor Leavitt.

       7               CHAIRMAN GILMORE:  Yes.  This

       8     document, which is presented by way of a

       9     floor amendment has been offered by Governor

      10     Leavitt, seconded by Mayor Kirk.

      11               Mr. Sokul, you've asked for the

      12     floor?

      13               COMMISSIONER SOKUL:  Yeah.  I just

      14     wanted to ask Governor Leavitt, I know that

      15     it's not your fault that you're doing this

      16     now because things were delayed and you were

      17     asked to withhold, but Mr. Pottruck has left.

      18     And I was just wondering if you had his

      19     permission to offer this like this.

      20               GOVERNOR LEAVITT:  It was

      21     actually offered as -- with several different

      22     alternatives.  I expressed to him that I



       1     would be offering it.  He did not protest.  I

       2     did not ask for copyright clearance.

       3               COMMISSIONER NORQUIST:  Is this

       4     today's conversation?

       5               GOVERNOR LEAVITT:  Yes, I

       6     talked with him today--

       7               COMMISSIONER NORQUIST:  Pottruck

       8     told you it was okay to present this -- his--

       9               GOVERNOR LEAVITT:  No, I told

      10     him I was going to be -- we -- advancing it.

      11     If he doesn't want to be associated with it,

      12     he certainly doesn't need to do it, doesn't

      13     need to vote for it.

      14               COMMISSIONER NORQUIST:  He's not

      15     here.

      16               GOVERNOR LEAVITT:  Well, okay,

      17     I'm offering it, recognizing, fully

      18     disclosing that they are his words. You may

      19     choose to support them or not support them

      20     based on your decision.

      21               COMMISSIONER NORQUIST:  Pottruck is

      22     against this as a resolution.



       1               COMMISSIONER PARSONS:  Point of

       2     information?

       3               CHAIRMAN GILMORE:  Mr. Parsons?

       4               COMMISSIONER PARSONS:  What -- what

       5     is -- I'm just trying to figure out what this

       6     is proposed as, a finding--

       7               GOVERNOR LEAVITT:  I propose

       8     this as a finding of the Commission.

       9               CHAIRMAN GILMORE:  Mr. Armstrong?

      10               COMMISSIONER PARSONS:  Because this

      11     is--

      12               CHAIRMAN GILMORE:  I'm sorry, do

      13     you have the floor, Mr. Parsons?  Go right

      14     ahead.

      15               COMMISSIONER PARSONS:  No, I'm

      16     just... I'm trying -- I'm having difficulty

      17     getting my mind around -- I've always thought

      18     of this as kind of a preamble to something.

      19     And when you -- when you separate the

      20     preamble from the body or text that it was a

      21     preamble to, it's hard for me to grapple with

      22     what you're left with.  It's -- it's -- so I



       1     -- I don't -- I don't quite know how to -- I

       2     mean, it's not a finding, as such.  It's not

       3     a proposal, as such.  It's a preamble to

       4     something that, without the something, I

       5     don't know how you -- you know, even if we

       6     approved it as what?  I mean, this is really

       7     like--

       8               GOVERNOR LEAVITT:  Mr. Chairman

       9     , may I respond?

      10               COMMISSIONER PARSONS:  --text to

      11     our ultimate report.

      12               CHAIRMAN GILMORE:  Governor

      13     Leavitt?

      14               GOVERNOR LEAVITT:  You will see

      15     from reading it that it does have what would

      16     include substantial policy guidance if it

      17     were adopted.  Clearly this document operates

      18     at thirty thousand feet.  It's a broad look

      19     at the horizon of tax issues that we've been

      20     dealing with.  But if adopted, it would very

      21     clearly make some statements that I think

      22     would guide the discussions of Congress in a



       1     productive way.

       2               Now, there were other details that

       3     could have been attached to it dealing with

       4     -- from the Business proposal, but we

       5     couldn't come to an agreement on the nexus

       6     carve-outs.  We could agree on almost all of

       7     the others, but the nexus carve- outs we felt

       8     created a permanent special privilege that

       9     would ultimately cause the sales tax not to

      10     be a viable tool in the future.  But this

      11     clearly does offer policy guidance.  I

      12     mentioned five areas that I thought were

      13     provided -- that this did provide policy

      14     guidance.  And given the fact that we haven't

      15     achieved thirteen votes on anything and this

      16     Commission has no formal finding, I would

      17     offer this thirty thousand foot level and ask

      18     if -- ask you to consider, are those findings

      19     matters on which you have agreement?  If they

      20     are, then I would invite you to vote for

      21     them.  If they're not, I would invite you to

      22     vote your conscience.



       1               CHAIRMAN GILMORE:  I'm going to

       2     call on Mr. Norquist.

       3               Let me say that the Chair has a

       4     familiarity with this document.  Mr. Pottruck

       5     had discussed it with me when it was

       6     initially put forward.  It was designed to be

       7     something that might bring a supermajority to

       8     the Business Caucus Proposal, but it needed

       9     to have a greater consensus in order to

      10     achieve the supermajority.  Many of us

      11     rejected this document and this text, even

      12     offered some other different forms of it,

      13     none of which ever achieved in any types of

      14     discussions a supermajority, even

      15     broad-ranging support from the Business

      16     Caucus.

      17               I believe that this document as

      18     written is a justification for taxes on the

      19     Internet.  An alternative format had been

      20     offered but never agreed to.  My intention is

      21     to vote no to this.  But naturally, the floor

      22     is open for discussion, and I think



       1     Mr. Norquist was next, then Mr. Pittman.

       2               COMMISSIONER NORQUIST:  I yield to

       3     Mr. Armstrong.

       4               CHAIRMAN GILMORE:  Mr. Armstrong.

       5               COMMISSIONER ARMSTRONG:  Governor

       6     Leavitt, I think that you and I and David

       7     were, in fact, intimately authors of this

       8     document in part.  David created it, and we

       9     were going back and forth with calls and what

      10     have you.  And it was meant to be a preamble.

      11     When I last left this, we were not going to

      12     bring this forward.  I mean, that was the

      13     understanding that I last left with, and I

      14     could well have missed a meeting between you

      15     and David.  But I just checked to find out

      16     whether I was one step behind by asking both

      17     my team and David's team, which is still

      18     here, did they expect that this would be

      19     introduced?  And the answer is no.

      20               Number two, that this may be a

      21     great idea, Mike.  But since I haven't seen

      22     the responses back and forth, I'm very ill



       1     prepared to vote on it.  And so I would just

       2     offer a suggestion to ya, that we have

       3     created an opportunity for further

       4     discussions between us.  And if we wish to

       5     include something like this, then let's

       6     include that in those discussions between us.

       7     But since this has not been reviewed by

       8     Mr. Pottruck or his staff, or at least my

       9     staff, I'd have to vote no.  But it doesn't

      10     mean that I don't think it's a good idea, I

      11     just think it's very premature.

      12               GOVERNOR LEAVITT:  Mr. Armstron

      13     g, I'm prepared to accept a deferred vote on

      14     this.  I would also like to make clear that I

      15     have indicated that David Pottruck was the

      16     primary author of it simply because I wanted

      17     to make certain that I wasn't in any way

      18     misrepresenting its source.  I have not and

      19     would not try to imply that he would vote for

      20     it.  He may well vote against it, seeing it

      21     as being out of context in -- in the in -- in

      22     the overall scheme.  I'm prepared to accept



       1     that.

       2               I have put it forward because I

       3     think we're going to fail as a Commission in

       4     coming to any finding that has thirteen

       5     votes.  And I think likely the reason for

       6     that is that we're going to be at a level of

       7     detail upon which we cannot agree.  And so

       8     one solution to that might be to move

       9     ourselves to a higher altitude and see if we

      10     can't find principles upon which we could

      11     agree that could, in fact, provide us with a

      12     context for policy guidance that would be

      13     helpful to the Congress and to others who

      14     have to wrestle with these weighty issues.

      15               CHAIRMAN GILMORE:  Mr. Pittman?

      16               COMMISSIONER PITTMAN:  Yeah, I just

      17     wanted to address two points.  One, I do

      18     believe if you do read the introduction here

      19     that it is clear that this was intended as

      20     some sort of preamble to the proposal, which

      21     we've already voted on, and I think this

      22     standing alone is -- is completely out of



       1     context of what it was intended.

       2               The other issue I did not want to

       3     leave hanging out there is, I don't think

       4     anybody, because I think you have a lot of

       5     people here who are all working diligently

       6     trying to put something together that is

       7     helpful to the country, helpful to the

       8     economy, helpful to the American consumers,

       9     but I didn't want to let stand the

      10     characterization of where we're apart is some

      11     sort of permanent carve- outs, because I

      12     don't think that has been the intention nor

      13     the words nor the actions of the people on

      14     this -- this group.  And I think if you

      15     polled the people one by one, I don't think

      16     anybody could point to things that are that.

      17     So I did not want that to stand because I do

      18     think that is a mischaracterization, and

      19     probably an impediment to reaching some sort

      20     of more consensus opinion.

      21               COMMISSIONER NORQUIST:  Governor?

      22               CHAIRMAN GILMORE:  Mr. Norquist.



       1               COMMISSIONER NORQUIST:  We don't

       2     have to speculate about where David Pottruck

       3     is.  His staff just came and told me that he

       4     would be opposed to this resolution, and they

       5     are disappointed that it's put forward the

       6     way it is.

       7               GOVERNOR LEAVITT:  Again, I

       8     have not represented his support of it.  I

       9     simply wanted to clarify his authorship of

      10     it.

      11               COMMISSIONER ANDAL:  Mr. Chairman,

      12     I call the question.

      13               CHAIRMAN GILMORE:  Motion to call

      14     the question.  Is there a second?

      15               There is a motion to call the

      16     question.  All in favor of calling the

      17     question please say aye.

      18               All opposed, nay.

      19               MAYOR KIRK:  No.

      20               CHAIRMAN GILMORE:  I think we ought

      21     to call the roll, please.

      22               MAYOR KIRK:  Dean, I think



       1     we'll be brief.  Would you, out of fairness

       2     to those of us who would like to speak to

       3     this, withdraw your motion?  I promise we'll

       4     be brief.

       5               COMMISSIONER ANDAL:  Fair enough.

       6               MAYOR KIRK:  Thank you.

       7               CHAIRMAN GILMORE:  The motion for

       8     the question is withdrawn.  The floor is open

       9     for discussion.  Governor -- I did it again.

      10     Mayor Kirk.

      11               MAYOR KIRK:  Governor.  I

      12     think he likes me in spite of that.

      13               CHAIRMAN GILMORE:  I'm nonplussed,

      14     I have no comment.

      15               MAYOR KIRK:  So am I.  Thank

      16     you.  And, members of the Commission, I do

      17     appreciate it, and I thank Governor Leavitt

      18     and others for bringing this proposal

      19     forward, and I appreciate you giving us an

      20     opportunity to have a chance to go on record.

      21               When we started down this road I

      22     characterized this debate as not so much



       1     debate about whether or not people were

       2     treated evenly or whether we were going to be

       3     discriminatory or non-discriminatory about

       4     the Internet from my perspective as a mayor

       5     dealing, not at a thirty thousand foot level,

       6     but at a where-the-rubber-meets-the-road

       7     level of government and have a responsibility

       8     to meet the needs of citizens every day in

       9     the most basic ways.  Even those citizens

      10     that shop and transact business over the

      11     Internet still have the same desires to live

      12     in neighborhoods that are safe and parks that

      13     are well maintained, to have public libraries

      14     that not only have access to computers but

      15     good old fashioned books, and yes, even red

      16     fire trucks that show up when all of that

      17     technology has a short in a fuse and has a

      18     fire.  There will never be a time in the life

      19     of our communities where you can digitize

      20     this.  In this form or large form.  And

      21     ultimately one of the elements of this

      22     Commission's work was to see what and analyze



       1     what the impact of our decisions would have

       2     on the abilities of state and local

       3     governments to provide services that all of

       4     us are dependent upon.  I think it's

       5     important for the public to know that I think

       6     all of us have at least verbalized at some

       7     point a commitment to having a recommendation

       8     to Congress that would set a broad national

       9     tax policy that didn't just deal with our

      10     business but the business of all Americans,

      11     that it would be fair, that it would be

      12     equal, that it would be non-discriminatory.

      13               And I would only amend your

      14     statement, Governor Leavitt, to some degree

      15     that we all hate taxes.  I think it's

      16     somewhat of an overstatement.  And we do the

      17     American public a disservice to say we hate

      18     taxes that provide the services we need.

      19     What we hate are taxes that are unfair.  What

      20     we hate are taxes that are applied to some

      21     people and not others.  What we really don't

      22     like is when government steps in and decides



       1     we like your business more than we like other

       2     businesses.

       3               And what I had wanted was an

       4     opportunity to make a statement to Congress

       5     and vote for a proposal that allows us to go

       6     on record in favor of those principles, of

       7     fairness, of non- discrimination with respect

       8     to the Internet, but also no special

       9     privilege, that treats retailers and

      10     e-tailers alike.  We've heard a lot of

      11     testimony about how wonderful e-commerce, and

      12     it is, and how fast it's growing.  We forget

      13     the fact that retailers pay about two thirds

      14     of all the sales taxes that are generated,

      15     and have been doing so for years.  And they

      16     support schools and they support communities,

      17     and they employ people.  And they give back

      18     to communities in so many more ways.  And I

      19     think it would be a mistake for this

      20     Commission to come out with a recommendation

      21     that says we favor one form of business,

      22     albeit new, albeit wonderful, albeit



       1     exciting, over other forms that have been the

       2     backbone of this nation's economy for years.

       3               I also wanted to be in support of a

       4     proposal that really gave states an incentive

       5     to reform the very complex and confusing and

       6     out of date state sales tax structures.  And

       7     I still think it's -- it is a strong, strong

       8     impediment for our governors and state and

       9     local tax administrators to hear that message

      10     that our current system is out of date with

      11     today's economy.  But this proposal at least

      12     encourages us to do the same thing.  It also

      13     commits us to working to eliminate the

      14     federal excise tax and reform

      15     telecommunications taxes.  But we're not

      16     going to be able to get all of those things

      17     at a level that each of us desired.

      18               And I think this policy is more

      19     than a preamble, I think we sell it short to

      20     put it as that.  It was brought forth by a

      21     number of people, with a lot of input with

      22     the thought that if we couldn't get



       1     concurrence on all the levels of detail,

       2     should we miss the opportunity, or should we

       3     take advantage of the opportunity to give

       4     Congress some policy directives?  And I think

       5     this proposal gives us the ability to do

       6     that, and I heartily endorse it and I'll vote

       7     for it.

       8               CHAIRMAN GILMORE:  There seem to be

       9     some hands.  Governor Locke?

      10               GOVERNOR LOCKE:  Thank you,

      11     Chairman Gilmore.  I'm going to be supporting

      12     this, and I do think it's a -- it's -- helps

      13     us frame the issues and informs the American

      14     public of the policy issues that are before

      15     us as a country.

      16               I think it's actually a fairly good

      17     preamble with respect to the majority vote

      18     yesterday with respect to the Business Caucus

      19     Proposal.  But I think it clearly describes

      20     the tensions, the dilemmas that face our

      21     country.  And I don't think it does

      22     disservice to what was voted on by the



       1     majority of the Commission members yesterday.

       2               I regret that we came so very, very

       3     close to discussions last night and this

       4     morning that could have enabled a

       5     supermajority and perhaps almost unanimous

       6     support for a proposition that would have

       7     addressed the issues that we looked at.

       8               Those of us who support this and

       9     those of us who voted against or abstained

      10     from the majority position of the Business

      11     Caucus Proposal yesterday, we do support a

      12     continuation of the moratorium.  We are not

      13     seeking immediately any type of the ability

      14     of the states to impose a tax on remote

      15     sales.  We think that there should be no

      16     access charges with respect to -- or charges

      17     on access to the Internet.  We supported some

      18     clarification of nexus so that those

      19     businesses that do have activities in states

      20     now clearly would not be subject to sales

      21     taxes.  And we supported the elimination of

      22     the -- of the federal excise tax on



       1     telecommunications.  We were so very, very

       2     close, but on a couple of details were not

       3     able to reach agreement and -- and the time

       4     has run out.  And I would hope that over the

       5     next few weeks that we can continue these

       6     discussions.  But in the event that we are

       7     not able to reach final closure, final

       8     agreement with a supermajority vote, a

       9     two-thirds vote as requested by the Congress

      10     for any type of finding or recommendation to

      11     the Congress, I think that what Mr. Pottruck

      12     wrote, while not -- while he has not endorsed

      13     this, nonetheless fairly accurately and --

      14     and fairly paints and describes the dilemmas

      15     that's existing in our country today.  And

      16     for that I think it's a good -- a good piece

      17     that all Americans should be aware of.

      18               CHAIRMAN GILMORE:  Further

      19     discussion?  Mr. Armstrong.

      20               COMMISSIONER ARMSTRONG:  Yes.

      21     Mr. Pottruck just took advantage of advanced

      22     digital technology by calling me on his cell



       1     phone and asked me to express on his behalf

       2     that he did not agree that this would be

       3     presented or that it was his authorship, and

       4     I say that on his behalf.

       5               Second, I will reiterate, Governor,

       6     that I think that this may be a good idea but

       7     I do not think in the context of none of us

       8     having reviewed what I just got distributed

       9     that it's a good idea today.

      10               GOVERNOR LEAVITT:  Mr. Armstron

      11     g, let me respond by saying -- could I

      12     complete my comment, Mr. Chairman?

      13               CHAIRMAN GILMORE:  We are going

      14     around twice now, if you could be brief,

      15     Governor.

      16               GOVERNOR LEAVITT:  I want to

      17     make it clear that I have not done anything

      18     to deliberately take advantage of

      19     Mr. Pottruck's words.  We'd discussed this, I

      20     worked on this document, others worked on the

      21     document, it was part of several different

      22     proposals.  It's been part of circulation.



       1     This is -- I agree, no one should be asked to

       2     vote for it that hasn't seen it.  If you

       3     don't want to vote on it, that's just fine.

       4     I think you've got a proposal, we could vote

       5     on it at a future time.  We can re-write it.

       6     It was a composite of lots of people's work.

       7     I don't represent his support for it.  Dave

       8     Pottruck and I have worked very cooperatively

       9     together; I have the highest regard for him,

      10     and I suspect he feels the same way about me,

      11     and I hope that he would know that I in no

      12     way intended this to do otherwise.

      13               CHAIRMAN GILMORE:  Motion,

      14     seconded, call the question.  All in favor of

      15     calling the question say aye.

      16               All opposed, nay.

      17               There is a nay.  Ms. Rosenker,

      18     please call the roll.

      19               MS. ROSENKER:  Mr. Andal?

      20               COMMISSIONER ANDAL:  Aye.

      21               MS. ROSENKER:  Mr. Armstrong?

      22               COMMISSIONER ARMSTRONG:  Aye.



       1               MS. ROSENKER:  Mr. Guttentag?

       2               COMMISSIONER GUTTENTAG:  Regretfull

       3     y abstain.

       4               MS. ROSENKER:  Mr. Harris?

       5               COMMISSIONER HARRIS:  Aye.

       6               MS. ROSENKER:  Mayor Kirk?

       7               MAYOR KIRK:  No.

       8               MS. ROSENKER:  Governor Leavitt?

       9               Ms. Jones?

      10               COMMISSIONER JONES:  No.

      11               MS. ROSENKER:  Mr. Lebrun?

      12               COMMISSIONER LEBRUN:  No.

      13               MS. ROSENKER:  Governor Locke?

      14               GOVERNOR LOCKE:  No.

      15               MS. ROSENKER:  Mr. Norquist?

      16               COMMISSIONER NORQUIST:  I need

      17     coaching here.  Aye.  Thank you.

      18               MS. ROSENKER:  Mr. Novick?

      19               COMMISSIONER NOVICK:  Abstain.

      20               MS. ROSENKER:  Mr. Parsons?

      21               Mr. Pincus?

      22               COMMISSIONER PINCUS:  Abstain.



       1               MS. ROSENKER:  Mr. Pittman?

       2               COMMISSIONER PITTMAN:  Aye.

       3               MS. ROSENKER:  Mr. Pottruck?

       4               Mr. Sidgemore?

       5               COMMISSIONER SIDGEMORE:  Yes.

       6               MS. ROSENKER:  Mr. Sokul?

       7               COMMISSIONER SOKUL:  Aye.

       8               MS. ROSENKER:  Mr. Waitt?

       9               COMMISSIONER WAITT:  Aye.

      10               MS. ROSENKER:  Governor -- Chairman

      11     Gilmore?

      12               CHAIRMAN GILMORE:  Aye.

      13               The question is called by a vote of

      14     ten yea, five nays, and three abstentions.

      15     All of this document has been offered by

      16     Governor Leavitt as a finding or

      17     recommendation to the report of this

      18     Commission.  All in favor of including this

      19     document as a finding of the Commission

      20     please say aye.

      21               All opposed say nay.

      22               Ms. Rosenker, call the roll please.



       1               MS. ROSENKER:  Mr. Andal?

       2               COMMISSIONER ANDAL:  No.

       3               MS. ROSENKER:  Mr. Armstrong?

       4               COMMISSIONER ARMSTRONG:  No.

       5               MS. ROSENKER:  Mr. Guttentag?

       6               COMMISSIONER GUTTENTAG:  Regretfull

       7     y abstain.

       8               MS. ROSENKER:  Mr. Harris?

       9               COMMISSIONER HARRIS:  No.

      10               MS. ROSENKER:  Mayor Kirk?

      11               MAYOR KIRK:  Aye.

      12               MS. ROSENKER:  Governor Leavitt?

      13               GOVERNOR LEAVITT:  Aye.

      14               MS. ROSENKER:  Ms. Jones?

      15               COMMISSIONER JONES:  Aye.

      16               MS. ROSENKER:  Mr. Lebrun?

      17               COMMISSIONER LEBRUN:  Aye.

      18               MS. ROSENKER:  Governor Locke?

      19               GOVERNOR LOCKE:  Aye.

      20               MS. ROSENKER:  Mr. Norquist?

      21               COMMISSIONER NORQUIST:  Aye.  Nay.

      22     I was looking for my coach.   No, we're fine.



       1     No.  Thank you.

       2               MS. ROSENKER:  Mr. Novick?

       3               COMMISSIONER NOVICK:  Abstain.

       4               MS. ROSENKER:  Mr. Parsons?

       5               COMMISSIONER PARSONS:  No.

       6               MS. ROSENKER:  Mr. Pincus?

       7               COMMISSIONER PINCUS:  Abstain.

       8               MS. ROSENKER:  Mr. Pittman?

       9               COMMISSIONER PITTMAN:  No.

      10               MS. ROSENKER:  Mr. Pottruck?

      11               Mr. Sidgemore?

      12               COMMISSIONER SIDGEMORE:  No.

      13               MS. ROSENKER:  Mr. Sokul?

      14               COMMISSIONER SOKUL:  No.

      15               MS. ROSENKER:  Mr. Waitt?

      16               COMMISSIONER WAITT:  No.

      17               MS. ROSENKER:  Chairman Gilmore?

      18               CHAIRMAN GILMORE:  No.

      19               Governor Leavitt's motion fails,

      20     five yeas, ten nays, three abstention, one

      21     not present.

      22               Other floor amendments to be



       1     offered at this time?  Governor Locke?

       2               GOVERNOR LOCKE:  Mr. Gilmore, I

       3     was just wondering if -- if you want me to

       4     sit by Commissioner Norquist so I can help

       5     him understand how he should vote?

       6               COMMISSIONER PARSONS:  Are you

       7     suggesting that I'm falling down on the job?

       8               GOVERNOR LOCKE:  On a more

       9     serious note, Chairman Gilmore, having voted

      10     on the prevailing side by which the privacy

      11     resolution by Mr. Sokul failed, did not

      12     receive a supermajority, I'd move for

      13     reconsideration of that.

      14               MAYOR KIRK:  Second.

      15               CHAIRMAN GILMORE:  It takes two

      16     thirds to move to reconsider and--

      17               COMMISSIONER SOKUL:  I would ask--

      18               CHAIRMAN GILMORE:  This motion is

      19     in order.

      20               COMMISSIONER SOKUL:  Governor

      21     Gilmore?

      22               CHAIRMAN GILMORE:  Yes?



       1               COMMISSIONER SOKUL:  I would ask

       2     unanimous consent that -- that Governor Locke

       3     and anyone else be able to change their votes

       4     at this time, if they so choose.

       5               COMMISSIONER NORQUIST:  These

       6     people who voted against privacy earlier

       7     today want to switch their vote?  Is that

       8     what's happening?

       9               CHAIRMAN GILMORE:  Without

      10     objection--

      11               COMMISSIONER ARMSTRONG:  Those of

      12     us who abstained would like to be able to

      13     support it.

      14               CHAIRMAN GILMORE:  Without

      15     objection, so that we do not go through the

      16     whole parliamentary process, we will allow --

      17     without objection we'll allow anyone that

      18     wishes to change their vote on Mr. Sokul's

      19     vote to so record that after they have so

      20     designated at this time.  Are there any

      21     people that wish to change their vote?

      22     Governor Locke does.  Any others?



       1               GOVERNOR LOCKE:  I change my

       2     vote from abstention to yes.

       3               CHAIRMAN GILMORE:  From abstention

       4     to yes.

       5               MAYOR KIRK:  Governor

       6     Gilmore, if you would show that I've changed

       7     mine from abstention to yes.

       8               COMMISSIONER ANDAL:  Records will

       9     show I am also so changing my vote.

      10               COMMISSIONER SOKUL:  Thank you.

      11               CHAIRMAN GILMORE:  Well, we're

      12     going to recommend privacy anyway.

      13               COMMISSIONER NORQUIST:  Does --

      14     does this mean the three Federal

      15     representatives are remaining opposed to the

      16     privacy resolution?

      17               CHAIRMAN GILMORE:  I believe their

      18     vote was an abstention, and it remains such.

      19               MAYOR KIRK:  It was

      20     regretfully--

      21               COMMISSIONER NORQUIST:  That --

      22     that's a no vote, that counts.



       1               CHAIRMAN GILMORE:  Other floor

       2     amendments?  Without -- if there are no

       3     others then, we will begin towards our

       4     conclusion because we still have an

       5     opportunity for the Commissioners to each

       6     offer concluding remarks.  I'm going to ask

       7     each Commissioner to hold please their

       8     remarks to three minutes.  Three minutes.

       9     Let us begin if we could, please, for

      10     concluding remarks, and we will begin

      11     alphabetically, Mr. Andal.

      12               COMMISSIONER ANDAL:  I have nothing

      13     to add.

      14               CHAIRMAN GILMORE:  Mr. Andal has

      15     nothing to add at this time.  Mr. Armstrong?

      16               COMMISSIONER ARMSTRONG:  Thank you,

      17     Mr. Chairman.  I would simply say at this

      18     stage that I don't believe that what

      19     separates us are special interests, whether

      20     it's the special interests of government to

      21     tax or for business and others not to tax or

      22     for even divergent interests on nexus.  I



       1     think what we've really run into is the issue

       2     of time.  And we passed an earlier -- I don't

       3     know if it's an amendment, Mr. Chairman, or

       4     whatever, that enables a continuation of

       5     discussion, and I would enter into that with

       6     great sincerity, that we take a lot of time

       7     to express how common we are, and yet at the

       8     end of the day, we can't seem to get over the

       9     goal line.  And I would hope that both sides

      10     of the nexus issue or even the preamble issue

      11     would meet, would conference call, would

      12     video conference in order to see if we can't

      13     bring more to the majority and more to the

      14     resolution of our issues.

      15               CHAIRMAN GILMORE:  Mr. Guttentag.

      16               COMMISSIONER GUTTENTAG:  I pass,

      17     Mr. Chairman.

      18               CHAIRMAN GILMORE:  Delegate Harris,

      19     Paul Harris.

      20               COMMISSIONER HARRIS:  I pass.

      21               CHAIRMAN GILMORE:  Commissioner

      22     Delna Jones.



       1               COMMISSIONER JONES:  I just want to

       2     add that while much of the discussion that's

       3     gone on has been very important and very

       4     critical, I think, to the long term effect of

       5     the issue of taxation and the Internet, I

       6     think some of the things as I sit here

       7     representing a state that does not have a

       8     sales tax has not been affecting my state

       9     particularly.  The issue that is still

      10     dividing us is the issue of nexus.  And I

      11     think in some side discussions some of the

      12     Business people have not really understood

      13     why that's such an important issue.

      14               If you were sitting in my seat

      15     representing a state that does not have a

      16     sales tax, we have really nothing in this

      17     issue other than the issue of an income tax

      18     that we are critically dependent upon.  If

      19     the rules are changed in relationship to the

      20     income tax structure, we really have no place

      21     else to go, as do some of the states who have

      22     only a sales tax and no income tax.  So I



       1     would hope that over the next few weeks or

       2     days that those issues could be resolved.  I

       3     guess I am not as optimistic as I had hoped

       4     to be by now, but I certainly hope that the

       5     powers that be will see it clear to not

       6     impact the income tax system as you're trying

       7     to deal with the sales tax system.

       8               CHAIRMAN GILMORE:  Mayor Kirk.

       9               MAYOR KIRK:  Pass.

      10               CHAIRMAN GILMORE:  Governor

      11     Leavitt.

      12               GOVERNOR LEAVITT:  Mr. Chairman

      13     , I would simply like to impart my personal

      14     appreciation and say what a privilege it's

      15     been to serve with this group.  This is a

      16     group of clear-thinking people who have

      17     devoted themselves to a very difficult task,

      18     particularly those who have devoted

      19     themselves from the private sector.  Those of

      20     us who are in the public sector spend a fair

      21     amount of our time having to do this as our

      22     job.  Obviously, you haven't -- you've taken



       1     on a public duty, and I would just simply

       2     like to say thank you and express my

       3     admiration for all of you.  I hope we'll have

       4     opportunities to deal with each other on less

       5     contentious issues where the bond that we

       6     have developed will be allowed to nurture and

       7     grow.  Thank you.

       8               CHAIRMAN GILMORE:  Mr. Lebrun.

       9               COMMISSIONER LEBRUN:  Thank you,

      10     Mr. Chairman.  First of all, I'd like to

      11     publicly thank Senator Tom Daschle for

      12     appointing me to this great Commission.  It's

      13     been a true privilege for me to serve with

      14     all of you.  I want to thank the Chair for

      15     the courtesies it extended to me and other

      16     members of the Commission.  I want to thank

      17     all the members of the Commission for the

      18     great contributions I think each and everyone

      19     of you have made toward this great debate.

      20     I, too, am somewhat disappointed that we've

      21     not been able to reach a consensus on some

      22     important issues, but I think what we have



       1     done has contributed to the information that

       2     will be continued to be debated in Congress,

       3     in state legislatures, and in city hall.  Any

       4     of us who have been involved in the

       5     legislative process knows that's it's an on

       6     going process, and this process is not going

       7     to end with the conclusion of this Commission

       8     or with our report.  The contributions that

       9     we have made through our debates, through the

      10     papers that are presented, the testimony,

      11     will be utilized by Congress, be utilized by

      12     state legislatures and governors and city

      13     hall, and it has been a great privilege and I

      14     thank you all very much.

      15               CHAIRMAN GILMORE:  Governor Gary

      16     Locke.

      17               GOVERNOR LOCKE:  Thank you very

      18     much, Chairman Gilmore.  And I want to really

      19     say to all the members of the Commission how

      20     much I've appreciated getting to know all of

      21     you, both the private sector, the various

      22     interest groups that have been represented,



       1     and the Federal officials.  I've very much

       2     appreciated getting to know and understand

       3     more of the issues that -- especially in the

       4     business community, how they -- what they

       5     face, and the challenges that you face.

       6               We in the State of Washington very

       7     much want e-commerce to grow.  We're very

       8     proud of the e- commerce businesses that we

       9     have.  And I believe that they truly will

      10     revolutionize the way in which citizens

      11     conduct their businesses and contribute to the

      12     quality of life through America.

      13               We need a level playing field, and

      14     we need, of course, the states to simplify

      15     their tax structure, and that's a

      16     prerequisite to any type of -- of -- of a

      17     level playing field.  We in the State of

      18     Washington do not have an income tax, we rely

      19     almost -- well, we rely to a large extent on

      20     sales taxes, and we just want to make sure

      21     that as we seek a level playing field and as

      22     we encourage e- commerce to grow, that we are



       1     not -- that if the sales tax is still to be

       2     viable, that we're not creating a situation

       3     where we are forced to go to an income tax or

       4     to raise property taxes or other forms of

       5     taxes.  But I would hope that over the next

       6     several weeks that through the informal

       7     discussions, that we still might be able to

       8     reach closure and really present to the

       9     Congress a great recommendation that all of

      10     us can support.  Thank you.

      11               CHAIRMAN GILMORE:  Grover Norquist.

      12               COMMISSIONER NORQUIST:  Yes, I'd

      13     like to say I've enjoyed serving on the

      14     Commission with all of the members.  I was

      15     asked to serve specifically to represent the

      16     interests of consumers.  And I'm particularly

      17     pleased with the proposal that -- that was

      18     passed by this Commission which makes the

      19     case for looking after the interests of

      20     consumers, calling for getting rid of the

      21     three percent telecommunications tax.  I

      22     believe Congress is on route to do that



       1     largely because of the work of this

       2     Commission speaking to state and local

       3     governments about their taxes being at

       4     fourteen percent on telecommunications, way

       5     above other industries.  And ensuring that we

       6     don't do what some politicians wanted to do,

       7     which was calling for some date certain

       8     taxing electronic commerce and distant sales.

       9     As we've learned from the people who've

      10     testified here, we don't want under the

      11     constitution to let Alabama tax collectors

      12     tax -- levy taxes on Michigan businesses any

      13     more than we can sustain the abuse of tort

      14     law where Alabama juries go after Detroit

      15     business with such abandon.

      16               I think this Commission and the

      17     proposal that we have voted through with

      18     majority status is a tremendous step forward.

      19     And I would remind everyone that the very

      20     powerful Medicare Commission, which concluded

      21     recently, put together a majority report,

      22     even though they'd been asked for a



       1     two-thirds majority, behind the bipartisan

       2     Breaux-Thomas Commission, and that was tremendously

       3     effective.  It is exactly the bipartisan

       4     approach that Congress will eventually pass.

       5     It was unfortunate the Clinton administration

       6     instructed their people to vote against it so

       7     it couldn't get two thirds, but it did have a

       8     solid majority and Congress has made it very

       9     clear that they look to that as the model.

      10     And I think that what we've passed now with a

      11     strong majority, and if we can add to it

      12     without compromising on principle, I think

      13     that will be delightful.  This Commission has

      14     been a tremendous success.

      15               CHAIRMAN GILMORE:  Bob Novick.

      16               COMMISSIONER NOVICK:  Pass.

      17               CHAIRMAN GILMORE:  Mr. Richard

      18     Parsons.

      19               COMMISSIONER PARSONS:  Thank you,

      20     Mr. Chairman.  For me, as well as others

      21     who've spoken already, and I assume some who

      22     are yet to speak, it's been a privilege to



       1     serve on this Commission with this

       2     distinguished and honorable group of people.

       3               I confess, however, to being

       4     somewhat disappointed here at the end, or

       5     close to the end, and somewhat bewildered.

       6     I'm disappointed that we haven't been able to

       7     come to a position that a supermajority could

       8     -- could rally around. I agree with

       9     Mr. Norquist that majority is -- is some

      10     evidence, but I think if we could get to the

      11     level of putting together a supermajority,

      12     that might be what they used to call in the

      13     law conclusive evidence to the Congress that

      14     a way has been found.

      15               I do agree with -- with both

      16     Governor Locke and Governor Leavitt who said

      17     that we got very close, that, in fact, all

      18     that separated us at the end was questions

      19     around this nexus issue.  And I think Delna

      20     Jones put her finger on -- on something that

      21     -- that, as we struggle over this last week

      22     to maybe come together one more time, we



       1     should bear in mind.  The real issue in nexus

       2     has very little to do with electronic

       3     commerce.  The real issue that the states are

       4     concerned with in the definition of nexus has

       5     to do with the other ways in which they get

       6     their arms around persons doing business in

       7     their state, namely income tax and other

       8     business activity tax.  Then somehow we can

       9     figure out how to separate these two so that

      10     we can get focused on electronic commerce.

      11     I think a way may be found that we can form

      12     consensus around it.  So maybe Mike's right,

      13     maybe a little more time would help.

      14               But at any rate, the thing I'm --

      15     I'm bewildered about is that if ever there

      16     was an issue that was of national scope and

      17     significance, and indeed it's the issues that

      18     led the Congress to create this commission,

      19     this -- this whole question of the Internet

      20     and taxation and electronic commerce is one.

      21     And if ever there was an issue that one would

      22     assume that -- that -- that, you know, our



       1     leaders might attempt to help lead on, this

       2     is one.  And so I'm -- I'm bewildered by --

       3     by the number of abstentions we've had from

       4     -- on virtually anything and everything.

       5     Particularly from -- from our federal

       6     representatives.  And I would hope that as we

       7     try one last time to push the ball over the

       8     goal line, that -- that we could at least get

       9     some position taken.  I don't think anybody

      10     can hide on this one.  I think that, you

      11     know, this Commission was put together in a

      12     balanced way to present a lot of different

      13     perspectives.  I think several of us, you

      14     know, have -- have tried hard to get home.

      15     Reasonable minds can differ, but I would hope

      16     at the end of the day that we would get --

      17     get everyone to be a part of the process of

      18     finding a solution here, and not just

      19     throwing up their hands and, you know, taking

      20     a powder on every issue.

      21               CHAIRMAN GILMORE:  Mr. Pincus.

      22               COMMISSIONER PINCUS:  Pass.



       1     Obviously, my eloquence failed.

       2               CHAIRMAN GILMORE:  Mr. Pittman.

       3               COMMISSIONER PITTMAN:  Oh, I too

       4     want to say it's certainly been a privilege

       5     serving on this Commission.  And I think it's

       6     been very interesting, not only the

       7     information that's come from the other

       8     Commissioners, but also the information that

       9     we gathered and that came to us, much of it

      10     unsolicited.  I'm sure, like all the other

      11     Commissioners, I heard from a lot of people.

      12     I found it very interesting.  I think it

      13     made, certainly, me more aware of the issues

      14     that confront folks from all walks of life.

      15     Having come from a state which is, when I was

      16     growing up, primarily small business and

      17     still having plenty of relatives in that

      18     business, I'm quite sympathetic to many of

      19     their plights.  And I think the issue which

      20     Dick brings up, that one of nexus issues,

      21     actually has little to do with the Internet,

      22     and it's a nagging issue of nexus and



       1     interpretations that the states have on it

       2     and the burden that places on -- on certain

       3     businesses.  Probably, although Mike said how

       4     many tax forms he has to fill out or

       5     whatever, he can afford it.  I think there's

       6     some business that get -- get crushed by

       7     that, and I think that's certainly what I

       8     heard a lot of.

       9               I do want to say, and I want to

      10     echo what others are saying, I think the --

      11     the -- what is very positive that's come out

      12     of today is indeed hearing that actually we

      13     have much more agreement than we do

      14     disagreement as a group.  And as a matter of

      15     fact, listening to the discussion, it sounds

      16     like there's one issue that we're really

      17     apart on, and I think if you tear it apart,

      18     we're not that far apart even on that one

      19     issue.  So although we didn't take a vote

      20     that gave a supermajority, I do take some

      21     pride and some comfort in the fact that we

      22     managed as a group to get it down to this



       1     much of an issue, instead of this big issue.

       2     And I don't think what we've had here is a

       3     failure, but I do think it's a success, and I

       4     think the very fact that a -- a -- a preamble

       5     which was worked on and, I'm not sure what

       6     draft it was and whose draft it was, that was

       7     put forward, but at least putting that in by

       8     folks who did not vote for the majority

       9     report I think is encouraging because it does

      10     say we're more on the same page than we are

      11     on different pages.

      12               CHAIRMAN GILMORE:  Mr. Sidgemore.

      13               COMMISSIONER SIDGEMORE:  Yeah, I

      14     just want to say this was a new and very

      15     different experience for me.  This -- this is

      16     not like our traditional board meetings or

      17     staff meetings at MCI WorldCom.  And I do

      18     also want to echo the comments that everybody

      19     else made.  It's really been an honor to work

      20     with so many smart, and I would say and

      21     underline, fair-minded people.  I think

      22     everybody here really tried very hard not



       1     only to defend their own constituency, but

       2     also to be open-minded and objective to -- to

       3     a great degree.  I also want to say that I

       4     think the majority proposals that we

       5     presented yesterday, although it didn't, you

       6     know, achieve the two-thirds consensus, I do

       7     think that's going to be a powerful proposal,

       8     and I do think there are a lot of very, very

       9     strong things in that that it'll be

      10     meaningful long term.  But, of course, it was

      11     our hope all along that we would get a

      12     two-thirds consensus.

      13               And on that point, you know, as Bob

      14     said, our differences here, particularly in

      15     this room in the various cities, you know, in

      16     the public forum, our differences have often

      17     seemed very great, and at the end of the day

      18     they turn out to be not, not really that

      19     great.  And I guess I want to be with Mike

      20     Armstrong on this, in that I am an optimist

      21     at heart, and I really believe that since we

      22     are so close, there's still an opportunity to



       1     come together.  And I just want to say that I

       2     am still open-minded, and I think everybody

       3     else is, too, and it would be just terrific

       4     if we could find a way to bridge that over

       5     the next little while.

       6               CHAIRMAN GILMORE:  Mr. Sokul.

       7               COMMISSIONER SOKUL:  Thank you,

       8     Governor.  We're -- our Commission doesn't

       9     make law; we're -- we're reporting to

      10     Congress our work products.  And I think that

      11     Congress -- there was a lot of discussion

      12     over two-thirds majority, what does that

      13     mean?  I think that what happened is Congress

      14     knew this was a tough issue, which is why

      15     they created the Commission in the first

      16     place, and they said we're gonna put in a

      17     two- thirds majority requirement, because if

      18     they can get it, that's going to make our job

      19     a lot easier.  And that's understandable.

      20     And there's still a chance that we might

      21     ultimately be able to make their job much

      22     easier.  However, if we -- if we can't do



       1     that, in the grand scheme of things what

       2     we're reporting back is, you know something,

       3     this is a tough issue.  You know, we're sorry

       4     we couldn't make it easy for you, but this is

       5     a tough issue.

       6               In certain respects we didn't help

       7     them where we possibly could have.  For

       8     example, it would have been helpful if they

       9     had known how the administration felt on

      10     certain issues; but that didn't happen.  But

      11     they do know a lot that they didn't know

      12     before.  They know more about the issues,

      13     they know a lot more about the nuances of the

      14     issues.  They know that there are sides that

      15     are formed on the debate.  You know, when

      16     some people say level playing field I hear

      17     nationalized tax powers, state tax powers.

      18     They know that privacy issues are important

      19     and -- and -- and need more exploration. They

      20     know that international issues are important.

      21     And they know that we all agree that the real

      22     problem here is the state and local tax



       1     systems which have developed since the

       2     Depression, not the Internet, not electronic

       3     commerce.  And those must be reformed.

       4     That's the first step.

       5               So even though we're not making

       6     Congress's job perhaps not as easy as they

       7     hope, I think that our Commission has already

       8     been a tremendous success, and it's been an

       9     honor to be part of it.

      10               CHAIRMAN GILMORE:  Mr. Waitt.

      11               COMMISSIONER WAITT:  Thanks,

      12     Mr. Chairman.  Again, I just wanted to echo

      13     some of the comments that have been made from

      14     some of the other Commissioners.  You know,

      15     it has been a privilege and an honor for me

      16     to serve on -- on this Commission, and it's

      17     also been a tremendous learning experience to

      18     be here, as well.  And I found it, you know,

      19     infinitely valuable.  I would like to thank

      20     Chairman Gilmore for the role that he's

      21     played on this Commission.  And I think where

      22     -- if I look at this and I look at where, you



       1     know, where we might have gotten bogged down,

       2     it was on the tough issue, on the big issue

       3     of what are we going to tax in terms of

       4     transactions on the Internet?  It had to do

       5     with the sales tax.  If you go to all the

       6     meetings, that was the biggest issue that we

       7     dealt with.  Now, we can call it just as

       8     simply the nexus issue, but that issue,

       9     that's just kind of the tip of the iceberg

      10     for the broader issue of what are we going to

      11     tax on the -- on the Internet?

      12               You know, I do have to compliment

      13     Mayor Kirk, or Governor Kirk as he keeps

      14     trying to give you a promotion, and -- and

      15     Governor Leavitt on the role that they

      16     played, because I really do understand where

      17     you're -- where you're coming from, you know.

      18     This is a big issue and you don't want to run

      19     the risk of losing revenues to your states

      20     with -- in an area where electronic commerce

      21     is going to continue to grow.  And I think

      22     the role a lot of us also have played is we



       1     want to keep electronic commerce growing.

       2     And I do think we got -- got very close to

       3     something -- to something there.  There's a

       4     lot of things, and we're in agreement on a

       5     lot of issues.  You know, when it comes to

       6     the digital divide, when it comes to -- comes

       7     to privacy issues, when it comes to

       8     simplification issues, but the fact of the

       9     matter is, the states have to have some

      10     incentive and have to have a little nudge

      11     before they're going to really simplify this

      12     system because this system today is much too

      13     complex for businesses to -- for businesses

      14     to deal with.  And if we are going to move to

      15     a level playing field, we gotta have a much

      16     simpler system if we're gonna deal with a tax

      17     system in this -- in this new economy.

      18               So, again, I think there's a lot of

      19     areas we agree on.  It's been very good for

      20     me to be, you know, part -- part of this

      21     Commission, and I've enjoyed it.  And I think

      22     our work here is, again, just starting, and



       1     we've really raised a lot of the issues and

       2     raised this debate, and the debate's going to

       3     go on and eventually as it came out in -- in

       4     Quill, it's going to be up to Congress to do

       5     what they're going to do and hopefully

       6     they'll listen to some of the advice that we

       7     -- we're -- we're giving them here.

       8               COMMISSIONER PINCUS:  Governor.

       9     Governor, excuse me, I passed, but since

      10     there have been several references to the

      11     Administration, I wonder if I might make a

      12     brief comment?

      13               CHAIRMAN GILMORE:  Mr. Pincus.

      14               COMMISSIONER PINCUS:  Thank you.

      15     Um, I didn't want to unnecessarily prolong

      16     the proceedings, since I think people are

      17     eager to go home, but I did want to, I guess,

      18     in reference to what Mr. Sokul said, that I

      19     think we've tried to be pretty clear about

      20     where the Administration is, both in public

      21     discussions in the last several days and also

      22     in private discussions with a number of



       1     people around this table.  And I think we

       2     have, as I said we were going to do

       3     yesterday, and I think a number of you know

       4     we've been doing for the past twenty hours,

       5     spent quite a bit of time trying to help

       6     bridge the gap and come up with something

       7     that thirteen people can support.  And I'm

       8     glad that we're going to have the opportunity

       9     to continue to work on that.  But I wanted to

      10     sort of undercut the notion that we've been

      11     sitting around drinking water and doing

      12     nothing.  I think we've actually, especially

      13     in the last two days, spent quite a lot of

      14     time trying to -- to address these issues,

      15     and every member of this Commission certainly

      16     has my commitment and my colleagues'

      17     commitment that we're going to continue to do

      18     that.  Thank you.

      19               CHAIRMAN GILMORE:  Well, first of

      20     all, let me begin my remarks by thanking

      21     Mayor Kirk, once again, for your hospitality

      22     here in Dallas.  We're lucky to have been



       1     able to be here.  This is a great American

       2     city.  And, Mr. Mayor, thank you very much

       3     for your hospitality.

       4               I also want to compliment and refer

       5     everyone here and thank the staff of this

       6     Commission that has worked tirelessly,

       7     sometimes under extremely onerous and

       8     difficult circumstances in order to bring us

       9     successfully through these ten months of

      10     these deliberations.  I want to compliment

      11     Heather Rosenker, and ask her to stand, and I

      12     also want to ask everyone on her staff who

      13     has helped her with any of these meetings to

      14     please stand also for our applause.

      15               I also want to thank the members of

      16     the Commission for the exemplary work on

      17     behalf of the people of the United States.

      18     I'm proud to have served as Chairman of this

      19     Commission and with each and every one of

      20     you, and I'm proud of the caliber of these

      21     deliberations, too.  And of the debate that

      22     we have had and the decisions that we, in



       1     fact, have made.  As we consider this

       2     challenge, we've got to think about the fact

       3     that we undertook one of the great challenges

       4     of contemporary policy and we did it in a

       5     ten-month period.  And we reached

       6     conclusions.  And I think we've demonstrated

       7     that even a federal commission can work on

       8     Internet time if it has to.

       9               We've accomplished great deeds on

      10     behalf of the people.  And I want to thank

      11     the Commissioners for their work and their

      12     effort and their service.  This has been the

      13     greatest examination of policy ideas that

      14     I've ever been associated with over these

      15     past ten months.  We have examined all the

      16     ideas, all the thinking on this, every

      17     theory, virtually all the data, all

      18     information, and a debate that began, I

      19     think, a year ago on the basis of sometimes

      20     myth, sometimes assertion, political

      21     posturing, I think has been swept away in the

      22     face of a great deal of thought,



       1     consideration, the facts, analysis, before we

       2     ever moved in this meeting to the proposal of

       3     any type of adoption by a majority of this

       4     Commission.  We have reached majority

       5     positions, in fact, one or two super-

       6     majorities that will rise to the level of a

       7     recommendation.  But other than that, we have

       8     reached a majority report, and it is a solid

       9     one.  And I believe that we have gotten over

      10     the goal line successfully.  And the Congress

      11     will benefit greatly from the success and the

      12     thought and the careful analysis of this

      13     Commission.

      14               I am very proud of the quality of

      15     the ideas that will be in the report to

      16     Congress.  In the words of Senator Lott,

      17     Congress expected bold policy proposals that

      18     reduce tax burdens on America's consumers and

      19     businesses.  And that is exactly what we're

      20     sending to him and to his colleagues.  The

      21     fact that the Internet is the most

      22     transforming economic development since the



       1     industrial revolution, information technology

       2     is driving the economic boom, it is creating

       3     new jobs, it is increasing productivity and

       4     efficiencies in every sector of the economy,

       5     and generating new wealth in America.  The

       6     Internet is not just facilitating commerce,

       7     it is creating new commerce.  For the first

       8     time, consumers can locate perfect

       9     information and access to goods and services

      10     at the touch of a button, and small mom and

      11     pop entrepreneurs can for the first time in

      12     history reach a global marketplace and

      13     compete with big capital intensive companies.

      14     The result is a digital marketplace that Adam

      15     Smith would have marveled at.

      16               America's response to this

      17     revolution should not be to tax it or all the

      18     people, the individual taxpayers and

      19     consumers and small businesses who have been

      20     empowered by it.  The history of the 20th

      21     Century was about bigger government built at

      22     the expense of hard-working people.  But the



       1     21st Century offers the promise of smaller,

       2     more efficient government and a proportionate

       3     increase in the economic freedom and liberty

       4     of individual people who are permitted to

       5     keep more of their own money.  The Internet

       6     changes everything.  Including government.

       7     Government at all levels must now begin to

       8     harness the efficiencies and productivity

       9     increases facilitated by information

      10     technology and the Internet.  Free enterprise

      11     is doing it, government must do it, too.

      12               These ideas generated by the

      13     Commission are going to leave a lasting

      14     legacy on thinking for a new century.  And

      15     what are they that we are talking about?  A

      16     ban on sales tax collections on remote

      17     Internet sales of goods and services.  A ban

      18     on sales taxes on the sale of digitized

      19     goods, such as content and information and

      20     video and music delivered electronically.  A

      21     ban on taxes on Internet access.  An

      22     abolition of the three percent Federal



       1     telephone tax.  An immediate tax cut of over

       2     five billion dollars annually for the

       3     American people.  Simplification of confusing

       4     and burdensome tax systems for all businesses

       5     in America, both retailers and

       6     telecommunications companies.  So this

       7     Commission has rung the bell for the 21st

       8     Century.  And a new paradigm in this day --

       9     in this country.  For that I want to thank

      10     you all for standing firm for the people of

      11     America, and I want you to know that I am

      12     proud to have served with each and every one

      13     of you as your Chairman.  Thank you for your

      14     participation and your commitment to public

      15     service.

      16               We have now come to the end of the

      17     agenda.  Without objection, we are adjourned.

      18     Thank you.

      19                    (Whereupon, at 3:40 p.m., the

      20                    PROCEEDINGS were adjourned.)

      21                       *  *  *  *  *




       1                       CERTIFICATION

       2               As the Reporter, I hereby certify

       3     that this meeting of the E-Commerce

       4     Commission took place in Dallas, Texas, on

       5     March 21, 2000, and were recorded on audio

       6     tape by me.  I further certify that these

       7     audio tapes were then reduced to writing by

       8     me and are a true and accurate record of the

       9     proceedings.

      10               _________________________________
                       Notary Public, State of Texas












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