 Fourth Meeting:
Transcript of March 20
ADVISORY COMMISSION ON ELECTRONIC COMMERCE
FOURTH MEETING
Dallas, Texas
Monday, March 20, 2000
2
1 MEMBERS:
2 THE HONORABLE JAMES S. GILMORE, III CHAIRMAN
Governor, Commonwealth of Virginia
3
DEAN F. ANDAL
4 Chairman, California Board of Equalization
5 C. MICHAEL ARMSTRONG
Chief Executive Office, AT&T
6
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
14
THE HONORABLE MICHAEL O. LEAVITT
15 Governor, State of Utah
16 GENE N. LEBRUN
President, National Conference of
17 Commissioners on Uniform State Laws
18 THE HONORABLE GARY LOCKE
Governor, State of Washington
19
GROVER NORQUIST
20 President, Americans for Tax Reform
21 ROBERT NOVICK
Counselor, U.S. Trade Representative
22
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1 MEMBERS (CONT'D):
2 RICHARD PARSONS
President, Time-Warner, Inc.
3
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
10
STANLEY S. SOKUL
11 Davidson & Company, Inc.
12 THEODORE WAITT
Chairman and CEO, Gateway, Inc.
13
14 * * * * *
15
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17
18
19
20
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22
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1 P R O C E E D I N G S
2 (12:30)
3 CHAIRMAN GILMORE: Good afternoon,
4 ladies and gentlemen. And welcome to the
5 fourth and final meeting of the Advisory
6 Commission on Electronic Commerce. I'm Jim
7 Gilmore, the chairman of the Commission and
8 Governor of the Commonwealth of Virginia, and
9 I would like to welcome everyone and to call
10 this meeting to order.
11 The Advisory Commission on
12 Electronic Commerce was established by the
13 Congress to study the issue of taxation of
14 electronic commerce. And for the last ten
15 months we've been deeply engaged in that
16 endeavor. The Commission held its first
17 meeting in Williamsburg, Virginia last June.
18 We met again in New York City in September,
19 and then again in San Francisco in December.
20 And I think we've come a long way since last
21 June.
22 Since June of last year, the
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1 Commission has heard testimony from over 55
2 experts and academics and think tanks and
3 interest groups representing a broad range of
4 perspectives on tax and electronic commerce
5 policy. If there's an opinion out there,
6 we've heard it. We've received over 7,000
7 pieces of mail and over 50,000 E-mails. Our
8 library has grown to over 280 selections.
9 Our web site received an award from MultiNet.
10 It was selected as one of that publication's
11 top sites of 1999. The Commission has been
12 viewed by tens of thousands of people on
13 C-SPAN, and our work has been closely
14 followed by the members of the United States
15 Congress.
16 In short, I think we can be
17 confident that we have fulfilled our
18 obligation to fully engage and to educate the
19 people of the United States on the policy of
20 Internet taxation. We have followed
21 Mr. Pottruck's work plan. And following that
22 work plan, the Commission began to move
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1 toward some conclusions by distilling dozens
2 upon dozens of issues into a policies and
3 options paper, which we discussed in San
4 Francisco. That document moved us to our
5 task here in Dallas, to sift through the
6 possible solutions and to come to some
7 conclusions regarding the direction that we
8 believe is best for the people of the United
9 States. And I'm confident that we will reach
10 a constructive conclusion and offer to
11 Congress policy proposals that will benefit
12 the people of America with regard to the
13 taxation of electronic commerce. In short,
14 this is the meeting that all of us have been
15 waiting for.
16 I would like to remind everyone
17 that this meeting is open to the public, it
18 is being Web-cast over the internet on the
19 Commission's Web site, which is
20 www.ecommercecommission, one word, .org.
21 Www.ecommercecommission.org.
22 Additionally, we have many members
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1 of the media who are covering our proceedings
2 here today. Among them is C-SPAN. C-SPAN is
3 taping this meeting and will broadcast it at
4 a later date.
5 At this time I would like to
6 introduce the very distinguished members of
7 the Commission. People who have devoted
8 hundreds of hours over the last year to serve
9 the people of the United States. Let me
10 begin, if I could, and I think these are
11 close to being in order.
12 Mr. John W. Sidgmore on my left,
13 the vice-chairman of MCI WorldCom and
14 Chairman of UUNet Technologies.
15 Mr. Robert Pittman, President and
16 chief operating officer of America OnLine.
17 Mr. Stan Sokul, Davidson and
18 Company, Incorporated and consultant to the
19 Association of Interactive Media.
20 Ms. Delna Jones. She is the
21 commissioner of Washington County, Oregon.
22 Governor Locke is not yet here;
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1 when he arrives we will introduce him. He is
2 the Honorable Gary Locke, the governor of the
3 State of Washington, who will be joining us
4 soon.
5 The Honorable Ron Kirk, the mayor
6 of the City of Dallas, where this illustrious
7 meeting is being held today.
8 The Honorable Michael O. Leavitt,
9 the governor of the State of Utah.
10 Let's see here, let's see, we have
11 one change. Mr. Lebrun, is that you? I'm
12 having a hard time seeing through those
13 lights. Gene Lebrun, who is president of,
14 1997-1999, the National Conference of
15 Commissioners of Uniform State Laws.
16 And then of course, good old Joe H.
17 Guttentag, the senior advisor to the
18 assistant secretary for tax policy, United
19 States Department of the Treasury. Joe.
20 On my right, the Honorable Dean F.
21 Andal, the chairman of the California Board
22 of Equalization.
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1 Mr. David Pottruck, President and
2 co-chief executive officer of Charles Schwab
3 Corporation.
4 Mr. Theodore "Ted" Waitt, the
5 founder and chairman of Gateway,
6 Incorporated.
7 Mr. Richard Parsons. He is the
8 president of Time Warner, Incorporated.
9 Mr. Grover Norquist, president of
10 Americans for Tax Reform.
11 Mr. C. Michael Armstrong, the
12 chairman of the Board of AT&T.
13 The Honorable Paul C. Harris,
14 Senior. He is a member of the House of
15 Delegates, Virginia State Legislature.
16 Mr. Lebrun I have previously
17 introduced.
18 Mr. Novick. Excuse me, Mr. Novick.
19 He is the general counsel of the U.S. Trade
20 Representative.
21 And Mr. Andrew J. Pincus, the
22 general counsel of the United States
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1 Department of Commerce.
2 Welcome, ladies and gentlemen, to
3 this meeting in Dallas.
4 And now with a bit of an
5 introduction, I would like to recognize our
6 host here in Dallas today. Mayor Kirk, I
7 want to thank you very much for inviting the
8 Commission to hold this final meeting in
9 Dallas. Dallas has grown to be home to many
10 of the major technology firms in the country,
11 such as EDS and Texas Instruments, whose
12 engineer Jack Kilby (phonetic) developed the
13 first semiconductor, as well as
14 Broadcast.com, now owned by Yahoo. With the
15 concentration of high-tech firms in this
16 area, it's fitting for us to conclude our
17 efforts here in Dallas.
18 Mayor Kirk, we're addressing a big
19 issue; Texas is a big state; Dallas is a big
20 city, and I know I speak for my fellow
21 Commissioners to give you a big thank you for
22 your hospitality. Ladies and gentlemen, the
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1 honorable mayor of the City of Dallas, Ron
2 Kirk.
3 MAYOR KIRK: Governor
4 Gilmore and fellow members of the Commission,
5 it's my privilege to welcome you to Dallas.
6 I was going to tell you about Jack Kilby
7 inventing the first semiconductor and Dallas
8 being the home to important companies like
9 EDS and Broadcast.Yahoo.com and Texas being a
10 big state. But you did a pretty good job of
11 summarizing that, Governor. But we are
12 thrilled to have you here.
13 And this is an important issue for
14 our city and for our state. Many people may
15 not realize the State of Texas now produces
16 more semiconductors than they do in the
17 Silicon Valley. We have the second highest
18 concentration of people employed in the
19 technology industry, with over a hundred
20 thousand high tech jobs added over the last
21 several years, and many of those are here in
22 our metropolitan area. And this is an
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1 important issue and will continue to be for
2 the future. And it's still my hope that this
3 Commission will find enough common ground to
4 make our work substantive rather than
5 perfunctory, and that we will be able to meet
6 the mandate of Congress for the required two
7 thirds majority to give them some direction
8 on the treatment of this incredible industry
9 as we go forward.
10 But in the meantime, we turned the
11 thermostat up and the wind down and cut the
12 rain off, and I hope you all got in safe, had
13 a wonderful day, and I hope our meeting and
14 our work product is as pleasant as the
15 weather. So, welcome, and let's get down to
16 business.
17 CHAIRMAN GILMORE: Thank you,
18 Mr. Mayor.
19 Over the next two days the
20 Commission will discuss several proposals and
21 resolutions that address our main charge:
22 What tax policies the people of America
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1 should pursue with regard to electronic
2 commerce. Keeping with tradition of this
3 Commission, I certainly encourage open
4 discussion, a frank exchange of ideas and an
5 honest debate over the next two days. I
6 expect that there are going to be some issues
7 that we will agree on and some we will not
8 agree on. But the debate itself will be
9 providing valuable information to Congress
10 and will be recorded for posterity at the
11 National Archives in Washington, D.C. Which
12 is a bit shocking. But in any case it will
13 be -- it will be there.
14 Ladies and gentlemen, an agenda has
15 been distributed to you. You will see that
16 the agenda proposes an orderly process for us
17 to move through the resolution and amendments
18 pre-filed, in advance of the meeting,
19 pursuant to Operating Rule IV.C. I would
20 like to call everybody's attention to
21 Operating Rule IV because it served the
22 important public purpose of providing the
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1 media, the public, and each of the
2 Commissioners fair advance notice of the
3 issues and policy proposals to be presented
4 and debated at this meeting. This is a fair
5 and open process that the Commission approved
6 when we developed the Operating Rules, and
7 Heather Rosenker, the Executive Director,
8 sent several notices to all Commissioners
9 reminding everyone of each deadline for
10 filing resolutions and amendments to be
11 considered here. As you can see from the
12 agenda that's in your notebooks there were
13 some 29 -- and your notebooks, there were
14 some 29 resolutions and amendments filed in
15 advance, and some of them are quite
16 comprehensive and extensive. The agenda
17 gives each Commissioner who complied with --
18 who complied with the rules a fair
19 opportunity to present his or her proposal.
20 We have received a procedural
21 resolution filed by Andy Pincus to amend the
22 rules to permit Commissioners to raise new
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1 proposals from the floor even if they were
2 not filed in advance. With regard to
3 Commissioner Pincus's resolution let me say
4 that I think that each of the Commissioners
5 here wants to preserve some flexibility in
6 the procedures to offer floor amendments,
7 depending upon how the debate goes today.
8 But I think that it's important that we give
9 those Commissioners who followed the rules an
10 opportunity to present and adopt their
11 proposals that they pre-filed with fair
12 notice to the world. So I've attempted to
13 balance the rights of each of the
14 Commissioners in a fair and an orderly
15 process.
16 First, the agenda takes up all
17 pre-filed proposals, resolutions, and
18 amendments, so long as each Commissioner
19 wishes to present and move their proposals.
20 After we've concluded the first round of
21 presentations and debate and amendments, then
22 I propose that we take up Mr. Pincus's
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1 resolution. And if it is the Commission's
2 pleasure, give each Commissioner an
3 opportunity to offer further amendments to
4 proposals from the floor.
5 Now, I think this is the fair way
6 to proceed. It protects the rights of the
7 Commissioners who operated in accordance with
8 the rules in round one; it provides for an
9 orderly and efficient process so that we can
10 get through the 29 pre-filed proposals
11 without staying here until Thursday; and it
12 accommodates a forum for floor amendments for
13 those Commissioners who wish to offer them in
14 a second round. Now, a copy of this agenda
15 was sent out last Thursday.
16 Without objection, I move that the
17 agenda be adopted as printed, and then we
18 will proceed to the business of the day.
19 GOVERNOR LEAVITT: Mr. Chairman
20 --
21 CHAIRMAN GILMORE: We'll start --
22 GOVERNOR LEAVITT: Mr.
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1 Chairman, I think there is some question with
2 respect to the agenda.
3 CHAIRMAN GILMORE: Governor
4 Leavitt.
5 GOVERNOR LEAVITT: I think
6 there is some concern about the fact that
7 we're going to be looking to develop a
8 proposal in toto. And I'd like to move that
9 we amend the agenda to provide for the
10 individual resolutions that would be offered
11 at this point in the agenda to the end of the
12 agenda when we would be able to look at those
13 in the context of the larger proposal.
14 That's my motion.
15 CHAIRMAN GILMORE: The Governor of
16 Utah, Mike Leavitt, has moved that we, in
17 fact, amend the agenda. And what is the
18 nature of the amendment?
19 GOVERNOR LEAVITT: The items
20 that we would move to now, which would be the
21 international issues, Items A1 and A2, I
22 would like to have those moved to the end of
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1 the resolutions that have been filed. The
2 items under B, Domestic Issues, really begin
3 to focus us on the entire package that we
4 ultimately hope to develop. And I would
5 argue and move that we not try to break those
6 into individual pieces, but deal with them
7 after we've had a chance to look at the
8 context of the entire report.
9 CHAIRMAN GILMORE: Is it your
10 position that the floor amendments be
11 considered throughout?
12 GOVERNOR LEAVITT: No, to be
13 specific, I would move items A1 and A2 to be
14 Item 17 1 and 2.
15 CHAIRMAN GILMORE: What is the
16 pleasure of the Commission? Is there any
17 further debate on the movement of the agenda
18 prior to its adoption?
19 There is a motion from the floor
20 that Items A 1 and 2, the international
21 issues, be moved to be Items 17 and 18 in
22 Section B. Is there a second?
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1 COMMISSIONER ANDAL: Mr. Chairman?
2 CHAIRMAN GILMORE: Mr. Andal. Is
3 there a second?
4 COMMISSIONER LEBRUN: I'll second.
5 CHAIRMAN GILMORE: Mr. Lebrun
6 seconds. Open for debate. Mr. Andal.
7 COMMISSIONER ANDAL: Yeah, unless
8 there's a compelling reason that I haven't
9 heard of, Governor Leavitt, I think that
10 everybody here has prepared for what is kind
11 of a torturous technical journey today by
12 having the items in order. And unless
13 there's some reason that the international
14 issues couldn't be resolved first, there's
15 only two of them, and they don't relate to
16 the domestic issues directly, I'd rather
17 stick to the formula that we knew we were
18 going to prepare for. I think if we start
19 mixing and matching these and moving around,
20 that we're going to get -- make this a more
21 complicated job than it would otherwise be.
22 Is there a -- is there a reason, other
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1 than --
2 GOVERNOR LEAVITT: The reason,
3 basically, is we'd like to deal with the
4 resolutions in the context of specific
5 proposals as opposed to looking at them one
6 at a time. Context, we need to have context
7 in which all of this fits.
8 COMMISSIONER ANDAL: Okay. Yeah, I
9 understand viewing things in context, but I'm
10 not sure why these two items at the beginning
11 or at the end are any less in context.
12 They're both individual items, and I think
13 it's just a matter of order.
14 CHAIRMAN GILMORE: Mr. Norquist?
15 COMMISSIONER NORQUIST: This builds
16 on a resolution that I introduced and that we
17 passed in New York, which is generally being
18 supportive of this Administration's
19 international position. I was sort of happy
20 that we were able to be supportive of
21 president Clinton's international initiative
22 prior to Seattle. And I think it's sort of a
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1 consensus issue within us, and when we have
2 the opportunity to be supportive of some --
3 something the Administration's doing right,
4 I'd kind of like to take it.
5 CHAIRMAN GILMORE: Further debate?
6 Okay, we'll call the question on
7 the question of Governor Leavitt to move the
8 first two items around in the agenda prior to
9 its adoption. Executive Director, would you
10 please call the role on the issue of whether
11 we pass or defeat Governor Leavitt's motion.
12 MS. ROSENKER: Mr. Andal?
13 COMMISSIONER ANDAL: No.
14 MS. ROSENKER: Mr. Armstrong?
15 COMMISSIONER ARMSTRONG: No.
16 MS. ROSENKER: Governor Gilmore?
17 CHAIRMAN GILMORE: No.
18 MS. ROSENKER: Mr. Guttentag?
19 COMMISSIONER GUTTENTAG: Yes.
20 MS. ROSENKER: Mr. Harris?
21 COMMISSIONER HARRIS: No.
22 MS. ROSENKER: Mr. Kirk?
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1 MAYOR KIRK: Yes.
2 MS. ROSENKER: Ms. Jones?
3 COMMISSIONER JONES: Yes.
3 MS. ROSENKER: Governor Leavitt?
4 GOVERNOR LEAVITT: Yes.
5 MS. ROSENKER: Mr. Lebrun?
6 COMMISSIONER LEBRUN: No.
MS. ROSENKER: Governor Locke here?
7 Mr. Norquist?
8 COMMISSIONER NORQUIST: Yes. No.
9 Sorry.
10 COMMISSIONER NOVICK: Good start.
11 Does he get to vote twice?
12 COMMISSIONER NORQUIST: I voted for
13 Locke and had --
14 MS. ROSENKER: Mr. Norquist?
15 COMMISSIONER NORQUIST: No. Thank
16 you.
17 MS. ROSENKER: Mr. Novick?
18 COMMISSIONER NOVICK: Yes.
19 MS. ROSENKER: Mr. Parsons?
20 COMMISSIONER PARSONS: No.
21 MS. ROSENKER: Mr. Pincus?
22 COMMISSIONER PINCUS: Yes.
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1 MS. ROSENKER: Mr. Pittman?
2 COMMISSIONER PITTMAN: No.
3 MS. ROSENKER: Mr. Pottruck?
4 COMMISSIONER POTTRUCK: No.
5 MS. ROSENKER: Mr. Sidgmore?
6 COMMISSIONER SIDGEMORE: No.
7 MS. ROSENKER: Mr. Sokul?
8 COMMISSIONER SOKUL: No.
9 MS. ROSENKER: Mr. Waitt?
10 COMMISSIONER WAITT: No.
11 CHAIRMAN GILMORE: The Executive
12 Director's handed me the roll call. In favor
13 of the motion, seven, against the motion
14 eleven, one abstention. The motion is
15 defeated.
16 Without further objection, we will
17 proceed with the agenda. We start with the
18 presentation of the resolution filed by the
19 Business Caucus entitled, Proposal to Foster
20 International Consensus Regarding the
21 Taxation of Electronic Commerce. And who
22 would like to present this resolution on
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1 behalf of the Business Caucus? Is there a
2 designee?
3 First of all, is there a motion to
4 adopt the Business Caucus --
5 MAYOR KIRK: I'll move
6 approval of Item 1.
7 SPEAKER: Second.
8 CHAIRMAN GILMORE: Motion for the
9 approval of Item 1. The Proposal to Foster
10 International Consensus Regarding the
11 Taxation of Electronic Commerce. It is moved
12 and seconded. Is there debate on this issue
13 or presentation?
14 COMMISSIONER PITTMAN: I would like
15 to just say a couple of words, if I could.
16 The international proposal is a four-part
17 proposal that recommends Congress take
18 actions that will foster international
19 consensus regarding taxation of electronic
20 commerce.
21 Our four-part plan includes the
22 following specific recommendations. One,
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1 that Congress should support a permanent
2 extension of the current moratorium on
3 tariffs and duties on electronic
4 transmissions. This proposal has been
5 discussed at every meeting, and nearly all of
6 us have favorably commented on the
7 desirability of a continued tariff
8 moratorium.
9 Two, Congress should affirm support
10 for the OECD's efforts to build international
11 consensus for tax rules that allow continued
12 growth of global E-commerce activities. The
13 OECD member nations have already made
14 substantial progress. For example, they've
15 obtained agreement that new taxes should not
16 be applied to E-commerce, and they support
17 application of existing rules to avoid trade
18 distortions.
19 Three, Congress should provide
20 adequate funding and other support for the
21 U.S. Treasury Department's efforts to build
22 international consensus for cross-border
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1 E-commerce activities. It's important to
2 enable the U.S. to work with foreign
3 governments. We need to ensure that tax
4 policies are not used to erect barriers to
5 markets for U.S. companies.
6 Fourth, and finally, Congress
7 should avoid legislation inconsistent with
8 the tax policy principles that emerge from
9 the international discussion. Otherwise our
10 leadership position could be compromised if
11 we take actions inconsistent with the tax
12 policies that we're encouraging other
13 countries to adopt. We can be sure that the
14 international community is watching this
15 Commission. Approval of this proposal will
16 demonstrate our commitment to a consensus
17 approach to E-commerce tax policies, to fair
18 treatment of consumers and businesses, and to
19 continued development of E-commerce. I do
20 encourage you to vote for this proposal.
21 CHAIRMAN GILMORE: Further
22 discussion? Mr. Pincus?
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1 COMMISSIONER PINCUS: Thank you,
2 Governor. Yeah, I would like to say a few
3 words, maybe generally, and then also
4 specifically about this issue.
5 I think the Commission has begun a
6 national discussion of some very important
7 issues. The president recognized the
8 importance of these issues early in February
9 '98 when he announced his support for the
10 Internet Tax Freedom Act and noted the
11 importance of developing consensus on them.
12 In accordance with that view that
13 the interests of all stakeholders have to be
14 taken into account, we've sought to work with
15 everyone, making good faith attempts to
16 achieve consensus within the Commission. And
17 I have to single out Governor Leavitt, who's
18 the chairman of the National Governors
19 Association, as someone who's truly made
20 Herculean efforts toward that goal.
21 Unfortunately, the Commission has
22 not yet been able to serve as a forum to
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1 forge that consensus. And we'd looked
2 forward to supporting an overall package that
3 would have reflected the views of at least
4 two thirds of the Commission, as Congress
5 required for a valid recommendation. And
6 we've been working hard as an honest broker
7 to try and achieve the balance that that
8 requires between technology interests, state
9 and local governments who have to provide
10 services and the continued viability of
11 traditional retailers, large and small. And
12 we've been working hard talking to many
13 members here about that. Unless the
14 consensus develops, however, we're going to
15 abstain from voting.
16 We remain open, however, to the
17 possibility that a principle consensus will
18 develop, and we hope before the meeting is
19 over we can attract two- thirds consensus,
20 but we do have views on the issues. And I
21 would like to say in connection with this
22 debate, as we've spoken of before, the
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1 Administration has argued forcefully
2 internationally that the current moratorium
3 on customs, duties on electronic
4 transmissions should be made permanent, and
5 that any taxation of electronic commerce
6 should be neutral, non- discriminatory,
7 simple, certain, fair, and flexible. And we
8 continue and we will continue to argue those
9 positions forcefully in every international
10 forum.
11 COMMISSIONER SOKUL: Governor?
12 CHAIRMAN GILMORE: Yes, sir.
13 Mr. Sokul?
14 COMMISSIONER SOKUL: I just have a
15 quick question for Tom, our counsel. In
16 light of that announcement, that the
17 Administration is going to abstain, how does
18 that affect the two-thirds supermajority
19 requirement? Because as I understand it, the
20 statute says the two thirds is with reference
21 to the Commissioners serving at the time.
22 Not serving at the time and voting, so
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1 abstention equals a no, effectively. Is that
2 true?
3 CHAIRMAN GILMORE: I'm going to ask
4 the Counsel and Parliamentarian to address
5 the issue that was raised --
6 COMMISSIONER SOKUL: But basically
7 for all intents and purposes a decision to
8 abstain is a decision to vote no.
9 MR. GRIFFITH: The statute requires
10 that for findings and recommendations to be
11 included in the report, they achieve
12 two-thirds support of the members of the
13 Commission. There are nineteen members of
14 the Commission. It would take thirteen
15 members to achieve that supermajority
16 requirement. Whether a particular
17 Commissioner abstains or not does not affect
18 that requirement. So to become a finding or
19 recommendation, according to the language of
20 the statute, you would need thirteen votes.
21 Does that answer your question,
22 Commissioner Sokul?
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1 COMMISSIONER SOKUL: I think so. I
2 think what you're saying is the abstention
3 has the same effect as a no.
4 CHAIRMAN GILMORE: Are you
5 inquiring as to whether an abstention
6 prevents the Commission from reaching the
7 thirteen number? It obviously does --
8 COMMISSIONER SOKUL: I guess that's
9 my point, that if this is going to make it
10 more difficult to reach two thirds because
11 three players have been taken out of an
12 equation and an abstention is effectively a
13 no.
14 CHAIRMAN GILMORE: Well, we shall
15 see. Are there other inquiries on this
16 matter? Any other debate that wishes to be
17 had? Is the Commission -- Mr. Norquist?
18 COMMISSIONER NORQUIST: I just want
19 to speak in favor of the measure. I think
20 the Administration has moved in the right
21 direction on this, and I think the Business
22 Proposal Resolution is very helpful and moves
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1 in the right direction, and I'm delighted to
2 be able to support it.
3 CHAIRMAN GILMORE: Okay.
4 SPEAKER: Call the question.
5 CHAIRMAN GILMORE: The motion has
6 been made to call the question. Second it?
7 SPEAKER: Second.
8 CHAIRMAN GILMORE: All in favor of
9 calling the question please say aye.
10 All opposed nay?
11 Roll call vote, please, on the
12 adoption of the first provision, the Business
13 Council Proposal to Foster International
14 Consensus Regarding the Taxation of
15 Electronic Commerce.
16 Ms. Rosenker, would you call the
17 roll, please?
18 MS. ROSENKER: Mr. Andal?
19 COMMISSIONER ANDAL: Aye.
20 MS. ROSENKER: Mr. Armstrong?
21 COMMISSIONER ARMSTRONG: Yes.
22 MS. ROSENKER: Mr. Guttentag?
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1 COMMISSIONER GUTTENTAG: For the
2 process and procedure reasons announced by
3 Governor Leavitt and by Commissioner Pincus,
4 I abstain.
5 MS. ROSENKER: Mr. Harris?
6 COMMISSIONER HARRIS: Aye.
7 MS. ROSENKER: Mr. Kirk?
8 MAYOR KIRK: Same reasons
9 articulated by Mr. Guttentag and the
10 Governor, I abstain.
11 MS. ROSENKER: Ms. Jones?
12 COMMISSIONER JONES: I abstain.
13 MS. ROSENKER: Governor Leavitt?
14 GOVERNOR LEAVITT: Abstain.
15 MS. ROSENKER: Mr. Lebrun?
16 COMMISSIONER LEBRUN: Abstain.
17 MS. ROSENKER: Mr. Norquist?
18 COMMISSIONER NORQUIST: Yes.
19 MS. ROSENKER: Mr. Novick?
20 COMMISSIONER NOVICK: Abstain.
21 MS. ROSENKER: Mr. Parsons?
22 COMMISSIONER PARSONS: Aye.
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1 MS. ROSENKER: Mr. Pincus?
2 COMMISSIONER PINCUS: Abstain.
3 MS. ROSENKER: Mr. Pittman?
4 COMMISSIONER PITTMAN: Yes.
5 MS. ROSENKER: Mr. Pottruck?
6 COMMISSIONER POTTRUCK: Yes.
7 MS. ROSENKER: Mr. Sidgmore?
8 COMMISSIONER SIDGEMORE: Yes.
9 MS. ROSENKER: Mr. Sokul?
10 COMMISSIONER SOKUL: Yes.
11 MS. ROSENKER: Mr. Waitt?
12 COMMISSIONER WAITT: Yes.
13 CHAIRMAN GILMORE: Chairman votes
14 yes, also.
15 MS. ROSENKER: Chairman Gilmore.
16 CHAIRMAN GILMORE: The vote on the
17 first item on the agenda is eleven yeas,
18 seven abstentions. Obviously it passes
19 eleven to no nays, seven abstentions. It is
20 a majority vote, but not the statutory two
21 thirds to yet be a recommendation within the
22 report.
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1 The next item is Commissioner
2 Sokul's recommendation, The Need for Improved
3 Knowledge of International Relations.
4 Mr. Sokul, you wish to move the
5 adoption of your resolution?
6 COMMISSIONER SOKUL: Yes.
7 CHAIRMAN GILMORE: Second?
8 SPEAKER: Second.
9 CHAIRMAN GILMORE: Moved and
10 seconded to adopt Mr. Sokul's resolution, The
11 Need for Improved Knowledge of International
12 Ramifications.
13 COMMISSIONER SOKUL: Governor
14 Gilmore?
15 CHAIRMAN GILMORE: It's been moved
16 and seconded. Debate. Mr. Sokul?
17 COMMISSIONER SOKUL: If it would
18 tease out some votes, I'd have this come up
19 last.
20 GOVERNOR LEAVITT: It just
21 might.
22 MAYOR KIRK: I might remind
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1 Mr. Sokul, you just voted against that
2 opportunity. Would you like to change your
3 vote on Governor Leavitt's motion?
4 COMMISSIONER SOKUL: I guess what
5 you're saying is won't make a difference.
6 MAYOR KIRK: Might make a
7 big difference.
8 CHAIRMAN GILMORE: Mr. Sokul, the
9 Commission has concluded that it will not at
10 this time recommend the first item. It may
11 not recommend yours. But the business of
12 this Commission will be reported to the
13 Congress, so please proceed.
14 COMMISSIONER SOKUL: Okay. I
15 offered this resolution because I think
16 there's a distinction that's important
17 between the development of international
18 rules among nations and how domestic
19 decisions affect our global competitiveness.
20 The previous resolution, which was an
21 excellent resolution, deals with the need to
22 develop consensus among nations on an
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1 international level. My resolution deals
2 with how domestic decisions that we make
3 amongst ourselves as a nation may have global
4 ramifications.
5 The resolution makes two points.
6 First, I think we should recommend to
7 Congress that whatever they do on this issue
8 they should explore: How would that system
9 that they set up or the states set up affect
10 the competitiveness of United States
11 companies competing in the global
12 marketplace? And on that issue I would note
13 that at the last meeting I asked the official
14 from the EU if he ever foresaw a time when
15 the European Union would require their
16 companies to collect state and local taxes
17 for our country. And his response was: No,
18 the states should maybe try to come up with a
19 system where their companies would
20 voluntarily comply. That raises the question
21 of what if we come up with a system that
22 forces our companies to collect every state's
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1 taxes and burdens our companies that way? I
2 mean, in the Internet environment, what's to
3 prevent a consumer from buying a product from
4 an international company? And unless we're
5 going to set up a world tax organization or
6 states are going to stop little brown trucks
7 at the border, like we heard last meeting,
8 that's an issue. And I think it's an
9 important issue that needs to be discussed.
10 Second, the resolution makes the
11 point that Congress should consider the
12 effects of our decisions becoming a model for
13 global action. We're the leaders in
14 E-commerce, the world watches us for signals
15 as to what's important and how things should
16 be structured. And how we treat our
17 sub-national taxes could become a model for
18 global action.
19 So my resolution just raises these
20 issues in point -- and I suggest that the
21 Commission should ask Congress not to decide
22 one way or another, but just note that these
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1 are important issues that should be explored
2 and considered as they debate the Internet
3 tax issue domestically.
4 CHAIRMAN GILMORE: Any further
5 discussion on Mr. Sokul's resolution?
6 Seeing none, ready to call the
7 question?
8 COMMISSIONER ARMSTRONG: Call the
9 question.
10 CHAIRMAN GILMORE: Mr. Armstrong
11 calls the question. Second?
12 SPEAKER: Second.
13 CHAIRMAN GILMORE: All in favor of
14 calling the question say aye.
15 All opposed nay?
16 We'll call the roll, please,
17 Ms. Rosenker.
18 MS. ROSENKER: Mr. Andal?
19 COMMISSIONER ANDAL: Aye.
20 MS. ROSENKER: Mr. Armstrong?
21 COMMISSIONER ARMSTRONG: Aye.
22 MS. ROSENKER: Mr. Guttentag?
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1 COMMISSIONER GUTTENTAG: I abstain
2 for the reasons stated with respect to the
3 previous resolution.
4 MS. ROSENKER: Mr. Harris?
5 COMMISSIONER HARRIS: Aye.
6 MS. ROSENKER: Mayor Kirk?
7 MAYOR KIRK: I abstain.
8 MS. ROSENKER: Ms. Jones?
9 COMMISSIONER JONES: Abstain.
10 MS. ROSENKER: Governor Leavitt?
11 GOVERNOR LEAVITT: As indicated
12 to Mr. Sokul, this may well have my vote at a
13 future time, as well as Mr. Norquist's, and I
14 abstain.
15 MS. ROSENKER: Mr. Lebrun?
16 COMMISSIONER LEBRUN: Abstain.
17 MS. ROSENKER: Governor Locke?
18 GOVERNOR LOCKE: Abstain.
19 MS. ROSENKER: Mr. Norquist?
20 Mr. Novick?
21 COMMISSIONER NOVICK: Abstain.
22 MS. ROSENKER: Mr. Parsons?
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1 Mr. Pincus?
2 COMMISSIONER PINCUS: Abstain.
3 MS. ROSENKER: Mr. Pittman?
4 COMMISSIONER PITTMAN: Yes.
5 MS. ROSENKER: Mr. Pottruck?
6 COMMISSIONER POTTRUCK: Yes.
7 MS. ROSENKER: Mr. Sidgmore?
8 COMMISSIONER SIDGEMORE: Yes.
9 MS. ROSENKER: Mr. Sokul?
10 COMMISSIONER SOKUL: Yes.
11 MS. ROSENKER: Mr. Waitt?
12 COMMISSIONER WAITT: Yes.
13 MS. ROSENKER: Chairman Gilmore?
14 CHAIRMAN GILMORE: Aye.
15
16 Mr. Sokul's resolution has received
17 eleven votes. No nay votes and eight
18 abstentions.
19 COMMISSIONER ANDAL: Mr. Chairman?
20 CHAIRMAN GILMORE: Mr. Andal.
21 COMMISSIONER ANDAL: Yes, I have a
22 parliamentary inquiry of the Chair. Given
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1 that we have a significant number of
2 Commissioners who are not going to vote on
3 these issues, they're going to abstain, I'd
4 like to ask the Chair to give me the answer
5 to two questions. One is, what is the legal
6 significance of a majority vote rather than a
7 two-thirds majority vote? And will a
8 majority vote be reflected in our report to
9 Congress?
10 CHAIRMAN GILMORE: Call on the
11 Counsel and Parliamentarian for a response to
12 that.
13 COMMISSIONER LEBRUN: Mr. Chairman?
14 CHAIRMAN GILMORE: Mr. Lebrun.
15 COMMISSIONER LEBRUN: Yeah --
16 CHAIRMAN GILMORE: Well, just a
17 moment, Mr. Lebrun --
18 COMMISSIONER LEBRUN: On this --
19 CHAIRMAN GILMORE: -- I've called
20 on the Parliamentarian first, and then after
21 his remarks I will come back to you.
22 Mr. Griffith?
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1 MR. GRIFFITH: Thank you, Mr.
2 Chairman. This is a question that's been
3 directed to our office many times since the
4 Commission was created, and we've answered it
5 informally to a number of Commissioners and
6 their staff. I'm asking Mr. Jowers to
7 distribute to each of the Commissioners now a
8 letter that we prepared over the weekend in
9 response to this question.
10 At the outset let me explain the
11 role of Counsel, the role of Parliamentarian
12 on these sorts of issues. The Commission
13 itself determines its own rules. The
14 Commission itself has the responsibility of
15 determining the statute and what it means and
16 how it applies to the Commission's
17 proceeding. Nevertheless, Counsel can be and
18 is now being called upon to give its best
19 advice about the meaning of the statute. And
20 that's what we have done. And you'll be
21 seeing our work product in just a moment.
22 Let me describe it for you orally.
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1 The first point to keep in mind is that it is
2 the Internet Tax Freedom Act itself that
3 established the Commission. It is the source
4 of the authority for the Commission to
5 transact its business. In the statute,
6 Section 1103 of the Internet Tax Freedom Act,
7 it makes clear that it is the obligation and
8 duty of this Commission to transmit a report
9 of the results of its study to Congress.
10 There is language in Section 1103 that talks
11 about a two- thirds supermajority
12 requirement. That language applies only to a
13 finding or recommendation of the Commission.
14 It is clear from our vantage point that
15 Congress wants a report, that Congress
16 expects a report; that is consistent with
17 hallmark principles of congressional
18 accountability that have followed advisory
19 commissions since they were created.
20 Now, the content of that report is
21 up to the Commission. For example, in our
22 view it would be perfectly appropriate for
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1 the Commission in its report to Congress to
2 include a listing of all the votes that came
3 before the Commission. To vote -- to report
4 the yeas and nays of the proposals.
5 Furthermore, it would be appropriate for the
6 Commission, if it were to determine that it
7 wanted to present the report in this way, to
8 highlight certain of the votes as being more
9 significant for Congress's attention than
10 other votes. Furthermore, it's also our view
11 that, if the Commission were so to determine
12 it, that it would be within the meaning of
13 the Act that the Commission could report the
14 majority proposals of the Commission. How
15 the Commission presents its report is
16 squarely within its discretion. But it does
17 not have the authority to call its work
18 product a finding or a recommendation unless
19 it has two thirds of the votes of the
20 Commissioners. Presumably, for those items
21 that two-thirds supermajority support can be
22 garnered, that will have a greater influence
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1 and impact upon Congress. Congress will
2 weight that differently than it would any of
3 the other actions of the Commission. But
4 it's certainly within the discretion of the
5 Commission, in our view, to present Congress
6 a report of its dealings.
7 But finally, it's been brought to
8 our attention that over the weekend the
9 Majority Leader of the Senate, Senator Lott,
10 and then I believe today the Speaker of the
11 House of Representatives, Speaker Hastert,
12 have sent letters to the Commission saying
13 that in their view they would welcome a
14 report of this Commission's works that
15 included majority votes, even if there were
16 no issues on which a supermajority could be
17 attained.
18 We, finally, think that that is
19 significant direction inasmuch as Congress
20 created this Commission, it is a Commission
21 within the Legislative Branch of Congress,
22 that Commissioners would do well to weigh
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1 heavily the views of the Congressional
2 leadership about what they expected to have
3 from this Commission.
4 Now, with that, I'd be happy to
5 answer any questions. Does that answer your,
6 question?
7 COMMISSIONER ANDAL: It does.
8 MR. GRIFFITH: Okay.
9 CHAIRMAN GILMORE: It is ruling of
10 the Chair that the report is mandatory under
11 the statute, all actions receiving a majority
12 vote on this Commission will be included and
13 designated as such. Only items receiving the
14 super two-thirds majority will be designated
15 as findings and recommendations.
16 COMMISSIONER LEBRUN: Mr. Chairman?
17 CHAIRMAN GILMORE: Mr. Lebrun.
18 COMMISSIONER LEBRUN: May I address
19 this point?
20 CHAIRMAN GILMORE: Yes, sir.
21 COMMISSIONER LEBRUN: Will all due
22 respect, I don't agree with Counsel. The
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1 statute's very clear. It says: No finding
2 or recommendation shall be included in the
3 report unless agreed to by at least two
4 thirds of the members of the Commission
5 serving at the time the finding and
6 recommendation is made. Those of us in the
7 group that are lawyers know what findings
8 are. When you try a case to a court, you
9 make findings of fact and conclusions of law.
10 Both Items A1 and A2 conclude findings of
11 fact, if you use it in the legal sense. They
12 set forth the premise upon which a
13 recommendation may or may not be made, but
14 they are clearly findings. And if the
15 findings don't obtain the necessary
16 two-thirds vote, they are not to be included
17 in the report. Had Congress wanted us to
18 include in the report something less than
19 findings that receive two-thirds vote, it
20 could have said so. It chose not to. It's
21 my understanding that the people who are
22 suggesting that it takes less than two thirds
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1 are the people who suggested to Congress that
2 they require the two thirds in the first
3 place. I think if we go this route, we're
4 changing the rules, we're not doing what
5 Congress told us to do, and I strongly object
6 to including in the report anything that
7 receives anything less than the necessary two
8 thirds vote, because these are clearly
9 findings, and calling them something else
10 doesn't change what they actually are. They
11 are findings.
12 CHAIRMAN GILMORE: Mr. Lebrun, is
13 that by way of a challenge to the ruling of
14 the Chair?
15 COMMISSIONER LEBRUN: I suspect I
16 know what the vote would be on that, so no, I
17 won't challenge the ruling of the Chair.
18 CHAIRMAN GILMORE: You're not
19 challenging the ruling of the Chair?
20 COMMISSIONER LEBRUN: Not at this
21 time. Mr. Chairman, I defer to Mayor Kirk.
22 CHAIRMAN GILMORE: Did I hear a
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1 voice?
2 GOVERNOR LEAVITT: I heard
3 Counsel say that we had the ability as a
4 Commission to define in rule ourselves what
5 we would include. And I would invite the
6 Chair to propose a rule as to how we would
7 handle -- as opposed to just ruling from the
8 Chair, I wonder if it would be possible for
9 you to go through the same process in
10 establishing the rule on what the report
11 would follow, as we did in the adoption of
12 all other rules governing the operation of
13 this Commission.
14 CHAIRMAN GILMORE: I think the
15 plain reading of the statute should, in fact,
16 govern on this, and that is, in fact, the
17 ruling of the chair.
18 MAYOR KIRK: Mr. Chairman,
19 if that's the case --
20 CHAIRMAN GILMORE: Mr. Mayor.
21 MAYOR KIRK: -- then I
22 appeal the ruling of the Chair. And I would
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1 refer you to the letter from our Counselman
2 (sic) itself. I mean, it can't be any more
3 plain than the -- on page 2, in the first
4 paragraph it says clearly: A finding or
5 recommendation that has not been agreed to by
6 at least two thirds members of the Commission
7 serving at that time the recommendation is
8 made.
9 Later in the paragraph he refers to
10 the fact that -- and this is our Counsel, he
11 says: It is a cardinal principle of
12 parliamentary law that a body acts by simple
13 majority, unless the governing legislative
14 authority provides differently. And in this
15 case, the governing legislative authority is
16 explicit and mandates that any report or
17 finding has to have at least two thirds a
18 majority of this Commission. And I would
19 urge the Chair to either reconsider that and
20 make it clear that, absent that two-thirds
21 finding, that these recommendations do not go
22 into the Commission's final report.
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1 CHAIRMAN GILMORE: There's a second
2 to the appeal of the ruling of the Chair?
3 COMMISSIONER LEBRUN: Second.
4 CHAIRMAN GILMORE: Mr. Lebrun
5 seconds the appeal of the ruling of the
6 Chair.
7 COMMISSIONER ANDAL: Call to
8 question.
9 CHAIRMAN GILMORE: Mr. Andal has
10 moved the question of the ruling of the
11 Chair. Second to the calling of the
12 question?
13 SPEAKER: Second.
14 CHAIRMAN GILMORE: All in favor of
15 calling the question please say aye.
16 All opposed say nay.
17 The Chair has ruled that the
18 statute is mandatory with respect to the
19 presentation of a report. All actions that
20 receive a majority will be included in the
21 report, as the statue suggests. However,
22 they will not be given the dignity of
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1 findings or recommendations because, in fact,
2 they will not have received the two-thirds
3 ruling -- or majority vote by the Commission.
4 COMMISSIONER SOKUL: Governor,
5 could you add to that, or did you mean to
6 exclude from that that things that receive
7 less than a majority aren't going to be
8 included in the report? I think if something
9 loses one to eighteen, that should be
10 included, too.
11 CHAIRMAN GILMORE: I don't think in
12 any statute or anyplace else that there is a
13 ruling that indicates that something that is
14 defeated by the Commission would be included.
15 MAYOR KIRK: Governor, will
16 all due respect, if we're going to report
17 anything getting less than a two-thirds
18 majority, if we're going to report all of our
19 work, then you might as well report anything.
20 Otherwise --
21 COMMISSIONER NOVICK: I certainly
22 would like the opinion of Counsel on whether,
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1 if his conclusion is that the results of this
2 Commission can go forward, even if not as
3 findings and recommendations, how he can
4 take -- or whether he takes the position that
5 something that's voted down isn't included as
6 a result of the Commission as well.
7 MR. GRIFFITH: I'm sorry, I didn't
8 hear the last part of your comment.
9 COMMISSIONER NOVICK: How is it --
10 I don't know what your position is on this,
11 but I take it that if your conclusion is that
12 the Commission can forward a report with the
13 results of the Commission activities, which
14 is what the statute says, a result of the
15 Commission activities would also be a vote,
16 eight in favor, eleven against, six in favor,
17 thirteen against a particular proposal.
18 MR. GRIFFITH: I think our view is
19 that it would take a majority, at least a
20 majority, vote to transmit a report from the
21 body of the Commission.
22 MAYOR KIRK: Will all due
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1 respect, Counsel -- with all due respect,
2 could you point me to any language in the
3 statute that --
4 MR. GRIFFITH: In Section 1103 it
5 says the Commission shall transmit a report
6 of the results of the study.
7 MAYOR KIRK: Right. And it
8 does not at all differentiate between a
9 majority versus supermajority, does it?
10 MR. GRIFFITH: And the principle of
11 statutory interpretation is when it's a
12 legislative body and it does not require a
13 supermajority for an action that it's a
14 majority that determines --
15 MAYOR KIRK: Will all due
16 respect, Counsel, I'm not alleging we're an
17 advisory body and we -- it explicitly says
18 that you have to have a two-thirds majority.
19 There is no language anyplace else that says
20 two thirds, except for where you have a
21 majority or except for the stuff we don't
22 like. And I mean, if we're going to be that
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1 inventive -- we've got at least be
2 consistent, Governor.
3 MR. GRIFFITH: Well, I think I am.
4 If I might, the two thirds language describes
5 only findings and recommendations included in
6 the report. The way I read the statute, and
7 I would suggest this reading to others, is
8 that Section 1103 anticipates that there will
9 be a report. In the absence of language
10 saying what type of majority is necessary for
11 a report to be transmitted, clear
12 parliamentary law is that it requires a
13 majority of the Commission to do so. The two
14 thirds language applies only to the inclusion
15 of findings and recommendations, which have
16 the added weight of a finding and
17 recommendation from this body.
18 COMMISSIONER NOVICK: Accepting for
19 argument's sake that majority is enough to
20 transmit a report, the question is what are
21 the contents of that report? And the statute
22 speaks quite clearly to the effect that
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1 what's in the report are the results of the
2 Commission.
3 And I think the plain meaning of
4 the word results is whatever this Commission
5 concludes, whatever its results are. A no
6 vote would be a result of this Commission.
7 And so therefore should be contained in the
8 report. Even on the interpretation that the
9 report can go forward with a majority.
10 MR. GRIFFITH: I think that's a
11 fair interpretation.
12 COMMISSIONER NOVICK: Well, that's,
13 I believe, the question that was posed, so if
14 we have a vote that is six, four and thirteen
15 against, that would also go in the report.
16 MR. GRIFFITH: I think that the
17 issue is, the two issues that Mr. Novick has
18 raised, the first issue is what does it take
19 for this Commission to transmit a report to
20 Congress? Mayor Kirk is correct that nowhere
21 in the statute does it say what type of
22 majority is necessary to transmit any report
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1 to Congress. In the absence of express
2 provision to the contrary, that means a
3 majority vote of this Commission determines
4 whether to send a report to Congress. That's
5 the first issue.
6 The second issue now is the content
7 of that report. And the statute is silent as
8 to the content of that report except for a
9 certain type of work product called finding
10 or recommendation. As to that type of work
11 product, it requires a two-thirds vote. It
12 does not say anything about what type of vote
13 is required for the rest of the report. And
14 it's to that that I believe, again, general
15 parliamentary procedure, general
16 parliamentary law, says that the majority of
17 the Commission can determine the nature of
18 the report. And that's the hypothetical that
19 I gave you. I don't presume to tell the
20 Commission what to do, but if the Commission
21 wanted in its report to list all the votes
22 that took place and inform Congress of what
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1 those votes were, I think that would be
2 perfectly permissible for them to do so. If
3 they only wanted to tell Congress of half the
4 votes that took place, I think it would be
5 permissible to do so.
6 COMMISSIONER NOVICK: But that --
7 CHAIRMAN GILMORE: Mr. Novick, can
8 you under --
9 COMMISSIONER NOVICK: -- wouldn't
10 be consistent with the results --
11 CHAIRMAN GILMORE: Mr. Novick, do
12 you understand the ruling of the
13 Parliamentarian?
14 COMMISSIONER NOVICK: I think I've
15 heard inconsistent rulings from legal counsel
16 on the question that Mr. Sokul raised, which
17 is: If there's a vote six to thirteen, would
18 that be a result of the Commission? I think
19 the plain reading of the statute, and I think
20 Counsel agreed, is that it would be one of
21 the results of the Commission.
22 CHAIRMAN GILMORE: You're engaging
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1 debate, Mr. Novick, which you're entitled to
2 do since we have not yet voted on the --
3 COMMISSIONER NOVICK: I appreciate
4 that.
5 CHAIRMAN GILMORE: -- call of the
6 question, and we will return to that.
7 But, Mr. Griffith, thank you, I
8 think you have made your position very clear.
9 COMMISSIONER SOKUL: Governor, Mr.
10 Chairman --
11 CHAIRMAN GILMORE: Now, the
12 Commission itself will make some decisions.
13 I'll call on Mr. Sokul, Mr. Norquist, and
14 then we'll return and Governor Leavitt.
15 Mr. Sokul?
16 COMMISSIONER SOKUL: I'd just like
17 to say that Counsel just answered my
18 question, and that is that the majority
19 determines the content of the report. And so
20 my prior question has been answered.
21 CHAIRMAN GILMORE: Mr. Norquist?
22 COMMISSIONER NORQUIST: It's my
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1 understanding that we had always planned to
2 allow Commissioners to put in their own
3 statements at the end, which were their
4 positions, and therefore anyone who has a
5 minority position that they would like
6 transmitted to Congress, it will be
7 transmitted. It doesn't take two thirds or a
8 majority, that we each have, I think, a
9 thousand words is what we'd agreed on, so,
10 you know, if the Administration wants to make
11 a case, they can put it in their thousand
12 words and it will be heard. Nothing won't be
13 heard. But we do have a letter from the
14 Speaker of the House and the Majority Leader
15 in the Senate, which is pretty authoritative
16 from the leadership of Congress that they
17 would like a report from us and consider a
18 majority to be quite fine.
19 CHAIRMAN GILMORE: Governor
20 Leavitt?
21 COMMISSIONER NORQUIST: And that's
22 what they look forward to and expect.
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1 CHAIRMAN GILMORE: Governor
2 Leavitt.
3 GOVERNOR LEAVITT: I'd just
4 like clarification. Will we ever have a
5 chance to vote on this report if it contains
6 no, quote, findings then, or is it the
7 position of the Parliamentarian that we'll
8 simply have a majority that will approve the
9 report?
10 CHAIRMAN GILMORE: Governor, first
11 of all, we have a two-thirds vote already on
12 the record that we voted in New York on
13 international tariffs and trade, eighteen to
14 one.
15 COMMISSIONER LEAVITT: No, no. My
16 question is: Will we ever have a chance to
17 vote on the report, if it --
18 CHAIRMAN GILMORE: Oh, certainly.
19 COMMISSIONER LEAVITT: -- contains
20 no formal findings, will we ever get a
21 chance --
22 CHAIRMAN GILMORE: Oh, certainly.
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1 COMMISSIONER LEAVITT: And will the
2 burden be two thirds, as it states in our
3 rules, or will it be 50 percent?
4 CHAIRMAN GILMORE: No, our rules
5 state the adoption of the report will be by a
6 majority vote.
7 COMMISSIONER LEAVITT: Our rules
8 say that --
9 CHAIRMAN GILMORE: Our rules say
10 Roberts' Rules --
11 COMMISSIONER LEAVITT: Now, do our
12 rules say that?
13 CHAIRMAN GILMORE: That is Roberts'
14 Rules of Order. You adopt the report by a
15 majority vote. However, we cannot include a
16 recommendation or a finding without two
17 thirds. The statute is clear about that.
18 COMMISSIONER LEAVITT: I would like
19 to have reference on the rule that adopts a
20 report by 50 percent, and it's my
21 understanding that we have the ability to
22 define this by rule. Is there a reason we
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1 couldn't define this in the same way we have
2 all the rest of our rules?
3 SPEAKER: That's right.
4 CHAIRMAN GILMORE: Mr. Andal?
5 COMMISSIONER ANDAL: It seems like
6 you could try to do that, if you like. But
7 right now we have the question before us of
8 whether or not a two-thirds majority is okay
9 for findings and recommendations, and a
10 simple majority under the Roberts Rules of
11 Order is okay for the rest of the report.
12 That was the ruling of the Chair. That
13 ruling has been challenged, and I suggest we
14 move to vote on that. And then we can -- if
15 you want to offer motions in the future to
16 amend the Operating Rules, we could do that.
17 But we need to move forward, I think.
18 I'll call the question, Mr.
19 Chairman.
20 CHAIRMAN GILMORE: Well, of course
21 the question has already been called, as a
22 matter of fact.
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1 SPEAKER: Mr. Chairman?
2 CHAIRMAN GILMORE: And I was
3 gaining -- adding a little latitude here so
4 that things could be aired out, as a matter
5 of fact. But to return to proper order,
6 there's a motion on the floor made by the --
7 There is a challenge to the Chair
8 that is made by Mayor Kirk, seconded by
9 Mr. Lebrun. The question is: Shall the
10 Commission sustain the ruling of the Chair?
11 And now we'll proceed to vote.
12 MS. ROSENKER: Mr. Andal?
13 COMMISSIONER ANDAL: Yes. Aye.
14 MS. ROSENKER: Mr. Armstrong?
15 COMMISSIONER ARMSTRONG: Aye.
16 MS. ROSENKER: Mr. Guttentag?
17 COMMISSIONER GUTTENTAG: I had
18 asked Mr. Chairman to comment on this issue,
19 but you may have overlooked my signal. So
20 I'd like --
21 CHAIRMAN GILMORE: Mr. Guttentag,
22 you're out of order. Just if you would,
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1 please, just cast your vote. There will be
2 an opportunity, I'm sure, during the time
3 that Mr. Pincus has requested to address some
4 of these additional issues. But you're out
5 of order and called on to vote. Unless you
6 have a parliamentary inquiry?
7 COMMISSIONER GUTTENTAG: I would
8 like to explain my vote, Mr. Chairman. I
9 support Mayor Kirk's position.
10 CHAIRMAN GILMORE: Is that a no
11 vote, Mr. Guttentag?
12 COMMISSIONER GUTTENTAG: No. Yes.
13 MS. ROSENKER: Mr. Harris?
14 COMMISSIONER HARRIS: Aye.
15 MS. ROSENKER: Mayor Kirk?
16 MAYOR KIRK: No.
17 MS. ROSENKER: Governor Leavitt?
18 COMMISSIONER LEAVITT: No.
19 MS. ROSENKER: Ms. Jones?
20 COMMISSIONER JONES: No.
21 MS. ROSENKER: Mr. Lebrun?
22 COMMISSIONER LEBRUN: No.
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1 MS. ROSENKER: Governor Locke?
2 GOVERNOR LOCKE: No.
3 MS. ROSENKER: Mr. Norquist?
4 COMMISSIONER NORQUIST: Yes.
5 MS. ROSENKER: Mr. Novick?
6 COMMISSIONER NOVICK: No.
7 MS. ROSENKER: Mr. Parsons?
8 COMMISSIONER PARSONS: Yes.
9 MS. ROSENKER: Mr. Pincus?
10 COMMISSIONER PINCUS: No.
11 MS. ROSENKER: Mr. Pittman?
12 COMMISSIONER PITTMAN: Yes.
13 MS. ROSENKER: Mr. Pottruck?
14 COMMISSIONER POTTRUCK: Yes.
15 MS. ROSENKER: Mr. Sidgmore?
16 COMMISSIONER SIDGEMORE: Yes.
17 MS. ROSENKER: Mr. Sokul?
18 COMMISSIONER SOKUL: Yes.
19 MS. ROSENKER: Mr. Waitt?
20 COMMISSIONER WAITT: Yes.
21 MS. ROSENKER: Chairman Gilmore?
22 CHAIRMAN GILMORE: Yes.
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1 MAYOR KIRK: Mr. Chairman,
2 parliamentary inquiry.
3 CHAIRMAN GILMORE: Yes, sir.
4 MAYOR KIRK: Just so I
5 understand, is it the ruling of the Chair,
6 then, that falling short of a two-thirds vote
7 to be a finding or recommendation, that it
8 can only be a result of the Commission if it
9 gets a majority vote?
10 CHAIRMAN GILMORE: I'm sorry, Mayor
11 Kirk.
12 MAYOR KIRK: I'm not --
13 CHAIRMAN GILMORE: Not yet anyway.
14 MAYOR KIRK: It's Governor
15 Bush.
16 CHAIRMAN GILMORE: Not yet anyway.
17 MAYOR KIRK: That fella, you
18 were real fond of him a couple of weeks ago,
19 I think. And I think both he and the
20 vice-president prefer --
21 CHAIRMAN GILMORE: You may have an
22 opportunity soon.
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1 MAYOR KIRK: -- that I stay
2 a mayor for some period of time. No, I think
3 you'd probably agree I should stay a mayor
4 for awhile. You and my wife.
5 I'm just confused. I don't mean to
6 be argumentative. But my concern now,
7 Governor, is this, it seems to me that we've
8 ruled that, short of these findings -- I mean
9 one thing we have done, and I will tell you
10 it distresses me personally, we've just
11 changed the rules dramatically at the
12 eleventh hour, and now we've basically said,
13 through the most strange legal reading I've
14 ever seen, that you don't have to be a
15 finding, we're gonna get a report, and we're
16 gonna send it on, but the only way you get to
17 be in the report is if you have a two
18 thirds -- I mean, a majority vote. You have
19 to have to have two thirds to be fact and a
20 finding, but to be in the report as a result,
21 you have to have a majority vote.
22 CHAIRMAN GILMORE: Well, that's
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1 right.
2 MAYOR KIRK: That makes no
3 sense at all. If you call results, are the
4 results of the Commission, they should
5 reflect every vote irrespective of whether it
6 is two thirds -- it's a majority or not. And
7 I would ask that our counsel, if they would,
8 as expeditiously as possible, provide me
9 anything in our rules where we at all
10 inferred or entertained any notion that,
11 short of a two-thirds majority, that we would
12 have a report that would be adopted on a
13 majority vote to include only those items
14 that received a majority. If you could give
15 me any section of our rules that refers to
16 that, I would be most appreciative.
17 MR. GRIFFITH: I believe the letter
18 addresses that issue, and I'd be happy to
19 take it up with you, but --
20 MAYOR KIRK: I mean, I read
21 your letter pretty plainly that says that we
22 follow the rules of the statute. But you
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1 just said we don't.
2 MR. GRIFFITH: No, no, I don't
3 think that's what I said.
4 MAYOR KIRK: I can quote
5 you. I mean, this is your language, you
6 don't quote anyone else. You say: It's a
7 cardinal principle of parliamentary law that
8 a body acts by simple majority unless the
9 governing legislative authority provides
10 differently. Our legislative authority
11 provides differently. You come up with a
12 ruling that says, well, that really doesn't
13 apply to the report --
14 MR. GRIFFITH: Well, I guess that's
15 where we differ, Mayor Kirk. I don't believe
16 that the Internet Tax Freedom Act says that
17 it requires a two-thirds majority to issue a
18 report. In fact, it says nothing like that.
19 The two thirds language applies only to
20 findings or recommendations.
21 SPEAKER: Governor --
22 CHAIRMAN GILMORE: Is there a
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1 parliamentary inquiry?
2 COMMISSIONER LEBRUN: Yes, I have
3 one.
4 CHAIRMAN GILMORE: Mr. Lebrun.
5 COMMISSIONER LEBRUN: I think
6 Counsel agreed that before we can make
7 findings or recommendations, requires
8 two-thirds vote. I'm looking at Item 1A,
9 which has already been voted on, and there's
10 language in here that says, for example, no
11 new taxes shall be applied to electronic
12 commerce. What is that if it's not a
13 recommendation or a finding? And I can go
14 through every one of these sentences in both
15 Items A and Item 2, and they include
16 findings. What are they, if they're not
17 findings? What is that that I just read if
18 it's not a recommendation?
19 CHAIRMAN GILMORE: It's the
20 majority opinion of the Commission,
21 Mr. Lebrun.
22 The Chair is sustained by a vote of
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1 eleven to eight. We'll move on to the
2 agenda.
3 Item B of the agenda is the issue
4 of Domestic Issues. The Business Caucus
5 Proposal is the first matter up. A Proposal
6 for Internet Tax Reform and Reduction. Is
7 there a motion to adopt Item B1, the Business
8 Caucus Proposal?
9 COMMISSIONER ANDAL: So moved.
10 COMMISSIONER POTTRUCK: Second.
11 CHAIRMAN GILMORE: It is moved by
12 Mr. Andal, seconded by Mr. Pottruck. The
13 floor is open for discussion.
14 Oh. There are two amendments under
15 Roberts Rules, in fact, of my own that have
16 been placed in here. And I might mention to
17 the members that there are two amendments
18 that I have filed to this resolution. These
19 amendments deal with the question of the use
20 tax and my resolution that says that we
21 should make a recommendation to the Congress
22 to not have the use tax applied throughout
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1 the United States. I intend now to withdraw
2 these amendments and not take them up at this
3 time. In the event that Mr. Pincus's
4 resolution passes and we go to floor
5 amendments, it would be my intention to offer
6 them at that time.
7 The third one, amendment, is
8 Mr. Sokul's. Mr. Sokul.
9 COMMISSIONER SOKUL: Thank you,
10 Governor. I would follow the same procedure,
11 follow your lead and withhold my amendment at
12 this time to be taken up later. I think that
13 the Business Caucus plan, as everyone in this
14 room knows, is the centerpiece of the debate
15 in the past few weeks, and I don't want to
16 distract from that at this time.
17 CHAIRMAN GILMORE: All of the
18 amendments to this have been withdrawn, with
19 freedom to bring them up at a later time in
20 the meeting, depending upon the vote on
21 Mr. Pincus's resolution. In the meanwhile,
22 the floor is open for discussion of the
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1 Business Caucus Proposal. Mr. Pottruck?
2 COMMISSIONER POTTRUCK: Thank you,
3 Governor. I welcome the chance to present
4 the Business Caucus Proposal. Business
5 Caucus really represents a starting point for
6 Mike Armstrong, Dick Parsons, Bob Pittman,
7 John Sidgmore, Ted Waitt, and myself to try
8 to come together, which we did, following our
9 San Francisco meeting, in an effort to try to
10 develop a comprehensive proposal to coalesce
11 around and get beyond what up to that point
12 was essentially discussion of the views and
13 ideas of individual Commissioners. And it
14 was an attempt to try to move away from a
15 political process to build a bridge, and
16 rather than a barrier, to competing views and
17 see if we could come up with a middle-ground
18 proposal.
19 The objective from the start of
20 this effort has been to come up with a strong
21 set of recommendations to Congress that could
22 establish an environment that continues to
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1 foster the development of the Internet and
2 electronic commerce, to lead to a simple and
3 equitable system for state and local sales
4 taxes that would impose equal obligations and
5 costs on all sellers, local or remote,
6 regardless of sales channel or technology
7 utilized, be respectful of the privacy rights
8 of individuals and the sovereignty of state
9 and local governments, and attract, if we
10 could, the votes of thirteen or more
11 Commissioners, the amount required under the
12 statute, to make a formal recommendation to
13 Congress.
14 The proposal has been the subject
15 of numerous discussions with virtually every
16 Commissioner, and many, many interested
17 public sector groups. There's been a lot of
18 dialogue and a lot of effort toward reaching
19 a compromise consensus. Now, consensus
20 doesn't meant that everybody agrees with
21 everything or even agrees to the final
22 proposal for the same reasons. There's been
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1 a lot of debate and dialogue about this
2 proposal.
3 This is definitely a
4 no-new-taxes-on-the-Internet proposal. But
5 it's not a no-sales-taxes-ever-on-the
6 Internet proposal. Our statement even has
7 the following language, it says: We do not
8 presume that the collection of sales and use
9 taxes on Internet transactions is an
10 inevitability. And we make that statement
11 because we recognize that simplification is
12 an absolute precursor for any effort to
13 create a level playing field or the remote
14 collection of sales taxes. We've tried to
15 present a fairness proposal. A proposal that
16 lays out the ground rules for simplification
17 and the ground rules to create a playing
18 field that is fair, regardless of sales
19 channel taken. We say the following in our
20 proposal. By eliminating any disparate
21 burden on interstate commerce, states will
22 have a pathway toward a system that extends
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1 their collection of existing state taxes to
2 remote sellers.
3 Concepts alone are not sufficient
4 to provide adequate guidance to Congress and
5 would not reflect the significant effort that
6 has been extended by all Commissioners
7 throughout the existence of this Commission.
8 Thus, the Business Caucus Proposal is
9 intended to satisfy two goals. One, portray
10 a broader consensus, and two, provide
11 sufficient specificity to be useful to
12 policymakers who will draft legislation.
13 The following items comprise the
14 general principles that are the basis for the
15 detailed recommendations in the Business
16 Caucus Proposal. First, we do not see the
17 Internet as a target for new taxes, nor do we
18 want to endorse any action that would expand
19 the digital divide, i.e., reduce the
20 availability of the Internet to those
21 Americans at the bottom of our socioeconomic
22 ladder. Accordingly, it's our recommendation
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1 that the temporary moratorium on taxes on
2 Internet access be extended permanently. One
3 of the principal areas of agreement among
4 virtually all Commissioners was that it is in
5 our national interest to eliminate all
6 barriers to Internet access.
7 Second, we do not believe there
8 exists any compelling reason to impose taxes
9 exclusively targeted at electronic commerce.
10 The Commission's issues and options paper
11 proclaims, quote, it is in the national
12 interest to establish an environment that
13 continues to foster innovation and
14 technological advancement in the development
15 of the Internet and electronic commerce, end
16 quote. Discriminatory taxes on electronic
17 commerce will not create such an environment
18 and will simply further expand the digital
19 divide. Accordingly, we believe the current
20 moratorium barring multiple and
21 discriminatory taxes should be extended for a
22 period of five years.
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1 Third, there's a widespread belief
2 among Commissioners that the current myriad
3 of taxes applied to telecommunications puts
4 an unnecessary compliance burden on that
5 industry, creates a competitive disadvantage
6 internationally, and ultimately increases the
7 cost to consumers. The oldest of these
8 taxes, the federal excise tax on
9 telecommunications, was enacted to pay for
10 the Spanish-American War and no longer serves
11 the policy purpose. It should be repealed.
12 The telecommunications tax system should be
13 reformed to reduce the overall tax burden on
14 consumers and simplified so that consumers
15 can have lower access costs to the nation's
16 information highway.
17 Fourth, we come to the issue of
18 privacy. There is enormous sensitivity
19 around this topic. The administration of any
20 tax system that includes large, multi-task
21 computers collecting information about the
22 spending habits of Americans creates
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1 significant trepidations for most
2 Commissioners. Individuals harbor great
3 fears that such information will be used in
4 ways that impinge upon their privacy.
5 Consumer privacy rights must be protected,
6 even though such protection could provide
7 significant obstacles to the formation of any
8 new approach which requires remote sellers to
9 collect sales taxes. Our recommendations are
10 mindful of this concern.
11 Fifth, the difficult issue of
12 collection of taxes on remote sales over the
13 Internet must be addressed. If the debate
14 and dialogue in this Commission has made
15 anything clear, it is the need for a
16 structured process that will lead to the
17 substantial simplification and reform of
18 state and local sales tax systems. Our
19 proposal recommends that this be accomplished
20 by adherence to a set of guidelines that
21 includes uniform rules and procedures, equal
22 burdens on all sellers and no interference
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1 with the innovation and technological
2 advancement of Internet and electronic
3 commerce. The need to do this is tied
4 directly to the fact that at some point in
5 the not-too-distant future, bricks and mortar
6 retailers will be completely transformed into
7 clicks and mortar retailers. In such a
8 world, we cannot let the tax system drive
9 business structure, perpetuating the type of
10 contempt and non-compliance that exists
11 today.
12 Now, if the states ultimately
13 succeed with their effort toward
14 simplification, creating an ability for
15 remote sellers to collect sales taxes, it is
16 not our intention to create a tax receipt
17 increase. Our proposal states the following:
18 Because we do not believe that any party in
19 the debate has sought to increase tax
20 revenues through more taxes, we believe it is
21 appropriate for states whose overall sales
22 and use tax revenue collections increase as a
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1 result of use tax collections on remote sales
2 to make substantial and proportional
3 reduction in their overall sales tax rates,
4 thus maintaining revenue neutrality in
5 overall sales and use tax collections.
6 The taxation of remote sales does
7 not appear to be a problem demanding a
8 solution instantly. Electronic commerce is
9 still a very small percentage of our total
10 commerce. In addition, the Center for the
11 Study of the States recently released a
12 report indicating that total sales tax
13 revenues were up 7.4 percent in the fourth
14 quarter of '99, and further strong gains are
15 likely this year.
16 But I just got a report from some
17 very authoritative sources which quote
18 Forrester, a research group that studies the
19 Internet, and here's what they had to say,
20 which I thought was particularly important.
21 75 percent -- 75 percent of the 16 to
22 22-year-olds who go online buy online.
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1 Forrester predicts that on-line sales of 170
2 billion in '99 will jump to 3.2 trillion in
3 2003. More liberal estimates forecast 10
4 trillion in a mere four years. This is an
5 important issue that needs to move toward
6 some new approaches.
7 Importantly, as states work toward
8 a simpler tax system, our proposal attempts
9 to clarify perhaps the most litigious and
10 uncertain area of tax law compliance for
11 businesses that operate in multiple states,
12 and that's the issue of nexus. We attempt to
13 draw some bright lines in the nexus area by
14 listing factors that in and of themselves
15 will not result in the imposition of
16 collection obligation on sellers or the
17 imposition of business activity taxes.
18 And finally, our recommendations
19 recognize that the burden and responsibility
20 of reform lies with the state and local
21 governments. Clearly there is a national
22 interest in ensuring that interstate commerce
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1 flows freely. In designing a process to
2 produce this system, we recognize that while
3 there is a national interest in creating an
4 environment that fosters growth of electronic
5 commerce and ensuring any taxing system does
6 not unduly burden interstate commerce, we
7 also recognize the need to be mindful of the
8 sovereignty of state and local officials in
9 setting policies for their electorate. We
10 believe our proposals strike the appropriate
11 balance.
12 I put forward this proposal.
13 CHAIRMAN GILMORE: Further
14 discussion? Mr. Norquist?
15 COMMISSIONER NORQUIST: Yeah, I'd
16 like to speak in favor of the proposal. I
17 think it puts together a very coherent
18 overview on how government, federal, state
19 and local, should look at the Internet. I
20 was put on this Commission to fill the slot
21 for the representative for consumers, and
22 looking at it from the standpoint of
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1 consumers, I think we make a real step
2 forward in the recommendation to get rid of
3 the 3 percent federal excise tax.
4 As has been pointed out, that is an
5 excise tax that was put in to fund the
6 Spanish-American War more than a hundred
7 years ago. It was put in when it was a tax
8 on the rich, and it was sold that way. Only
9 a hundred thousand people had phones at the
10 time and were paying taxes. It was presumed
11 to be a temporary tax because of that. And
12 it has unfortunately lasted for a hundred
13 years.
14 I have a resolution later looking
15 to sunset the Gore tax, the E-rate tax, once
16 its goal of wiring all schools has been
17 achieved. And the reason for that is, if we
18 don't sunset that that we could be paying --
19 our grandchildren could be paying the Gore
20 tax long after schools have been wired and
21 many other things have come to pass, but the
22 tax could last forever.
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1 In addition to the importance of
2 abolishing the 3 percent telecommunications
3 tax, and I hope people are aware that there's
4 been legislation introduced both by
5 Mr. Tauzin of Louisiana, and Mr. Portman
6 of Ohio to do this.
7 So I think Congress has been
8 listening to us as we've discussed this
9 issue. On the 3 percent in particular.
10 We've had several, I don't know, test votes
11 here where everybody except the
12 Administration representatives supported
13 those efforts.
14 But in addition the simplification
15 and reduction of state and local excise
16 taxes, I think, is also particularly
17 important. As people testified during the
18 hearings here, the average tax, excise tax,
19 sales taxes on telecommunications is 14
20 percent, and it gets to 25 and 30 percent in
21 some states and localities. The average
22 sales tax in the country is a lot closer to 5
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1 or 6 percent. We have a discriminatory tax
2 structure that discriminates against
3 telecommunications.
4 I understand how we got there, and
5 that's that telecommunications used to be a
6 government granted monopoly and a government
7 regulated monopoly, and because local
8 governments and state government could pass
9 on taxes that went just to their local
10 consumers, it was as if they were passing a
11 tax on the people who lived in their city or
12 their state. But today with real competition
13 between telecommunications, states or cities
14 that add additional taxes on
15 telecommunications as if they were immobile
16 and couldn't move, as if they were government
17 monopoly, I mean, we are taxes what is
18 becoming increasingly a competitive market as
19 if it was a monopoly. And I think the
20 recommendations to clarify those taxes, to
21 simplify those taxes is extremely important
22 for consumers, because I don't think -- the
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1 gist is there's been a nationwide movement to
2 fight against the high excise taxes on
3 automobiles. And Governor Locke in
4 Washington state, the voters voted almost two
5 to one to cut those discriminatory excise
6 taxes.
7 Governor Gilmore, you've taken a
8 lead in fighting for reducing discriminatory
9 excise tax on automobiles. American
10 consumers are beginning to look at their
11 phone bills and seeing similar overburdensome
12 taxes there. And I think from a consumer
13 standpoint, this is a very strong proposal.
14 I personally would propose -- would
15 have preferred to put a permanent ban on
16 taxation of electronic commerce starting now
17 and into the future. But I think in terms of
18 building a majority consensus for this, I
19 think this is a very good staring point, and
20 I'm delighted that the leadership in Congress
21 has already said that they're looking forward
22 to receiving this proposal.
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1 CHAIRMAN GILMORE: Thank you,
2 Mr. Norquist. Having looked around the room
3 and not seen a hand raised, I'm going to take
4 a moment and address it myself, if I could.
5 I think everybody on the Commission
6 is aware that my position has been that we
7 ought to work towards a proposition that
8 eliminates Internet taxes on E-commerce to
9 the greatest possible extent that we can.
10 I've listened very closely to the kiosk
11 argument that was so eloquently made by
12 Governor Locke last time, and believe that an
13 issue like that can be addressed by banning
14 sales on remote -- banning taxes on remote
15 sales as opposed to the downtown sale. And I
16 believe that we can minimize any impact,
17 which I think is undemonstrated, to states
18 and localities by doing this elimination with
19 respect to business to consumers. And that,
20 of course, would minimize that impact. But
21 I've listened very closely over this past ten
22 months to the issues of impact upon
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1 localities and states, impact upon
2 traditional retail, and the evidence just
3 isn't there. But what is there is an
4 opportunity to do something that's good for
5 consumers. So having looked at the business
6 proposal, it not being, certainly, my
7 proposal, but having looked at it, what is
8 contained within it, and I want to explain
9 why I'm going to vote for this.
10 It does extend the moratorium on
11 internet sales. I have been a critic of this
12 moratorium in many ways, but it is a good
13 start, to extend this moratorium at least
14 five years. It does define nexus, which
15 means that businesses that are going to be
16 setting up in this country in order to do
17 business will have some clear picture about
18 what they can and what they can't do before
19 they are subjected to taxes or the collection
20 type of obligations with respect to
21 consumers. It does contain an elimination of
22 the 3 percent telecom tax, which is very good
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1 for the working men and women of this country
2 that I've been trying to watch out for in
3 this process. It calls for the elimination
4 of access taxes on taxes onto the internet.
5 And furthermore, one of the difficulties with
6 the current moratorium is that it
7 grandfathers in those taxes which currently
8 exist with taxation of access to the
9 Internet. This proposal eliminates that and
10 says we will not tax access to the Internet.
11 It does have a full call for
12 simplification. The people on this
13 Commission have a different idea about
14 simplification. There are people on this
15 Commission that want simplification so that
16 they can find a pathway to new taxation of
17 the Internet, and I acknowledge that. And
18 there are people, such as myself that want
19 simplification because they think it's better
20 for business and for the consumers of this
21 country, and I am for that. And so I can
22 support this.
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1 It does have the ability here for
2 an extended period of time for the National
3 Conference of Commissioners on Uniform State
4 Laws, NCCUSL, I believe its designation is,
5 to go forward and try to draft some uniform
6 statutes. Having worked with Mr. Lebrun, I
7 am confident that NCCUSL will do a wonderful
8 job with this, if it becomes a part of that.
9 It calls for a new commission to monitor all
10 of those developments as it goes along, and
11 reduces taxes on telecommunications, which I
12 think is good for working men and women. So
13 I think this will go a long way, and that's
14 why I have come to support this and will
15 continue to on the vote that is coming
16 immediately.
17 Next individual, Governor Leavitt.
18 COMMISSIONER LEAVITT: Thank you,
19 Governor. I would like to ask Mr. Pottruck
20 some questions related to his presentation,
21 and to say how much I have appreciated the
22 very good spirited sense of work that you
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1 have done over the course of the last several
2 weeks. I know you've put an enormous amount
3 into this effort, and I want to, as a person
4 who really is not involved in retail
5 commerce, I think you've done an
6 extraordinary service.
7 Couple of questions, if I could.
8 The first is, you mentioned a statement that
9 we do not presume that the collection of
10 sales and use tax on Internet transactions is
11 inevitable. In other words, are you saying
12 that this -- it would be unfair to
13 characterize this as an anti-tax proposal?
14 COMMISSIONER POTTRUCK: There were
15 several negatives there, Mike, I want to make
16 sure I have it right. Say that one more
17 time.
18 COMMISSIONER LEAVITT: Well, as you have characterized this to me in our conversations, you've indicated
19 that this is not designed to be a
20 "anti-Internet -- anti-tax proposal." Is
21 that a fair characterization?
22
23 COMMISSIONER POTTRUCK: Well, I think
22 different people support it for different
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1 reasons. I think Governor Gilmore may support
2 this proposal for reasons different than the
3 ones I support it. We all see -- it's a
4 compromise. We seek different things in it
5 that we particularly like. From my
6 perspective, I very strongly like the fact
7 that there's no new taxes; we're clear on
8 that, no new taxes. We don't want these
9 access taxes and all these other types of
10 taxes that -- even the ones that have been
11 grandfathered in, we think they should be
12 out. We think that certain kinds of
13 telecommunications taxes are important to be
14 reduced.
15 We also recognize, however, and it
16 says it in the language, that Internet tax --
17 the pathway of buying things over the Net and
18 the pathway of buying things in a store
19 physically, face to face, are going to get
20 very blurred in the years ahead. And the
21 legal constructions that may come out of all
22 of that, it's hard to imagine how that's
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1 going to be good for consumers or good for
2 fairness. And, therefore, we've tried to
3 create a pathway recognizing that today's
4 sales tax system, we've all been educated
5 about this, 30,000 different taxing
6 jurisdictions, different definitions, the
7 process of trying to create a system to apply
8 today's sales tax system to remote sellers
9 would be a monumental undertaking and very,
10 very difficult.
11 And so, therefore, we view the
12 fact, and I view the fact, that a precursor
13 to remote sales collection over the Internet
14 is simplification. But that down the road
15 with that precursor of simplification, it
16 seems to me that we will have an opportunity
17 to come back and visit, revisit, where are
18 we, are these numbers here accurate? Are
19 more and more sales moving to the Net? And
20 in fact we've come to a situation where we do
21 see -- unlike today where we see sales tax
22 collections are strong, we see an erosion of
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1 the tax base of local governments. We're
2 going to have an opportunity to work toward
3 simplification, look at what's happening, and
4 come to a conclusion of whether it's time to
5 reconsider Quill and have a very new
6 approach, a 21st Century approach that
7 employs technology to create a playing field
8 that is fair to all sellers.
9 COMMISSIONER LEAVITT: May I just
10 follow on that? Those are the words that I'm
11 interested in. You speak in the report of
12 equalizing the burdens of tax collection for
13 local and remote sellers. Are you speaking
14 here toward the ultimate policy of a level
15 playing field?
16 COMMISSIONER POTTRUCK: Well, we're
17 trying to address the issue of how
18 competition is going to happen in the years
19 ahead, and I would hope that some of my
20 colleagues in the Business Caucus would also
21 jump in here, as I finish, or at any time, at
22 any time. In fact, right now would be okay,
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1 too.
2 COMMISSIONER ARMSTRONG: You want
3 some help, David?
4 COMMISSIONER POTTRUCK: Yeah, Mike.
5 Go ahead.
6 COMMISSIONER ARMSTRONG: All righty.
7 COMMISSIONER LEAVITT: Was that a
8 lateral or a forward pass?
9 COMMISSIONER POTTRUCK: That was a
10 Tennessee Titans pass of some sort.
11 MAYOR KIRK: I think it's
12 more of a tag team.
13 COMMISSIONER ARMSTRONG: We don't
14 mean to gang up, we just want to answer.
15 Mike, I would answer your question, is this
16 an anti-tax proposal, I'd say yes. Today
17 there are an average of 18 percent taxes on
18 access in telecommunications. That is a
19 barrier to access to the Internet and to
20 telecommunications. That's a terribly
21 regressive tax. That's a huge contribution
22 to the digital divide. And I'm really
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1 against that, both in being the chief tax
2 collector in this audience, to collect that
3 from consumers. I don't think it's fair.
4 We talk about a level playing
5 field, I think that's not a level playing
6 field, and I think all of us should be
7 against that kind of a playing field. But if
8 you ask me if I'm for a fair playing field or
9 a level playing field or however we want to
10 put it, sure we all are. And I think the
11 issue is: How do we get there? And I think
12 we believe let's simplify and standardize.
13 Mr. Chairman, I have to withdraw a
14 prior comment I made where I suggested that
15 AT&T was paying 55,000 different taxes
16 annually. And I'm sorry that, upon further
17 staff work, we included our wireless as well
18 as our cable, and we have to report that we
19 pay 99,000 different taxes.
20 UNIDENTIFIED MALE SPEAKER: You just
21 acquired all those since we met last.
22 COMMISSIONER ARMSTRONG: I did that
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1 to impress you.
2 UNIDENTIFIED MALE SPEAKER: I'm not the only
3 one that's impressed.
4 COMMISSIONER ARMSTRONG: And, Mike,
5 that's one point two a minute. And doggone
6 it, not only do we have to get rid of the
7 regressive nature that imposes a digital
8 divide, we have to simplify this tax system.
9 COMMISSIONER LEAVITT: Let me see
10 if I understand what you've said. You've
11 said this is clearly an anti-tax proposal
12 when it comes to telecom and
13 telecommunications because you believe --
14 COMMISSIONER ARMSTRONG: And access.
15 COMMISSIONER LEAVITT: And access.
16 COMMISSIONER ARMSTRONG: Yeah.
17 COMMISSIONER LEAVITT: Because you
18 believe, as I believe most people around this
19 table do, that it's overtaxed as an industry
20 and too complex. But I've also heard you say
21 that the long-term policy that you believe in
22 is the creation of a level playing field when
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1 it comes to sales tax and transactions that
2 occur over the Internet.
3 COMMISSIONER ARMSTRONG: And that I
4 disagree that that ought to be a mandate
5 irrespective of the complexity, the lack of
6 simplification and standardization. So I
7 just -- it's the order of things.
8 COMMISSIONER LEAVITT: So in other
9 words, if we could achieve a highly
10 simplified system that did not discriminate
11 against those who played on the Internet or
12 otherwise, a level playing field is the --
13 should be the object of our efforts?
14 COMMISSIONER ARMSTRONG: In my
15 words, I don't think that any form of
16 distribution should have one advantage over
17 another form of distribution.
18 COMMISSIONER PARSONS: If I could
19 add something, Mr. Chairman?
20 CHAIRMAN GILMORE: Mr. Parsons.
21 COMMISSIONER PARSONS: Just
22 speaking in behalf of the proposal, I thought
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1 the colloquy between the Governor and David
2 and Michael was helpful. Certainly, you
3 know, I support the proposal. I think it
4 does provide what I would call the pathway to
5 a level playing field. I think that is a
6 premise of the Business Community's proposal.
7 I think that pathway involves a necessary
8 simplification of the state taxing system,
9 otherwise you do run afoul of Quill and all
10 of the burdens that the current system
11 implies.
12 But assuming that simplicity could
13 replace complexity, I think that actually in
14 some respects down the road expands the base
15 and thereby would allow the states to reduce
16 the absolute level of taxes so that, you
17 know, I associate myself with what Mike was
18 saying in terms of being anti-tax but for
19 reduced levels of taxation, not just in the
20 telecommunications area but across the board,
21 because if we could get a simplified form
22 that would allow you to expand the base, then
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1 everybody's else tax, you know, the overall
2 water level would go down.
3 So I think it's, you know, it isn't
4 perfect. As you know, Governor, a lot of us
5 tried to noodle at the edges of this to try
6 and see if we could create something that
7 would form a bigger bridge than maybe we have
8 already. Everybody, I think, within our
9 caucus would have tweaked here a little
10 differently or there a little differently,
11 but as a package I think it's premised on the
12 right foundations and moves in the right
13 direction. So we support it.
14 SPEAKER: Mr. Chairman?
15 CHAIRMAN GILMORE: Delna Jones.
16 COMMISSIONER JONES: Mr. Pottruck,
17 I don't know who wants to take this. You can
18 decide. The issue of tax neutrality has been
19 mentioned, but I have a question and I want
20 you to explain how tax neutrality fits with
21 the issue of the electronically submitted, or
22 digital submitted, activities? How does that
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1 compare with the issue of tax neutrality?
2 COMMISSIONER POTTRUCK: Let me see
3 if I understand what you're talking about --
4 what you're referring to, Delna. Are you
5 referring to the part of our proposal that
6 talks with taxes on digital goods, are you
7 talking about?
8 COMMISSIONER JONES: Yes.
9 COMMISSIONER POTTRUCK: Well, in
10 our proposal we recognize, you know, and a
11 lot of this comes from me, it was listening
12 to the testimonies. We had so much testimony
13 in our three meetings, it was an educational
14 process, I'm sure, for all of us. That to
15 tax digitally delivered goods was going to be
16 extremely difficult and would probably drive
17 providers of digital goods off shore or make
18 U.S. providers uncompetitive. And so we
19 included in our proposal a tax relief on
20 digitally provided goods. And recognizing
21 that would create an uneven playing field for
22 their physical equivalents, we recommended an
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1 equal relief for the physical equivalents of
2 digitally provided goods.
3 Now, maybe either Bob or Dick would
4 like to comment further on that.
5 COMMISSIONER PITTMAN: Well, I can
6 take a little bit of it.
7 I really think there are two
8 primary reasons for this exemption. First,
9 we believe the nature of the distribution of
10 digital products would make it nearly
11 impossible, as David mentioned, to
12 effectively enforce such a tax. And the
13 second issue is that we think taxing
14 digitized content would raise serious
15 concerns about privacy. I mean, and those of
16 us in this business are not sure how you
17 would get that information without
18 compromising privacy, and we think that is a
19 huge issue with the consumer. So I think
20 with those two in front of us, I think we
21 tried to be pragmatic about it and find some
22 way to build it into the framework of this
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1 whole proposal.
2 COMMISSIONER PARSONS: And I agree
3 with Bob. I mean, if a level playing field,
4 as the term has been used, is good for the
5 goose, it's good for the gander. That if an
6 object is not taxable in its digitally
7 delivered form, which it shouldn't be, and
8 the real issue from my perspective was the
9 privacy one. There's no way you can
10 determine, you know, where the tax -- on whom
11 the tax should be levied and how and where
12 without inquiring to things, I think, most
13 consumers would not want to have to, you
14 know, reveal, necessarily, with respect to
15 every purchase. And, therefore, again, you
16 wanted not to favor one channel of
17 distribution as opposed to another.
18 So that was the reasoning behind
19 it. But as I say, there are lots of things
20 in the proposal, and this is obviously why we
21 put it in, to subject it to debate which
22 people could have -- reasonable people would
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1 have differing views on.
2 COMMISSIONER JONES: Let me follow
3 up, if I can.
4 CHAIRMAN GILMORE: Go ahead, Delna
5 Jones.
6 COMMISSIONER JONES: Let me make
7 sure that I'm clear. That means if you sell
8 a CD in the store or if you sell a video in a
9 store or if you sell a book in a store, a
10 main street bookstore, that is no longer --
11 taxes are no longer collected on that product
12 or any other product that could possibly be
13 delivered digitally?
14 COMMISSIONER POTTRUCK: I think
15 that is the -- that is our starting point
16 that's in our proposal. That's correct.
17 COMMISSIONER JONES: That's a
18 starting point? Glad to hear you say that.
19 COMMISSIONER POTTRUCK: That's what
20 in our --
21 COMMISSIONER JONES: Thank you.
22 COMMISSIONER POTTRUCK: Well, I
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1 think that our proposal --
2 COMMISSIONER PARSONS: The proposal
3 was a starting point.
4 COMMISSIONER POTTRUCK: Our
5 proposal is a starting point, and our
6 proposal, when it ultimately finds its way to
7 Congress, will be subject to more discussion
8 and debate. We don't expect anything to be
9 approved; it will be a point of discussion.
10 And I think Governor Leavitt was
11 someone who brought up this issue in our San
12 Francisco meeting about the difficulty of
13 digitally delivered goods and so forth, and
14 we thought that disadvantaging people who
15 provide the equivalent of digitally delivered
16 goods in physical form was a bad idea. And
17 so that's where we are.
18 CHAIRMAN GILMORE: Ted Waitt.
19 COMMISSIONER WAITT: Thanks,
20 Governor. And just add my thoughts, you
21 know. I think we have an obligation to
22 achieve as much as we can, given the fact
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1 that there's really no one single solution
2 out there. And these are complex issues
3 we're dealing with, and the Business Caucus
4 Proposal deals with a lot of issues. It's a
5 fairly comprehensive proposal. And it does
6 provide a few things. I mean, it provides
7 the clarity that is needed. It definitely
8 provides for simplicity. It deals with
9 issues like privacy and the digital divide,
10 which are crucially important in this new
11 economy. And it does move us towards, you
12 know, this level playing field that we've --
13 that we've been talking about.
14 Most importantly in all this issue
15 is to keep this new economy rolling. I mean,
16 in terms of what's going to be best for
17 businesses, consumers, as well as the various
18 taxing entities around is to keep the new
19 economy rolling and to keep everybody
20 successful because that's where everything's
21 coming from.
22 Let me just make one comment real
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1 quickly about, you know, one of the areas
2 that has probably been a little more
3 controversial in the Business Caucus
4 Proposal, and that's been around the area of
5 clarification of the nexus rules. You know,
6 having dealt with the vagaries of nexus that
7 exist out there, it has been very difficult,
8 and I think we heard testimony in the last
9 few times we were here, from various entities
10 how complicated it is to deal with this, the
11 lack of clarification in the nexus world. It
12 is extreme -- it is extremely vague, and you
13 need clarity for both existing businesses as
14 they move towards the clicks and
15 mortar/bricks and clicks that I believe David
16 talked about, and also new business that get
17 created. Right now the people that benefit
18 mostly from the vagaries are the various
19 attorneys that deal with corporate
20 restructurings and answering all these
21 questions because when it's vague you've got
22 to get a lot of advice to figure out, you
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1 know, what you're supposed to do.
2 So, anyway, I mean, from my
3 perspective, I support this because I think
4 it's the right thing for consumers, it's the
5 right thing for businesses, and most
6 importantly it's right for the new economy.
7 CHAIRMAN GILMORE: Delegate Harris.
8 COMMISSIONER HARRIS: I would like
9 to lend my support to the Business Caucus
10 Proposal. I think it's a great starting
11 point for future discussions on how to deal
12 with this very complex issue.
13 Anyone who has followed this
14 Commission from its inception and our first
15 meeting in Williamsburg, Virginia, realizes
16 that we got off to a very slow start. Our
17 meeting in Williamsburg at best can be
18 described by one obstruction after another,
19 procedurally, in terms of organizing this
20 Commission. And finally we've been able to
21 get down to the business that this Commission
22 was started for, which is to address the
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1 critical issues affecting E-commerce and how
2 our constituencies would be affected.
3 I think all sides on this issue
4 have been willing to work together, to do
5 what's best for the American people, to do
6 what's best for America's businesses, to make
7 sure that America maintains its competitive
8 edge worldwide, to close the digital divide.
9 We've heard a lot of talk about closing the
10 digital divide. This proposal takes us in
11 that direction. We've heard a lot of talk
12 about a level playing field. But no one has
13 bothered to define what a level playing field
14 is, other than the obvious fact that the most
15 vocal advocates for a level playing field
16 would clearly prefer that there would be some
17 part of this proposal that would impose now a
18 new tax collection requirement and saddle the
19 American people with about a $49 billion a
20 year tax burden.
21 This proposal put forth by the
22 Business Caucus is both responsible, it's
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1 comprehensive, it's obvious that the members
2 of the Business Caucus have taken into
3 account all of the various perspectives on
4 this issue. And it's the part about closing
5 the digital divide and allowing this engine
6 that is fueling the American economy, this
7 technology industry, to continue unabated by
8 undue regulation and interference.
9 The greatest thing that we have to
10 generate more prosperity in the future for
11 Americans is our own creativity. And the
12 Internet provides a wonderful opportunity for
13 individuals who have not been able to avail
14 themselves to cash to start up a business,
15 who haven't had the political connections or
16 business connections to get a business
17 started, for the first time to have the
18 opportunity to provide their creativity in a
19 worldwide setting in an open market where
20 ideas can create prosperity.
21 And I want to thank the members of
22 the Business Caucus for realizing all of the
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1 various complex legal domestic and
2 international issues involved in crafting a
3 position that takes into account both the
4 anti-taxers' position, some of the views of
5 the pro-taxers' positions, but doing what's
6 best for all of us. And it's unfortunate
7 that at our final meeting, in my view, we're
8 still seeing some of the same obstructions
9 that we saw in Williamsburg. We see the same
10 people throwing the same monkey wrenches into
11 this process. And what we ought to do is
12 come together and be willing to give and take
13 in an environment so that we can propose a
14 responsible proposal to Congress that will
15 serve as a meaningful platform for future
16 debate on how we should deal with E-commerce.
17 And I'm satisfied that this Business Caucus
18 Proposal achieves that objective. And it's
19 unfortunate that we can't get a broader
20 consensus because there is nothing in this
21 Business Caucus Proposal that would require
22 today that Americans pay more taxes. And I
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1 want to thank the members of the Business
2 Caucus for their proposal.
3 CHAIRMAN GILMORE: Mr. Sidgmore.
4 COMMISSIONER SIDGEMORE: Obviously
5 I, want to lend my support to the proposal.
6 And I want to get back to Governor Leavitt's
7 question before, because I think it's an
8 important one to me.
9 It's obvious that some of us
10 support this proposal for different reasons.
11 And I certainly do not see this as an
12 anti-tax proposal. I mean, it is certainly
13 anti-tax with respect to access to the basic
14 technology and the telecommunications cost
15 associated with that. I think, actually, you
16 know, we've had a few disagreements on this
17 panel. That's probably the one item that
18 we've all agreed on from the beginning, and I
19 think it's important to acknowledge that.
20 And even though I get some perverse pleasure
21 in the fact that Mike fills out 99,000 forms
22 each year, it's unfortunate that we probably
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1 fill out the same number or similar.
2 I think the way I saw this from the
3 beginning was sort of almost as a bridge
4 between the pro-tax camp and the anti-tax
5 camp, if I could draw it with such bright
6 lines. And, you know, I think if you look
7 through the proposal basically we've
8 acknowledged the issue of level playing
9 field, we've actually provided a pathway to a
10 level playing field, no formula, which I
11 understand some would like, but we left it
12 open so that we can revisit that important
13 topic on the transactional tax side in a few
14 years when I think the situation will be much
15 more clear.
16 CHAIRMAN GILMORE: Mr. Norquist.
17 COMMISSIONER NORQUIST: Yeah,
18 again, I think that this is a very good
19 proposal. It is a compromise. I would like
20 a prohibition, federal prohibition on taxing
21 electronic commerce. But Governor Leavitt
22 asked whether this was sufficiently anti-tax.
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1 In my work-a-day job I run Americans for Tax
2 Reform, and we ask all candidates for office
3 to make a commitment not to raise taxes. We
4 ask governors, state legislators,
5 congressmen, and senators. We have two
6 hundred and nine members of the U.S. House,
7 forty-one members of the Senate, six
8 governors, and eleven hundred state
9 legislators. And any state legislator or
10 congressman who voted for this would be very
11 much in keeping with the taxpayer protection
12 pledge. This does not in any way lead to
13 higher or new taxes or the imposition of
14 taxes that haven't been imposed, it doesn't
15 require any of that. It does, in fact, call
16 for a significant tax reduction on
17 telecommunications taxes and for
18 simplification, which state and local
19 governments should have been doing over the
20 last 30 years, but it would be nice to start
21 now down that path.
22 There are some people who think
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1 that if you simplify stuff, that down the
2 road people may wish to allow Alabama
3 politicians to impose taxes on Michigan
4 businesses. I think that would violate the
5 Commerce clause. But five years from now we
6 at least won't have what we do have now,
7 which is some people coming up with the
8 hysterical projections that the world's going
9 to end if we don't tax electronic commerce
10 now.
11 We've seen after this Christmas,
12 the first Internet Christmas, that all of --
13 that not only was Y2K a big nothing, the
14 threat that everybody would buy everything
15 over the Internet and there wouldn't be any
16 sales in malls, that also didn't happen this
17 Christmas. And I think that as we go through
18 a number of Christmases the understandable
19 concerns that some have had will be assuaged.
20 We've also been through this twice before.
21 About twenty, 25 years ago the pro-tax and
22 spend politicians said everyone will buy
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1 everything over catalogs, and therefore we
2 have to tax catalog sales. Congress then, as
3 it did on the day it created this Commission,
4 rejected that idea, voted overwhelmingly no,
5 and of course malls and downtown stores have
6 done fine. People don't go to catalogs to
7 buy sandwiches.
8 We also had about ten years ago the
9 tax and spend politicians said if we don't
10 tax services the world's going to Hades. And
11 Governor Martinez, former Governor Martinez,
12 of Florida thought that was a good idea. And
13 got his little backside kicked out of the
14 governorship. And we haven't gone to
15 extensive taxing of services, and the schools
16 still run, and government spending as a
17 percentage of GNP by state and local
18 governments is growing, while government
19 spending as a percentage by the federal
20 government is shrinking. The federal
21 government's becoming more efficient as state
22 and local governments have become less
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1 efficient.
2 So, again, I think a five-year
3 breathing period where we can look at this
4 again, people will understand that we don't
5 need to violate the Constitution and upend
6 the commerce clause, that state and local
7 governments are doing just fine, they've got
8 more money than they know what to do with
9 wisely, and that we can, then, take another
10 look at it.
11 So it doesn't close the door,
12 Governor Leavitt. I wish it would close the
13 door. But we have a majority on this
14 Commission that's willing to say, let's close
15 the door for five years, and I think that's a
16 fine proposal. Again, I've talked to
17 congressional leaders who are aware what this
18 proposal is, they're looking forward to it.
19 And I think this is going to be extremely
20 well received in Congress and could be law
21 quickly.
22 CHAIRMAN GILMORE: Mayor Kirk.
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1 MAYOR KIRK: Thank you,
2 Governor. I don't know quite where to start.
3 I would like to be able to support a proposal
4 that does all of the things that we've heard
5 these various Commissioners around the table
6 say they want to accomplish, because all of
7 us have agreed we would like to not increase
8 the tax burden, we've all paid a lot of lip
9 service to this notion of a level playing
10 field, no matter how undefined it is. But
11 regrettably, I just don't believe this
12 proposal gets here. I think there's a reason
13 when this proposal first surfaced that the
14 Business Commissioners may have done
15 something that a lot of us felt was
16 unthinkable, that they got all the government
17 representatives to come out and say that's a
18 bad proposal. Governor Gilmore doesn't like
19 it, Governor Leavitt didn't like it, we
20 didn't like it. The E-Fairness Coalition
21 didn't like it, main street retailers.
22 People were aghast that this Commission would
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1 come out with something this flagrant in
2 terms of a huge money grab for the business
3 members of this Commission.
4 Now, one of our Commissioners has
5 talked about the fact that we got started off
6 on the wrong foot and we got caught up in
7 procedure, and those procedures are important
8 because we have rules and we say we're going
9 to govern by themselves, and one of the
10 reasons -- one of the first issues that we
11 discussed was, and we lamented the fact,
12 Congress didn't give us any money. And we
13 were sitting there sort of lamenting the fact
14 how are we going to do this job in less time
15 that we had with no budget, and one of the
16 first recommendations of the Chair was, why
17 don't we get AT&T and the business members to
18 pay for it? And wisely, with that logic, all
19 the business members said, are you kidding?
20 That would be the worst thing we can do is
21 forward to the Congress a report with a logo
22 that said Paid for by AT&T, AOL, Gateway and
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1 them, they'll laugh us out of the house. And
2 so we wisely retracted from that.
3 But what we've done, though,
4 regrettably, is come in the back door with a
5 proposal that at least we've got one group
6 out there telling us is going to cost the
7 American public over $20 billion a year, with
8 all of the breaks and all of the take-aways
9 within this proposal. And I can't see how
10 anyone in good conscience could forward this
11 to Congress in the name of fairness.
12 If we're worried about their being
13 a lawyers' haven now over nexus, there's
14 not -- even the worst lawyer -- even I, and,
15 Ted, I'm not the best lawyer in the world --
16 even I could figure out a way under these new
17 nexus proposals designed in this proposal to
18 figure that no business would ever have a
19 presence in any state. So we're going to
20 have a new level playing field, and that new
21 level playing field is no one will be present
22 in a state and no one will pay taxes.
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1 We have no idea what the fiscal
2 impact is on this. This is more than a
3 starting point. We've done the worst thing,
4 that I couldn't imagine that we would do, is
5 recommend that Congress create even yet
6 another Commission to arguably oversee the
7 work of NCCUSL and the state legislators and
8 governors to see if, in fact, we do exactly
9 what they tell them to do in this report
10 that's not a report because we now changed
11 the rules at the eleventh hour. And even
12 though I don't want to be -- I definitely
13 don't like dealing in rules versus substance,
14 but I want to make sure I register my
15 objection to the previous ruling of the Chair
16 and Commissioners. I would read to you what
17 our rules say, not the statute, what our
18 rules say, is that -- and it's Section E of
19 our rules it says, upon approval of an
20 interim or final report by at least two
21 thirds of the Commissioners serving at the
22 time the report is issued, the Commission
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1 shall transmit a report to the Speaker of the
2 House of Representatives.
3 We're playing a very dangerous game
4 with the American Public by deciding that
5 just because we can do it and we've all got a
6 majority, we're not going to play the
7 rules -- by the rules that Congress
8 established for us or that we established for
9 ourselves, just for the sake of we've got
10 ourselves at the table now, we've all got our
11 hands in the pie and we're going to grab as
12 much as we can and try to send that off in
13 the name of public policy.
14 COMMISSIONER NORQUIST: Mayor --
15 MAYOR KIRK: Finally, I want
16 to call to your attention -- I did not
17 interrupt you, Grover.
18 I want to call to your attention an
19 article, the front page of our Dallas Morning
20 News today that says U.S. software dominance
21 facing threat principally because the world's
22 richest economy turns to one of the world's
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1 poorest for the 300,000 well-trained
2 technicians, and it goes on into the reality
3 of the fact that we are suffering a real
4 intellectual glut in this country because of
5 our inability to finance and to prepare young
6 people for careers in this economy, and we're
7 having to go more and more to other countries
8 to look for the intellectual and technical
9 help that we need. That is the fuel that's
10 driving this economy. John Sidgmore said it
11 Wednesday, I've heard Mike Armstrong say it,
12 I've heard every Business member of this
13 Commission state, one of your principal fears
14 is finding the intellectual technical talent
15 to do this. And if a business needs to
16 thrive because they're not going pay taxes,
17 all of us have raised a question as whether
18 or not that business ought to be subsidized.
19 And they shouldn't be. And we haven't
20 addressed that.
21 I'd love to be able to support a
22 proposal that does what we've said it does --
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1 what you've each committed yourselves and
2 what we've said it does. But, gentlemen,
3 this isn't it. And I think we do ourselves a
4 real disservice, Governor, if we don't at
5 least adhere to the rules that we established
6 and get about the business of trying to do
7 what we've all said we've committed ourselves
8 to do. We have plenty of time. We were
9 awfully close to having the required
10 consensus that would produce the report that
11 did all of these things. There's no reason
12 we can't get on to that once this proposal
13 fails.
14 CHAIRMAN GILMORE: The Chair does
15 not accept the idea that his ruling is in
16 violation of the rules, but we will --
17 MAYOR KIRK: Governor, I
18 just want to do whatever I need to do to
19 maintain and preserve that option, that I
20 can't -- if you would read the rules, I can't
21 understand how it can be more plain than
22 reading our own rules that say that the final
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1 report must receive at least a two-thirds
2 vote. And I'm not reading from the statute,
3 I'm reading from the rules adopted by this
4 Commission.
5 CHAIRMAN GILMORE: Yes, Mayor, but
6 the statute trumps the rules. And that --
7 MAYOR KIRK: But the statute
8 said --
9 CHAIRMAN GILMORE: -- is, in fact,
10 the rules.
11 MAYOR KIRK: -- two-thirds,
12 and then you had our lawyer write an opinion
13 that said that our rules would override on
14 the report, which was less than the
15 findings --
16 CHAIRMAN GILMORE: May I clarify?
17 I --
18 MAYOR KIRK: -- so now I'm
19 reading the rules.
20 CHAIRMAN GILMORE: I understand
21 your position. I think that it's important
22 for you to understand my position, which is
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1 that I am not ruling in contravention of
2 either the statute or the rules.
3 Mr. Sokul is next on the list.
4 Mr. Sokul, you're next.
5 COMMISSIONER SOKUL: If Mr. Pittman
6 wanted to respond to something specifically,
7 I'd wait.
8 CHAIRMAN GILMORE: Mr. Pittman, did
9 you want to go into this --
10 COMMISSIONER PITTMAN: Yeah, I just
11 wanted, you know, I'm really begging for it
12 to ever disagree with you, Mayor, having
13 heard you at a couple of these meetings, but
14 I do want to make the point that I don't
15 think Business is at all grabbing for money.
16 The taxes are given to other folks, they're
17 not kept in our profits. And I think one of
18 the issues that all of us in business face
19 is -- in a strange way it's less about taxes
20 and more about where you deploy assets. And
21 I think all of us who have been in business
22 are very concerned that at a time when are in
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1 a crunch for technical people, we are working
2 very hard to improve our services day in and
3 day out because we're getting increasing
4 demand, increasing competition, not only from
5 this country but from other countries, is
6 that we deploy every asset we can find to
7 making the product better, not to stop that
8 while we try and build a complicated tax
9 collection system, which we think would bog
10 down this economy. So again, the taxes are
11 not us trying to get -- keep money; we don't
12 keep the taxes, we give them to somebody
13 else. All we've ever done in any process is
14 collect taxes on behalf of some authority.
15 CHAIRMAN GILMORE: Mr. Lebrun.
16 COMMISSIONER LEBRUN: Thank you,
17 Mr. Chairman. First of all, I would concur
18 in the comments of Mayor Kirk. Section 1103
19 of the enabling legislation not only required
20 a two-thirds vote for our findings, but it
21 also states, and I'll quote, any
22 recommendation agreed to by the Commission
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1 shall be tax and technologically neutral and
2 apply to all forms of remote commerce. One
3 of the recommendations contained in the
4 Business Caucus Proposal is this continuation
5 of the moratorium for five years, but also a
6 prohibition of taxes on sales of digitized
7 goods and products and their non-digitized
8 counterparts.
9 It is my understanding that there
10 are currently twenty-eight states that
11 consider downloaded software to be taxable,
12 and nineteen states consider downloaded
13 information taxable. Twelve states,
14 including my state of South Dakota, imposes a
15 sales tax on broad categories such as
16 electronic information services. If this
17 proposal were enacted, it is not tax neutral.
18 My state and any state that falls in these
19 categories I just outlined are going to have
20 an immediate adverse effect on tax revenues.
21 I'm sure Governor Locke can speak for
22 Washington, but it's my understanding that
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1 Washington alone would lose over a hundred
2 and $50 million annually in sales tax revenue
3 if digitized products or comparable products
4 such as CDs, music, radios, newspapers,
5 magazines, all which can be obtained from a
6 digitized form, becomes tax exempt. So I
7 don't think that this proposal, in this
8 instance alone is tax neutral.
9 Now, we've heard from over 6,000
10 retailers and employees of retailers. And
11 they're saying this proposal that you've got
12 before us is not a level playing field
13 because they still have to collect that tax
14 paid by the citizens of my state or your
15 state, if your state imposes a sales tax. I
16 can't figure out what economic reason there
17 is to make a distinction if I buy something
18 over the Internet, over the telephone,
19 through a catalog, or from the brick and
20 mortar store, why it should be treated
21 differently. And there aren't 30,000 taxing
22 districts out there imposing sales and use
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1 tax; the closest figure I ever heard is maybe
2 6,000, and that can probably be reduced with
3 a simplified tax form. But to use the number
4 30,000 is misleading; that's not the case.
5 The level playing field means just
6 what it says. Why should there be a
7 difference in the media that's used to
8 purchase a product or a service? If it's a
9 taxable type of transaction, it should be
10 taxable regardless of the media that's used
11 to purchase it. I don't believe that your
12 proposal meets the requirement of the
13 statute.
14 CHAIRMAN GILMORE: Mr. Pottruck,
15 did you wish to respond to Mr. Lebrun?
16 COMMISSIONER POTTRUCK: Yes, I
17 would like to do that.
18 Mr. Lebrun, the Supreme Court found
19 in the Quill case that there were reasons not
20 to impose those taxes. And they have to do
21 with complications largely and the amount of
22 work necessary for businesses to understand
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1 the complexity of local sales tax structures
2 all over the United States. And that's not a
3 political organization, that's our Court,
4 listening to arguments on all sides and
5 coming to that conclusion. Now, that hasn't
6 changed very much. If anything, the sales
7 taxes have become more complicated in the
8 interim since the Quill decision.
9 We have an opportunity, as Governor
10 Leavitt said, to see a problem that's big
11 enough to see and small enough to still solve
12 and to get on it now. We have that
13 opportunity. We have that opportunity to
14 simplify. We've tried to lay a road map out
15 to simplify and to encourage the states to
16 simplify.
17 I believe that a lot of our debate
18 is around the details. There were a lot of
19 discussions about the Business Caucus
20 Proposal, with Governor Leavitt, with Mayor
21 Kirk, with many members of this Commission
22 who ultimately appear not to be able to
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1 support our proposal largely around the
2 details of the proposal, and I understand,
3 the devil is in the details. We considered
4 whether we should have a more simplified
5 proposal that would move from a 10,000-foot
6 level to a 30,000 foot level and therefore
7 eliminate the details so maybe we could reach
8 a broader consensus.
9 But it seemed to us that weren't
10 going to get there, we weren't going to do
11 our work for Congress if we simply operate at
12 that level.
13 CHAIRMAN GILMORE: Mr. Sokul.
14 GOVERNOR LEAVITT: Mr.
15 Chairman, following Mr. Sokul's remarks, I'd
16 like to call the question on them.
17 CHAIRMAN GILMORE: All right,
18 Governor Leavitt, I have a list and I think
19 it's unfair not to be able to go down it on
20 people I've already recognized on the list,
21 but at the conclusion of the list
22 Mr. Pottruck will have a chance to sum up
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1 and, in fact, we will call the question.
2 Mr. Sokul.
3 COMMISSIONER SOKUL: Okay, thank
4 you, Governor.
5 I support this proposal, and I'd
6 just like to briefly explain why. It has to
7 do with why I think this Commission has
8 already been a success and what our
9 obligation is to make it an even better
10 success.
11 Our Commission is already a great
12 success. It's already contributed to the
13 public policy debate in the following
14 fashion. When we were in Williamsburg we
15 heard a lot about fairness, the need for
16 fairness and the need for level playing
17 field. And that's still occurring. But a
18 funny thing happened on the road to Dallas.
19 This Commission exposed and put a spotlight
20 on state and local tax systems. And it
21 showed very brightly and very clearly that
22 those systems are terrible. They're terrible
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1 enough for intrastate commerce, but they're
2 horrible for a company engaged in interstate
3 commerce. And before we can talk about
4 applying that system to electronic commerce,
5 which is inherently interstate and indeed
6 inherently global, the states really need to
7 clean up their act, to put it bluntly.
8 And I don't agree that this
9 proposal is a money grab by the companies on
10 this Commission. The companies that are on
11 this Commission are on this Commission
12 because they're the ones that are affected so
13 much by this current state and local tax
14 systems. And when they point out those
15 problems and shine the light on those
16 problems, I don't consider that a money grab,
17 I consider that a constructive suggestion to
18 Congress.
19 Now, what is a level playing field?
20 We've heard a lot about a level playing
21 field. In my way of thinking, a level
22 playing field will occur when there will be
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1 equal burdens for everybody. Equal burdens.
2 When the state and local governments, through
3 the NCCUSL process or otherwise, reform their
4 use tax system to such an extent that they're
5 willing to impose the exact same burdens on
6 their local merchants, then we will have a
7 level playing field. I'm here in Dallas, I'm
8 from Virginia, I bought something in the gift
9 shop earlier. They didn't ask me where I was
10 from. They didn't force me for the City of
11 Dallas, for the State of Texas, to identify
12 where -- who I was, where I'm from, what I
13 was buying. And they're not going to have to
14 send the tax back to Virginia.
15 CHAIRMAN GILMORE: Yeah, but we
16 know now, Mr. Sokul.
17 COMMISSIONER SOKUL: I know. And
18 to Fairfax County. Now, that's the problem
19 that the Quill decision addressed, and that's
20 why states can't force remote merchants to
21 collect taxes. It's because the -- while it
22 might be, on one level, unfair to a local
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1 merchant now, the proposed solution is fifty
2 times more unfair than what a local merchant
3 confronts today. So when the state and local
4 governments devise a system that's so simple
5 they will impose the exact same burdens on
6 their local retail merchants, then we will
7 have a simple system and then we will have
8 equal burdens.
9 Now, finally, the final reason that
10 I'm supporting this proposal is that we're
11 not a law- making body. We're making
12 suggestions to Congress for their action.
13 And to me that implies or strongly suggests
14 that we shouldn't be timid. We should point
15 out the problems, we should be comprehensive
16 in what the problems are, and we should be
17 aggressive on suggested solutions to foster
18 debate and move the process along. I think
19 this proposal does a wonderful job at that,
20 and that's why I'll vote for it.
21 CHAIRMAN GILMORE: Last three names
22 on my list are Mr. Andal, myself, and
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1 Mr. Pottruck to close. Mr. Andal.
2 COMMISSIONER ANDAL: Thank you, Mr.
3 Chairman, and I'd like to thank, before I
4 begin, the Business Caucus members who
5 struggled to reconcile some really difficult
6 issues here, trying to put something on the
7 table that most of us could accept. I'm
8 sorry that we can't get unanimous opinion,
9 but I think we've come a long way.
10 I want to talk about two things in
11 the proposal. One is what I view as the
12 disproportionate taxation of
13 telecommunications in our country, and why
14 that's so harmful to ordinary citizens. And
15 then second of all, what I view as the sales
16 tax compromise proposal that has been put
17 forth in the Business Caucus Proposal. It is
18 not exactly everything I wanted, but it, I
19 think, helps to go down the path of
20 simplification.
21 On telecommunications, Mike
22 Armstrong mentioned earlier that he was
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1 the least-expensive tax collector in a
2 country. I do collect more tax than AT&T,
3 $29 billion a year, but I'm not nearly as
4 inexpensive as you are. You are free. And
5 telecommunications tax -- companies collect
6 boat-loads full of tax for state and local
7 governments across the country, and they
8 collect it at -- in most cases without any
9 recompense from the government, and their
10 customers pay that tax. And in the old days
11 it didn't really matter that much because you
12 had regulated monopolies, they collected the
13 tax, and when it came time to have a rate
14 increase, they'd just pass it on to their
15 customers. That's no longer true. Now it
16 goes to their bottom line.
17 And so when we have all these
18 disproportionate share -- taxes on
19 telecommunications all across the country,
20 that kind of -- expense and bottom line goes
21 directly to these companies' spreadsheets,
22 balance sheets at the end of the year. On my
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1 phone bill in California there are eight
2 different surcharges. And I'm often asked as
3 a tax official, what are all these for? And
4 no one knows. Billions of dollars of
5 surcharge revenue, just in California, are
6 collected by telecom companies. In addition
7 to that, those taxes that don't apply to
8 other businesses in California. In addition
9 to that, these companies do not get treated
10 the same for property tax purposes across the
11 country. They are singled out for different
12 kinds of property tax assessment than other
13 companies.
14 Now, you say, why should we care?
15 Why should we care about AT&T, why should we
16 care about MCI, why should we care about
17 these telecom companies? The reason we
18 should care as ordinary citizens here in
19 Dallas or in California or anywhere else in
20 the country, is because they are the ones
21 that are investing in the Internet backbone.
22 They're buying the fiberoptic line, they're
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1 buying the switching stations, they're the
2 ones that are moving at a faster and faster
3 speed to deliver data and voice and
4 information to our homes. The more they have
5 to pay in taxes, the less they have on their
6 balance sheet at the end of the year, the
7 more capital requirements that aren't being
8 met, and the less they're investing in the
9 Internet backbone. We should all be
10 concerned about the disproportionate share of
11 taxes that go on telecommunications in this
12 country, and we should all do something about
13 it because we want to grow the Internet as
14 fast as possible to keep our international
15 advantage.
16 So I like very much the pieces of
17 this proposal that relate to that, relate to
18 getting the disproportionate property tax
19 burden off the telecom companies. And by the
20 way, telecommunications companies are some of
21 the biggest property owners in each state in
22 terms of value. This is a lot of money at
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1 stake.
2 And then I want to go to the sales
3 tax issue. This is a compromise, even though
4 it's not seen as enough by some of those who
5 wanted to go further. The compromise is
6 basically this in the Business Caucus
7 Proposal. I want to codify existing law,
8 Quill and otherwise, and I want to say to the
9 governors and the state tax collectors across
10 the country, you cannot go outside of your
11 border to collect sales tax from a company
12 that doesn't have a physical presence in your
13 state. This proposal, though, does -- says
14 that we ought to codify existing law and we
15 ought to keep it there until, until, the
16 states simplify their own tax system. And
17 Mayor -- or I guess it was Gene that said the
18 6,000 rates. There are 6,000 rates, there
19 are over 30,000 tax rate areas.
20 And when Mike Armstrong and John
21 Sidgmore talk about all these tax returns
22 they have to follow, it's not just the rate,
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1 it's the rate, plus the tax rate area, plus
2 the non-uniform tax base in each state. It
3 creates an administrative nightmare. And to
4 be honest with ya, with all due respect to my
5 friends in the state and local tax community,
6 these states have done absolutely nothing to
7 simplify their tax systems. They come here,
8 they come to forums, they come to Congress
9 and they say, we will simplify if you do
10 this. The you do this is always we want to
11 raise taxes. And the simplifying never
12 happens. And what the Business Caucus
13 Proposal does is it calls that bet. It says
14 if you want to overturn Quill and you want to
15 impose tax collection burdens on out of state
16 collectors, then you simplify first. It
17 ought to have had it on the cover of the
18 proposal, simplify first, then we will move
19 to the discussion of whether or not to
20 overturn existing law as to out of state
21 sellers. That's the only way we can protect
22 our Internet commerce from a slowdown that
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1 relates to confusion, litigation, and
2 administrative cost.
3 I have to talk about a few things.
4 Mayor Kirk talked about this would be a $20
5 billion loss to American taxpayers. And this
6 all, I guess, depends on where you come from,
7 but where I come from when you -- when the
8 taxpayers pay less and the government gets
9 less, the American taxpayers are getting
10 savings, not cost. We're allowing those
11 taxpayers to keep their money, not send it to
12 the government. That is not a cost to
13 American taxpayers, that is a savings to
14 American taxpayers.
15 And finally, we talked about the
16 rules, and we spent a lot of time talking
17 about rules around here, but in the Internet
18 Tax Freedom Act, there is an obligation to
19 have tax neutrality. And I think, my friend,
20 it does not say revenue neutrality. Tax
21 neutrality means similar products get taxed
22 the same. Therefore, if you have a music CD
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1 that's in tangible personal property form,
2 and a musical CD that's digitally
3 transferred, that it should be taxed the
4 same. That is tax neutrality, and that's
5 exactly what the Business Caucus Proposal
6 does. It need not be, to satisfy the rules,
7 revenue neutral. And I think that's one of
8 the confusions that we have.
9 Finally, I'd just like to say that
10 we -- this is a proposal that I think it
11 accomplishes a great deal of good. The
12 reason I vote for it, even though I'm
13 strongly opposed to overturning Quill, is I
14 don't think the states will simplify. I
15 don't think if you go twenty years back and
16 listening to all the promises and all the
17 speeches and all the good intentions, that
18 they have ever simplified anything. The
19 states continually make it more complicated,
20 not more simple. And if they want to tax, if
21 they want to go out of our state's borders
22 and tax the Internet transactions, then they
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1 ought to simplify first, and then we'll
2 discuss it. And I don't think they will.
3 And I think this is a reasonable compromise,
4 and I strongly support the Business Caucus
5 Proposal.
6 CHAIRMAN GILMORE: I previously
7 failed to see Governor Locke's hand.
8 Governor Locke.
9 GOVERNOR LOCKE: Thank you, Mr.
10 Chairman. I really appreciate Mr. Pottruck
11 and others of the business community for
12 putting together their proposal. In many
13 ways we've actually been more aligned than
14 would be apparent. But I cannot support this
15 particular proposal, and I just want to make
16 a few comments.
17 First of all, I think there's
18 almost unanimity among the group, all the
19 Commission members, that we ought to
20 permanently ban future access charges, not
21 just extend the moratorium, but ban access
22 charges with respect to the Internet so that
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1 there is unencumbered use of the Internet and
2 we ought to encourage that -- this growing
3 medium.
4 Second of all, I think there's a
5 great deal of support among the members here,
6 including myself, to repeal the Federal
7 telecommunications tax. So there's not
8 disagreement there.
9 Nobody that might be opposed to
10 this Business Caucus Proposal is suggesting
11 that we collect any additional taxes today,
12 or even three or four years from now. In
13 many ways, I and others agree with Mr. Andal
14 that unless there is simplification first,
15 the states will not be allowed under Quill or
16 any other type of law to try to collect taxes
17 from remote sellers, whether it's catalog
18 sales or sales over the Internet.
19 I am concerned, however, that this
20 proposal, with its level of detail, goes too
21 far. And that's what concerns me. I think
22 we agree in principle and wish that we could
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1 have reached that 30,000 level -- or
2 30,000-foot elevation and focused on the
3 principles, which would have then given
4 guidance to the Congress. But the details
5 here, I think, go too far, and let me just
6 give you one example. It may be fine to say
7 that digitized goods should not be taxed
8 because of the privacy issues and the
9 complexity of trying to track that down, but
10 then to say that their physical counterparts
11 should also be exempt from tax, so if I go to
12 the department store and I buy a CD, if I go
13 to the book store and buy a book, if I buy a
14 magazine, if I buy at the airport off the
15 newsstand Golf Digest Magazine, when I could
16 actually have much of that downloaded and
17 read it over the computer, to say that those
18 physical items would no longer be subject to
19 sales tax, that troubles me, because in our
20 state of Washington that would be a loss to
21 us annually of almost a hundred and $30
22 million a year.
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1 Now, there are some who believe
2 that there should be no sales tax over the
3 Internet, whether it's simplified or what
4 have you because they say that the sales tax
5 is an outmoded form of taxation. That may be
6 true. And maybe over time we'll find out.
7 But, some of those people say that revenues
8 to local governments will increase, not
9 because of sales taxes, but through the
10 income taxes. And I know that people in
11 California have cited the growth in income
12 taxes and have, therefore, said that there
13 should be less reliance on the sales tax.
14 But we need to look at the various -- the
15 fact that in many jurisdictions all across
16 America there are no income taxes. And this
17 is an issue of states' rights. That if the
18 states are going to be facing the dinosaur of
19 a sales tax, let that be their burden, let
20 them figure that out, let's not mandate them
21 or force them into other methods of taxation,
22 whether property taxes or income taxes
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1 because of the loss of sales taxes due to
2 the -- due to the exemptions that would be
3 given to the Internet or the lack of a level
4 playing field.
5 And if we're going to say that the
6 tangible equivalents of digitized goods are
7 not subject to sales tax, why is it that we
8 then say that if we buy clothes over the
9 Internet from a remote sale -- a remote
10 seller, it's not subject to sales tax. And
11 again, nobody here is proposing that we
12 subject those items to sales tax until there
13 is simplification, if and when that ever were
14 to occur. But if we say that, for instance,
15 you buy clothes from L.L. Bean, whether the
16 Internet or by catalog sales, there's no
17 sales tax there, but if I go and buy that
18 same item in my store in my local community I
19 pay sales tax. How is that a level playing
20 field? How is that a level playing field
21 where we say that the tangible equivalent of
22 a digitized good is not subject to sales tax
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1 if we buy it in our own communities, but if
2 we also buy the physical component from our
3 own community and not through the Internet
4 and not through catalog sales, we do pay
5 sales tax over that? And so I guess I'm
6 concerned that in our quest to try and reach
7 consensus that we've focused so much on the
8 details that it's proven problematic for many
9 of us.
10 Yes, there should not be access
11 charges for the Internet. Yes, we should
12 eliminate the telecommunications tax. Yes,
13 there should be simplification before there
14 ever is any duty to collect on remote
15 sellers, and maybe that will never happen.
16 Maybe that will never happen and that
17 simplification will never happen, in which
18 case the law of the land stays. There is no
19 sales tax on remote sellers whether by
20 Internet or by catalog sales.
21 And finally, there should be a
22 level playing field. Even with respect to
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1 what we're doing with respect to encouraging
2 the growth of Internet sales. And finally,
3 nobody is proposing any additional taxes
4 today. Thank you.
5 CHAIRMAN GILMORE: Thank you,
6 Governor Locke. If I may have the floor for
7 just a moment.
8 With respect to this proposal that
9 has come forward, which I intend to vote for
10 as chairman, it has some language in it that
11 I believe acknowledges the positions of both
12 of the groups that are here on this
13 Commission. In fact, that, I think, is one
14 of the more appealing aspects of this.
15 Frankly, there's some language in this
16 proposal that I think is a little tough to
17 take. It talks a great deal about the
18 details about simplification, about extra
19 commissions to monitor such simplification.
20 While I'm not opposed to simplification, I'm
21 for it, but there's a heavy implication that
22 it will mean at some point a taxing type of
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1 authority or proposal up the road.
2 But on the other hand, the Business
3 group was willing to place into
4 acknowledgement within this document both
5 sides, not just one side and to say that, in
6 fact, there were people on this Commission
7 who adamantly do not believe that even in the
8 face of simplification that that
9 automatically means a sales tax up the road.
10 That's when I was able to begin to come
11 toward this Commission report because -- or
12 this compromise report because it does do
13 major tax cuts to help out consumers and
14 working men and women of the country, as well
15 as fostering the growth and opportunities of
16 this great new industry.
17 But a level playing field? That
18 means a lot of things to a lot of different
19 people. The truth is that there is very
20 rarely a level playing field in this country
21 and among all of these industries and types
22 of occupations, even within retail, things
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1 are not identical, and it's impossible to
2 make things identical. And if that's what
3 meant by a level playing field in terms of
4 taxing, then you have to make everything a
5 level playing field everywhere all the time.
6 We had a firm come into this
7 Commission and basically take me on, I think
8 it was in San Francisco, a major firm that
9 said that they always had a level playing
10 field, they never got any governmental
11 benefits. Just this past week we made a
12 major grant in the State of Virginia to that
13 very same company that said that they do not
14 have any types of benefits out of government,
15 but we made that grant because we wanted the
16 jobs, we wanted the growth, and we wanted the
17 opportunity, we wanted the income tax, we
18 wanted the new jobs. And that firm was quite
19 frightened, as a matter of fact, at one point
20 because they weren't sure that they were
21 going to get their special grant, and said so
22 in the paper. Well, they were going to get
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1 it because it was good for the people of
2 Virginia to foster that type of development.
3 But then they're gonna come tell me that
4 everything has to be a level playing field
5 and everything has to be identical. Because
6 we have to be wise and assess, as a matter of
7 fact, the nature of there various industries
8 and where, in fact, the playing field is for
9 the best interests of the people of our
10 respective states and of the United States.
11 I think the most compelling thing I
12 would say about this proposal is it contains
13 language in this that, for those people who
14 want to reach a taxing opportunity somewhere
15 up the road, it gives them some -- buys them
16 some time, which I think is a remarkable
17 concession, quite frankly. We don't believe
18 necessarily that it will ever arrive, but the
19 opportunity is there for those people who
20 want a taxing regime to exist somewhere up
21 the road. It's a remarkable, I think,
22 concession. But we don't believe that there
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1 will ever be a need for that type of taxing
2 authority, many of us that are on the
3 Commission.
4 But this is a very evenhanded
5 proposal that acknowledges both of these
6 matters, while at the same time delivering
7 major tax cuts to the people of the United
8 States. So I'm going to vote for it. I'm
9 going to support it. And I believe that it's
10 the best approach. And those who would either
11 vote no or abstain should remember that they
12 may be passing up the one opportunity they
13 have in a piece of language to recommend to
14 the Congress, to do a finding and a
15 recommendation, which says that there may be
16 an opportunity for further thought on this up
17 the road.
18 The closing, before we call
19 Governor Leavitt's question, the closing
20 remarks go to the person who has proposed it,
21 and that is Mr. Pottruck.
22 COMMISSIONER POTTRUCK: Thank you,
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1 Mr. Chairman. Well, I think we can all see
2 that there's a lot of debate around this
3 proposal, and people support it for different
4 reasons. They see in it what they like. And
5 it's -- if we look back upon the entire
6 process, as a business person who sits on
7 this Commission, this process is so unusual
8 because in business we try to make problems
9 as small as they -- as we can and then solve
10 them, and of course in government the process
11 of dialogue and debate makes problems bigger,
12 and then they seem almost impossible to
13 solve. But that's what I think we've done,
14 we've in fact invited in all points of view
15 in the four meetings that we've had. We've
16 had lots of debate, lots of presentations,
17 and the problem is big and very complicated.
18 And therefore to reach a recommendation, to
19 reach any kind of even a majority point of
20 view, or a supermajority point of view, it
21 requires us to put together a proposal where
22 you like some things and can just live with
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1 others to try to find a middle ground. And
2 that's what we've tried to do; we've tried to
3 create something that's a middle ground.
4 We recognize the fact that
5 virtually nobody wants new access taxes on
6 the Internet. There's almost unanimity about
7 the idea of repealing telecommunications
8 taxes. There's clear support for the
9 importance of simplification. Some view
10 simplification as the precursor for an
11 opportunity for a level playing field of how
12 taxes are applied, others see simplification
13 as an end in and of itself. And in either
14 case simplification is a valuable thing to
15 do. And I don't think anyone supports the
16 idea that this should be a windfall for
17 taxes. Nobody thinks that this should raise
18 tax receipts on Americans. Nobody thinks
19 that that's what's needed right now.
20 So we have this compromise proposal
21 that we think does a lot of good, provides
22 the pathway for moving to a 21st Century
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1 structure. And I am delighted by the work
2 that people have done to make this possible.
3 We've had a lot of discussion, a lot of
4 participation. Even those that can't support
5 this proposal, Mr. Chairman, have
6 participated in the discussion. And I think
7 in many cases they've come to that conclusion
8 because they couldn't support the details.
9 But we've tried to come to something here
10 that represents a very moderate point of
11 view, and I'm delighted on behalf of the
12 Business Caucus to move this proposal
13 forward.
14 CHAIRMAN GILMORE: Governor Leavitt
15 has called for the question. Is there a
16 second?
17 COMMISSIONER ANDAL: Second.
18 CHAIRMAN GILMORE: All in favor of
19 calling the question please say aye.
20 All opposed nay.
21 The question is called.
22 Ms. Rosenker, if you would call the roll,
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1 please. A yes vote adopts the Business
2 Caucus Proposal, a no opposes it. We shall
3 now see the cards.
4 MS. ROSENKER: Mr. Andal?
5 COMMISSIONER ANDAL: Aye.
6 MS. ROSENKER: Mr. Armstrong?
7 COMMISSIONER ARMSTRONG: Aye.
8 MS. ROSENKER: Mr. Guttentag?
9 COMMISSIONER GUTTENTAG: Abstain.
10 MS. ROSENKER: Mr. Harris?
11 COMMISSIONER HARRIS: Aye.
12 MS. ROSENKER: Mayor Kirk?
13 MAYOR KIRK: No.
14 MS. ROSENKER: Ms. Jones?
15 COMMISSIONER JONES: Abstain.
16 MS. ROSENKER: Governor Leavitt?
17 GOVERNOR LEAVITT: Abstain.
18 MS. ROSENKER: Mr. Lebrun?
19 COMMISSIONER LEBRUN: Abstain.
20 MS. ROSENKER: Governor Locke?
21 GOVERNOR LOCKE: Abstain.
22 MS. ROSENKER: Mr. Norquist?
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1 COMMISSIONER NORQUIST: Aye.
2 MS. ROSENKER: Mr. Novick?
3 COMMISSIONER NOVICK: Abstain.
4 MS. ROSENKER: Mr. Parsons?
5 COMMISSIONER PARSONS: Aye.
6 MS. ROSENKER: Mr. Pincus?
7 COMMISSIONER PINCUS: Abstain.
8 MS. ROSENKER: Mr. Pittman?
9 COMMISSIONER PITTMAN: Yes.
10 MS. ROSENKER: Mr. Pottruck?
11 COMMISSIONER POTTRUCK: Yes.
12 MS. ROSENKER: Mr. Sidgmore?
13 COMMISSIONER SIDGEMORE: Yes.
14 MS. ROSENKER: Mr. Sokul?
15 COMMISSIONER SOKUL: Yes.
16 MS. ROSENKER: Mr. Waitt?
17 COMMISSIONER WAITT: Yes.
18 MS. ROSENKER: Chairman Gilmore?
19 CHAIRMAN GILMORE: Aye.
20 CHAIRMAN GILMORE: The Commission
21 has voted for the proposal. Eleven yeas, one
22 nay, seven abstentions. It cannot be a
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1 recommendation of this panel, but will be so
2 reported as voted in that manner to the
3 Congress.
4 The next item on the agenda is the
5 State and Local Caucus Proposal, which is in
6 your books, is an alternative proposal to the
7 one that we have adopted, but is one that we
8 can fully discuss at this time and vote once
9 again.
10 Is there a motion to adopt the
11 State and Local Caucus Proposal submitted by
12 Commissioners Kirk, Leavitt, Lebrun, and
13 Locke?
14 GOVERNOR LEAVITT: So moved.
15 GOVERNOR LOCKE: Second.
16 CHAIRMAN GILMORE: Moved by
17 Governor Leavitt, seconded by Governor Locke.
18 This floor is open for discussion.
19 GOVERNOR LEAVITT: Mr.
20 Chairman, I'd like to be recognized.
21 CHAIRMAN GILMORE: Governor
22 Leavitt.
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1 GOVERNOR LEAVITT: Mr.
2 Chairman, it's my purpose at this time to
3 offer an amendment to our proposal. I'd like
4 to characterize the amendment because I
5 believe it's of some importance in
6 understanding its derivation.
7 First, the words of this proposal
8 are coming from a combination of two places.
9 First, a proposal written by Mr. Pottruck,
10 that I believe the members of our -- of this
11 Commission, many of them, thought was very
12 productive, well written and well reasoned,
13 that follow the same essential line of
14 reasoning that we have had discussed today.
15 The second part is the business proposal
16 itself. And it's our purpose now to actually
17 put forward a proposal based on the Business
18 proposal that we believe will allow us to
19 move toward a -- a decision and a significant
20 policy guidance.
21 CHAIRMAN GILMORE: Governor
22 Leavitt, the amendment is out of order. The
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1 proposal itself has been filed in due course
2 and may be presented and voted upon. The
3 amendment is out of order unless at a later
4 time we pass Mr. Pincus's floor amendment
5 proposal.
6 GOVERNOR LEAVITT: I would, Mr.
7 Chairman, then ask for a suspension of the
8 rules to allow a proposal based on the
9 Business proposal that I believe would be
10 quite well received by many members of this
11 group, if, in fact, there is a desire to see
12 this resolved or if we're just interested in
13 being able to use parliamentary procedure to
14 block it. I would like to have -- make a
15 motion for a suspension of the rules and ask
16 that it -- this amendment to my own proposal
17 be allowed.
18 SPEAKER: Second.
19 CHAIRMAN GILMORE: It is moved and
20 seconded that we suspend the rules in order
21 to allow an amendment to the proposal.
22 The --
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1 SPEAKER: I'd like to speak to the
2 amendment.
3 CHAIRMAN GILMORE: It is the --
4 such a suspension of the rules requires a
5 two-thirds vote. It is debatable.
6 Mr. Andal, you had your hand up.
7 COMMISSIONER ANDAL: With all due
8 respect, Governor, we have spent an enormous
9 amount of time mostly on procedural votes by
10 your group arguing that we ought to stick to
11 the rules. And I spent -- we listened to
12 Mayor Kirk for at least ten minutes talking
13 about how important the Operating Rules are.
14 All of the people listed here, Items 1
15 through 16, have put their materials in
16 before this meeting so that we could review
17 'em, that we could look at 'em, we could see
18 whether or not we liked them or not, and we
19 could have a significant analysis done on
20 them, and we did that with your State and
21 Local Caucus Proposal and I'm prepared to
22 vote on it. But in the absence of that, I
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1 think we need to treat you just the same way
2 that we treat everyone else, which means that
3 we go -- if you want to make another
4 proposal, which it sounds like you do, you
5 need to go down to Item 17 and Commissioner
6 Pincus's proposal to do floor amendments.
7 But in the absence of that, it is completely
8 unfair, I think, to all the people who
9 submitted their resolutions in advance to
10 allow you to amend your proposal before we
11 vote on it. So I'm going to oppose the --
12 COMMISSIONER LEBRUN: Mr. Chairman?
13 COMMISSIONER ANDAL: -- motion to
14 suspend the rules.
15 GOVERNOR LEAVITT: Mr.
16 Chairman, may I respond?
17 CHAIRMAN GILMORE: Governor
18 Leavitt.
19 GOVERNOR LEAVITT: I think
20 there would be some value in members of the
21 Commission understanding the basic nature of
22 the proposal in order for them to make a
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1 decision as to whether or not they would
2 choose. I heard from the last discussion
3 some very clear themes of agreement. First
4 of all, that we all recognize
5 telecommunications is, in fact, too complex
6 and over taxed and that there is a need for
7 us to reduce it. Second, that we should be
8 moving generally toward a level playing
9 field. Third, that simplification should
10 come before any nexus.
11 There is an agreement, I believe,
12 that could be reached, based on the fact that
13 we would include their words, on the
14 following things: First, that the Internet
15 isn't a target for new taxes; second, that
16 there's no reason to impose exclusive or
17 targeted taxes on electronic commerce; third,
18 that telecommunications should be reduced;
19 fourth, that privacy is a concern; fifth,
20 that taxes are -- that are owed today but
21 they're not being collected and that's part
22 of the process, that's part of the proposal
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1 that's there now, that we should be moving
2 toward a level playing field, that we should
3 extend the moratorium. I think it's very
4 important to note that the proposal, the
5 Business proposal is not to extend a
6 moratorium on sales taxes collected on the
7 Internet, but access taxes in specific. We
8 can reach agreement on that point. That
9 there should limited carve-outs on defining
10 nexus. And that there should be a 3 percent
11 federal excise tax ultimately eliminated.
12 That we should have -- that there is
13 currently an excess -- that any excess burden
14 should be eliminated.
15 So what would be the differences of
16 the proposal? Well, first of all, they would
17 be -- we would look at the fact that there
18 are, in fact, $20 billion worth of carve-outs
19 in this -- in the Business proposal, and we
20 would simply like to talk about those
21 carve-outs. Now, we can reach basic
22 agreement if we can talk about these
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1 carve-outs. Right now at this table there
2 are no -- there are five -- six business
3 representatives. There are no retailers at
4 this table, there are no small business
5 people at this table, and I'm inclined to
6 believe that if we had a Business proposal
7 that represented that spectrum of business as
8 well as simply the perspectives of those
9 honorable people who are here, it might look
10 substantially different. Those $20 billion
11 of carve-outs would benefit a certain segment
12 of business. Not directly, but they would
13 certainly benefit because it would allow them
14 not to have to collect it, and that's a
15 competitive advantage that needs to be dealt
16 with.
17 The second primary difference is
18 that this -- Commissioner Andal talked about
19 the need to simplify first. We're in
20 complete agreement, we need to simplify
21 first. We need to define the result, then
22 simplify, and then get the result. What's
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1 being proposed in both of these proposals
2 that would be drawn from the exactly the
3 Business proposal is that we have a
4 revolution in sales tax collection, and it's
5 a needed revolution. The question is, how do
6 we go about getting there?
7 Now, Mr. Chairman, we are very
8 close here. There are lots of areas of
9 agreement. There's been a lot -- we've been
10 very close as a group in working together
11 between the meetings. It seems very
12 unfortunate to me that we would at this point
13 choose not to have an alternative proposal
14 that would move us forward simply on the
15 basis of a need to suspend the rules. And I
16 would implore on my fellow Commissioners that
17 we allow this to be done. And then, Mr.
18 Chairman, I'd like to call at the end of that
19 I'd like to call for a recess where we could
20 give the details of this and allow it to be
21 studied by members of the Business Caucus and
22 others to see if, in fact, between now and
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1 tomorrow morning we might be able to find a
2 resolution that would allow us to give to
3 Congress true -- a true guidance on this
4 issue.
5 CHAIRMAN GILMORE: Ladies and
6 gentlemen of the Commission, what is before
7 the house is the question of whether we will
8 suspend the rules for an amendment at this
9 time. When we earlier addressed this issue
10 we decided to go in order on matters that
11 have, in fact, been filed on due notice, and
12 then if at the end of the day Mr. Pincus's
13 resolution to offer amendments from the floor
14 at that time is adopted, then it will be
15 done. In fact, I would anticipate something
16 similar to this being offered at that time,
17 should Mr. Pincus be successful in his
18 motion. But in any case, that is the issue
19 that is before us at this time. Whether to
20 suspend the rules requires a vote of
21 two-thirds.
22 COMMISSIONER PARSONS: Point of
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1 information --
2 COMMISSIONER LEBRUN: Mr.
3 Chairman --
4 COMMISSIONER PARSONS: Point of
5 information, Mr. Chairman?
6 CHAIRMAN GILMORE: Yes,
7 Mr. Parsons.
8 COMMISSIONER PARSONS: Do I
9 understand the Chair -- well, let me ask the
10 question directly. If Mr. Pincus's motion to
11 have floor amendments be appropriate at some
12 point in these proceedings, and presumably
13 once we've gone through the agenda, if that
14 is approved, would the Governor have an
15 opportunity to raise his amended proposal
16 then --
17 CHAIRMAN GILMORE: Yes, he will.
18 COMMISSIONER PARSONS: -- which
19 would also give some of us a chance to read
20 it.
21 CHAIRMAN GILMORE: Yes, he will.
22 COMMISSIONER PARSONS: All right,
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1 thank you.
2 COMMISSIONER LEBRUN: Mr. Chairman?
3 SPEAKER: Point of order --
4 CHAIRMAN GILMORE: Go ahead.
5 Mr. Lebrun.
6 COMMISSIONER LEBRUN: I would urge
7 support of the motion to suspend the rules.
8 We've just heard a good debate on the
9 Business Caucus Proposal, a lot of these
10 issues were discussed thoroughly. I don't
11 think there's any issue before this
12 Commission as important as what we're talking
13 about right now, and that's the taxability of
14 transactions over the Internet or other
15 remote sales. We've got a huge agenda. If
16 we don't get to this proposed compromise that
17 Governor Leavitt suggested until the very
18 end, and that's where it would kind of fall,
19 we're going to be short on time. It seems to
20 me that now is the time when we're in this
21 topic to try to get this matter resolved.
22 The Business Caucus Proposal did not get the
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1 necessary two-thirds vote. Why don't we take
2 a chance now to look at a compromise, and
3 most of you have seen it, probably all of you
4 have seen it, to let us debate that now when
5 it's fresh in all of our minds, and take that
6 vote. Perhaps we will get the necessary
7 two-thirds vote. But to postpone it until we
8 go through all these other items will not
9 give it the sufficient time it's going to
10 need. It's four o'clock and the end of our
11 first day already. So I would urge you to
12 support the motion to suspend the rules so we
13 can proceed with this particular matter.
14 SPEAKER: Mr. Chairman?
15 CHAIRMAN GILMORE: Mr. Sidgmore.
16 COMMISSIONER SIDGEMORE: Yeah, I
17 think, you know, if we really are as close as
18 Governor Leavitt suggests, I think all of us
19 would like to see exactly what it is we're
20 close on and what we're not close on. On the
21 other hand, amending it on the fly and
22 talking about it verbally here at this time,
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1 I just don't see how that gets us forward.
2 So, I mean, my approach would be let us --
3 you know, let us see it in writing and then
4 we can take it up, you know, at the next --
5 GOVERNOR LEAVITT: Mr.
6 Chairman, I'd be happy to distribute it --
7 COMMISSIONER HARRIS: Mr. Chairman.
8 GOVERNOR LEAVITT: -- and I'd
9 be happy to put off action until we've had a
10 chance to meet.
11 COMMISSIONER HARRIS: Mr. Chairman.
12 CHAIRMAN GILMORE: I can't see who
13 that is. Paul Harris.
14 COMMISSIONER HARRIS: Mr. Chairman,
15 I would hope that we would reject this offer
16 to suspend the rules. I mean, it's important
17 in our last meeting that we have some order
18 in this agenda. If we suspend the rules on
19 this, then we open the floor for all sorts of
20 tricks and shenanigans and delays, just like
21 we had in Williamsburg. It's important to
22 discuss these issues. If they're so
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1 important, why didn't we all have an
2 opportunity to receive these well in advance
3 of the Commission's meeting in Dallas so that
4 we could individually review them, research
5 them, ask questions about 'em, and not be
6 handed these amendments on the fly as has
7 been suggested earlier? I think these issues
8 are far too important for us to be making
9 these types of ad hoc changes to the agenda
10 when we don't have the kind of time that we
11 need to carefully and thoughtfully look
12 through what's being proposed.
13 CHAIRMAN GILMORE: Mr. Harris, I
14 believe that Governor Leavitt has withdrawn
15 the motion to suspend the rules at this time.
16 GOVERNOR LEAVITT: No, no, I
17 have not.
18 CHAIRMAN GILMORE: You have not?
19 GOVERNOR LEAVITT: No, I have
20 not.
21 CHAIRMAN GILMORE: Then we will --
22 COMMISSIONER ANDAL: Call the
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1 question.
2 CHAIRMAN GILMORE: Mr. Andal has --
3 GOVERNOR LEAVITT: I have a
4 point of order, Mr. Chairman. I'd like to
5 ask the parliamentarian if it's necessary to
6 suspend the rules to substitute my own
7 proposal for another.
8 CHAIRMAN GILMORE: Mr. Parliamentar
9 ian?
10 MR. GRIFFITH: I'm sorry, could you
11 repeat the question again, Governor Leavitt?
12 GOVERNOR LEAVITT: I'd like to
13 know if it is -- in order to substitute a
14 proposal that I have submitted, along with my
15 colleagues, if it's necessary for us to
16 suspend the rules, if that is the same as a,
17 quote, floor amendment, or if this is simply
18 a substitute that's necessary to --
19 MR. GRIFFITH: If you have an
20 existing proposal that was on file and was
21 approved as part of the agenda once the
22 agenda is approved, it's taken away from you
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1 and it belongs to the meeting. To amend the
2 agenda it takes two-thirds vote to do so. So
3 I think the effect is the same.
4 GOVERNOR LEAVITT: Mr.
5 Chairman, I'd also like to respond to
6 Commissioner Harris. And, I mean, there have
7 been some of us who have spent a lot of time
8 negotiating, I mean actually negotiating and
9 compromising on some of these things. And
10 frankly that happened less than forty- five
11 days ago. In fact, it happened Wednesday or
12 Thursday. In fact, we're hopeful it will not
13 just happen Wednesday or Thursday, but maybe
14 this afternoon and tomorrow, and that perhaps
15 we'll be able to actually reach a solution to
16 this and not simply do it autocratically on
17 the basis of whatever you might have eleven
18 votes to do.
19 SPEAKER: Governor --
20 COMMISSIONER ARMSTRONG: Mr.
21 Chairman.
22 CHAIRMAN GILMORE: We have a motion
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1 to suspend the rules, which is, in fact,
2 still on the floor. Does anyone wish to
3 speak to the motion of whether we should
4 suspend the rules? Mr. Armstrong?
5 COMMISSIONER ARMSTRONG: Yes. I
6 would like to acknowledge Governor Leavitt's
7 points that I hope he's right, we are really
8 coming closer together if we could spend some
9 time together. I find this forum a difficult
10 one to do that. We have a Business Caucus
11 Proposal, and rather than deal with the
12 suspension of the rules, I note both from
13 Governor Locke and Governor Leavitt a listing
14 of all the things we agree on, and from my
15 perspective it's the important stuff. And
16 the things that we seem to have a separation
17 on, although we don't dive very deep, are
18 that the digital goods and tangible
19 equivalents are troubling, and that the
20 preemption of the states on nexus might be
21 troubling.
22 And if that's the case, rather than
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1 play with the rules -- I've never spent so
2 much time on rules since I was on the student
3 council. And I hate to tell you how long ago
4 that was. I would rather get on with the
5 rules, get on with the business, and recess
6 as early as possible, and hear suggestions
7 and proposals on the Business Caucus Proposal
8 that Governor Leavitt and Governor Locke
9 would like to make. Thank you.
10 COMMISSIONER ANDAL: Call the
11 question.
12 CHAIRMAN GILMORE: Motion is
13 whether or not to suspend the rules. Second
14 for the call to question?
15 SPEAKER: Second.
16 CHAIRMAN GILMORE: All in favor say
17 aye.
18 Question is called.
19 Ms. Rosenker?
20 MS. ROSENKER: Mr. Andal?
21 CHAIRMAN GILMORE: Excuse me. The
22 question before the house is: Shall the
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1 rules be suspended so as to allow a floor
2 amendment at this time?
3 COMMISSIONER ANDAL: Andal. No.
4 MS. ROSENKER: Mr. Armstrong?
5 COMMISSIONER ARMSTRONG: No.
6 MS. ROSENKER: Mr. Guttentag?
7 COMMISSIONER GUTTENTAG: Aye.
8 MS. ROSENKER: Mr. Harris?
9 COMMISSIONER HARRIS: No.
10 MS. ROSENKER: Mayor Kirk?
11 MAYOR KIRK: Aye.
12 MS. ROSENKER: Ms. Jones?
13 COMMISSIONER JONES: Aye.
14 MS. ROSENKER: Governor Leavitt?
15 GOVERNOR LEAVITT: 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: No.
22 MS. ROSENKER: Mr. Novick?
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1 COMMISSIONER NOVICK: Yes.
2 MS. ROSENKER: Mr. Parsons?
3 COMMISSIONER PARSONS: No.
4 MS. ROSENKER: Mr. Pincus?
5 COMMISSIONER PINCUS: Yes.
6 MS. ROSENKER: Mr. Pittman?
7 COMMISSIONER PITTMAN: No.
8 MS. ROSENKER: Mr. Pottruck?
9 COMMISSIONER POTTRUCK: No.
10 MS. ROSENKER: Mr. Sidgmore?
11 COMMISSIONER SIDGEMORE: No.
12 MS. ROSENKER: Mr. Sokul?
13 COMMISSIONER SOKUL: No.
14 MS. ROSENKER: Mr. Waitt?
15 COMMISSIONER WAITT: No.
16 MS. ROSENKER: Chairman Gilmore?
17 CHAIRMAN GILMORE: No.
18 GOVERNOR LEAVITT: Mr.
19 Chairman, I move for a recess.
20 SPEAKER: Second.
21 CHAIRMAN GILMORE: The motion to
22 rescind the rules fails, eight yeas, eleven
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1 nays.
2 There is a motion on the floor for
3 a recess.
4 COMMISSIONER NORQUIST: How long a
5 recess, and are we going to be looking at
6 the Kirk, Leavitt, Lebrun, Locke proposal
7 or --
8 CHAIRMAN GILMORE: Let me stop
9 where we are. We have on the floor at the
10 present the State and Local Caucus Proposal,
11 which is open to debate at this time and
12 eligible for a vote at the conclusion of that
13 debate. I had anticipated, frankly, a recess
14 at that time. But thereafter we will move,
15 frankly, to many of the issues that were just
16 raised with respect to some of these specific
17 taxes, Internet taxes -- access taxes, and
18 federal excise -- on stand-alone resolutions,
19 and we will, in fact, be taking them up in
20 the next hour or so, and then we will move to
21 the question of whether or not to open the
22 floor to floor amendments and have a general
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1 melee on that for a few hours.
2 So this is where the meeting is and
3 we are on our way. I had intended to have
4 the State and Local Caucus Proposal aired at
5 this time, and then move for recess, but it
6 is up to the body as to whether they would
7 like to recess at this time. That is where
8 we stand.
9 COMMISSIONER NORQUIST: My body
10 says health break.
11 CHAIRMAN GILMORE: Without
12 objection we'll recess for fifteen minutes.
13 Thank you very much.
14 GOVERNOR LEAVITT: Mr.
15 Chairman, we need longer than fifteen
16 minutes. We'll never get it done.
17 (Recess)
18 CHAIRMAN GILMORE: Okay, ladies and
19 gentlemen. I believe our
21 intentions are to take some substantive steps
22 here in order to streamline the agenda so
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1 that we can go directly to the question of
2 the floor amendment issue, and deal with some
3 of those issues today, and see where we go
4 from here.
5 But where we are on the agenda
6 right now is the State and Local Caucus
7 Proposal as submitted 30 days in advance.
8 Governor Leavitt.
9 GOVERNOR LEAVITT: Mr.
10 Chairman, I'm prepared to withdraw that
11 proposal pending the fact that we'll have a
12 chance to deal with the Pincus amendment,
13 which would allow for a substitute motion to
14 be made with the plan that I spoke of
15 earlier.
16 CHAIRMAN GILMORE: The State and
17 Local Caucus Proposal is withdrawn. What
18 remains on the agenda in terms of the
19 stand-alone proposals, many of which could
20 also some back by way of a floor amendment at
21 a later time, are Items 3 through 16.
22 Without objection all of those are withdrawn
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1 at this time.
2 And we move on the agenda to Item
3 C, Procedural Issues. The one item that we
4 have is the Commissioner Pincus Amendment to
5 the Operating Rules Regarding Offering
6 Amendments or Modifications. This proposal
7 is now on the floor. If it passes, there
8 will be additional floor amendments offered
9 at this time, one additional one. At which
10 time I propose that we will recess for a
11 period of 45 minutes and then return and
12 address some of the additional floor
13 amendments, if any.
14 In the meanwhile, we are at C1.
15 Mr. Pincus, do you have a motion?
16 COMMISSIONER PINCUS: I move the
17 adoption of that amendment, Mr. Chairman.
18 CHAIRMAN GILMORE: Is that
19 seconded?
20 COMMISSIONER ANDAL: Second.
21 CHAIRMAN GILMORE: It has been
22 moved, and seconded by Mr. Andal, that the
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1 Commissioner Pincus's Amendment to the
2 Operating Rules be adopted. Is there
3 discussion? Seeing none, all in favor of the
4 adoption of Mr. Pincus's Amendment please
5 say -- well, let's see, do we need to do a
6 roll call on this?
7 Let's see -- say aye.
8 Any objection, any nays?
9 In the absence of any nays, without
10 any objection, Mr. Pincus's Amendment to the
11 Operating Rules is adopted.
12 COMMISSIONER ANDAL: Do you guys
13 want to abstain?
14 CHAIRMAN GILMORE: Mr. Pittman.
15 COMMISSIONER PITTMAN: I would like
16 to offer an amendment that we -- just in the
17 interest of time and making sure we can move
18 ahead quickly, is that we limit the floor
19 amendments to one per Commissioner and we
20 limit the discussion to ten minutes on each.
21 COMMISSIONER ANDAL: Second.
22 CHAIRMAN GILMORE: In line with our
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1 placing some order on the additional
2 proceedings for this day, Mr. Pittman has
3 made his motion to limit debate and offerings
4 under the floor amendment proposal. It is
5 seconded. Any discussion?
6 MAYOR KIRK: Bob, is your --
7 on the time limit is my only -- I think I
8 agree with you wholeheartedly in terms of
9 limiting it to one amendment per Commissioner
10 or even one -- just limit it to the maker of
11 the motion, but this is important enough I
12 hope we're not just -- I don't even know if
13 he can explain it -- help me understand the
14 timing part of it.
15 COMMISSIONER PITTMAN: Well, I
16 think, and correct me if I'm wrong, that we
17 always have the ability to amend that ten
18 minutes if we find we have a great
19 discussion. What I'm trying to avoid is I'm
20 not -- I don't do what you guys do normally,
21 and it just seems to me we've got some very
22 important issues to deal with, and we can get
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1 sidetracked with lots of discussion about
2 issues which seem to be not at the central
3 issue here, which is -- which people have all
4 brought up and it sounds like we're pretty
5 close on agreement. So, mine is really to
6 avoid distracting us from, I think, important
7 issues.
8 MAYOR KIRK: Thank you.
9 CHAIRMAN GILMORE: Further
10 discussion?
11 COMMISSIONER LEBRUN: Mr. Chairman?
12 CHAIRMAN GILMORE: Mr. Lebrun.
13 COMMISSIONER LEBRUN: I'd hate to
14 see us restrict the opportunity to debate an
15 amendment. We devoted considerable amount of
16 time discussing and debating the Business
17 Caucus Proposal. What Governor Leavitt is
18 about to present I think is as important, and
19 I think it would be a mistake to either limit
20 the time or limit those who may have
21 something worthwhile to offer on it. I would
22 hope that we don't put any such limitations
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1 on the debate.
2 CHAIRMAN GILMORE: Mr. Lebrun, I
3 don't think there's any intentions to ever
4 limit debate on the filed motion that
5 everything had notice on, in the same way
6 that the Business Caucus one did. I think
7 the concern at this point is a plethora of
8 floor amendments with no predictability to it
9 of any kind running us into the evening or
10 even into the week. In the absence that,
11 though, if we go to a main substantive motion
12 for further discussion, I'm sure there will
13 be latitude by the Commission.
14 GOVERNOR LEAVITT: Mr.
15 Chairman, I'd like to say I support limiting
16 debate on floor amendments, but I have
17 withdrawn the State and Local Proposal in
18 order to preserve time for other matters.
19 And I would not want to be -- would not
20 like -- want that gesture to be rewarded with
21 only a ten-minute discussion on our proposal.
22 CHAIRMAN GILMORE: Mr. Pottruck.
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1 COMMISSIONER POTTRUCK: I'd like to
2 support Governor Leavitt in that regard. I
3 think that we should follow Mr. Pittman's
4 recommendation, but here we have a clear
5 example of where a pre-existing proposal was
6 put in, replaced by a new proposal. We may
7 not ultimately complete the discussion of
8 that proposal. But I'd hope that we could
9 spend a little more than ten minutes on it.
10 CHAIRMAN GILMORE: Is there an
11 amendment to Mr. Pittman's proposal, or shall
12 it be voted on?
13 GOVERNOR LEAVITT: Mr.
14 Chairman, I would offer an amendment that
15 we -- to Mr. Pittman's proposal that we allow
16 up to the same amount of time that was
17 provided with the other one for the State and
18 Local substitute, and ten minutes for all
19 others.
20 COMMISSIONER ANDAL: I'm a little
21 lost in this whole thing. I thought it was
22 ten minutes per Commissioner. So if you add
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1 up ten minutes per Commissioner, that's a lot
2 of time to spend on one proposal. Is it for
3 each proposal?
4 COMMISSIONER PITTMAN: Ten minutes
5 per proposal was my thought, that if we get
6 into one that's very interesting and that we
7 think we're making progress on and is
8 substantive, we always have the ability to
9 amend the ten-minute rule, but it keeps us
10 from just -- I think keeps us on track and
11 keeps us moving, and hopefully keeps us
12 focused on the important ones.
13 SPEAKER: Mr. Chairman?
14 CHAIRMAN GILMORE: I'm going to
15 offer a motion and see if we can't satisfy
16 everybody by doing the following. We're
17 going to recess, I believe, for 45 minutes.
18 When we come back, at that time, why don't we
19 give a half an hour to this debate; if -- an
20 extension would be favorably considered if
21 necessary, if we're making some progress.
22 And then we might be able to conclude this
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1 matter at a reasonable hour. Would that, as
2 a substitute motion, be acceptable to you,
3 Mr. Pittman?
4 COMMISSIONER PITTMAN: It would
5 indeed.
6 CHAIRMAN GILMORE: Forty-five
7 minute recess followed by a half hour debate,
8 which will be seen --looked upon favorably if
9 we have to -- to do that.
10 GOVERNOR LEAVITT: Mr.
11 Chairman?
12 CHAIRMAN GILMORE: Governor
13 Leavitt?
14 GOVERNOR LEAVITT: I'm
15 wondering, I haven't looked at the full
16 agenda, but I'm wondering, given the nature
17 of the side discussions and all the things
18 that we've been talking about, if there is
19 there a need for us to come back, or could we
20 have the recess continued until tomorrow so
21 we'd have enough time to kind of work among
22 ourselves and see if we couldn't find places
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1 where this could be brought to solution?
2 COMMISSIONER ANDAL: I think there
3 is a potential reason not to do that. If
4 we -- it takes some time to write this report
5 in physical form so that we can vote on it
6 tomorrow. If we don't make our decisions
7 today, it's going to be very difficult to
8 have it in a form that we can vote on finally
9 tomorrow. And I think as long as it takes
10 today, we ought to get it done, we ought to
11 debate it as long as we want, we ought to
12 come to conclusions, but we ought to get it
13 done today so we can have it available for a
14 final vote tomorrow.
15 GOVERNOR LEAVITT: I have a
16 feeling that any resolutions may not happen
17 around this table. It may happen at another
18 table.
19 COMMISSIONER PARSONS: May I, Mr.
20 Chairman?
21 CHAIRMAN GILMORE: Mr. Parsons.
22 COMMISSIONER PARSONS: It does seem
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1 to me that we've made some substantive
2 progress, the prospect for making some
3 additional substantive progress is out there.
4 I would much rather take the time to explore
5 that and find out if it's possible. And then
6 if it's possible, I suspect the rest of it
7 will fall together pretty quickly, Dean, than
8 try and adhere to a timetable that might not
9 allow for full exploration and then we miss
10 an opportunity. I think the proposal, first
11 of all, it's -- I guess it's 20 -- 15 to 5:00
12 now. If we broke for 45 minutes, we'd be
13 back at 5:30 and we'd be off to the races. I
14 know somebody's got some big plans for this
15 evening, I believe.
16 COMMISSIONER NORQUIST: 6:30.
17 COMMISSIONER PARSONS: It seems to
18 me that if we -- if we took the time to
19 really sort of explore in depth and then
20 decide whether there is progress to be made
21 or not, that makes more sense than trying to
22 shoehorn ourselves into an artificially tight
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1 schedule.
2 COMMISSIONER NORQUIST: Governor.
3 CHAIRMAN GILMORE: Mr. Parsons,
4 discussions have been going on, of course,
5 for a number of weeks in this matter with
6 some deal of intensity. It certainly would
7 be the Chair's wish that we try to do this
8 today instead of going over until tomorrow.
9 The Commission, of course, can make that
10 decision. But it would be my intention to
11 stay by the agenda and come back today and
12 try to resolve this matter. We all know what
13 the issues are, let's see if we can address
14 it instead of going off all night. And that
15 would be the intention of the Chair.
16 SPEAKER: Mr. Chairman.
17 COMMISSIONER NORQUIST: Some of us
18 gave up, you know, our votes in order to
19 speed this up. Why don't we take the 45
20 minutes, see what we can do in half an hour,
21 and see if we can accomplish it? I mean,
22 let's try and get the work done today. You
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1 know, those of us who put our resolutions in
2 30 days ahead made sacrifices for people who
3 want to do stuff at the last minute. I mean,
4 let's not --
5 CHAIRMAN GILMORE: Mr. Pittman, do
6 you want to withdraw your motion and we'll
7 take the recess now?
8 COMMISSIONER PITTMAN: I would.
9 SPEAKER: Mr. Chairman?
10 CHAIRMAN GILMORE: Motion is
11 withdrawn.
12 GOVERNOR LEAVITT: I would like
13 to ask if Mr. Parsons was making a motion
14 that we adjourn for the evening, I'd be
15 willing to second it.
16 COMMISSIONER PARSONS: I was not
17 making a motion, I was making an observation.
18 And expressing a perspective. I think there
19 was a motion on the floor, however. And I
20 understand where the Chair is, and we'll see
21 where the vote falls, and we'll do what we
22 gotta do.
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1 CHAIRMAN GILMORE: Is there a
2 motion to recess for 45 minutes?
3 COMMISSIONER ARMSTRONG: So moved.
4 COMMISSIONER ANDAL: Seconded.
5 CHAIRMAN GILMORE: Mr. Armstrong,
6 seconded by Mr. Andal. All in favor please
7 say aye.
8 All opposed nay.
9 Ayes have it. Forty-five minute
10 recess. Excuse me, roll call vote. I beg
11 your pardon. Roll call vote because we have
12 opposition. The motion is to recess for 45
13 minutes. Heather Rosenker.
14 MS. ROSENKER: Mr. Andal?
15 COMMISSIONER ANDAL: Aye.
16 COMMISSIONER ARMSTRONG: I'd like
17 to ask -- I don't know even if it's the right
18 phrase, parliamentary inquiry.
19 CHAIRMAN GILMORE: Parliamentary
20 inquiry?
21 COMMISSIONER ARMSTRONG: Yes, sir.
22 Do we have the option, Mr. Chairman, that if
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1 in this 45 minutes we are on the issues that
2 would appear from both sides to close in on
3 this rather than the reopening of the whole
4 darn thing, that we can communicate that we
5 wish to continue working, or are we obligated
6 to come back and begin conducting business
7 again?
8 CHAIRMAN GILMORE: The Chair will
9 accept a communication with respect to the
10 time involved for further discussions.
11 COMMISSIONER ARMSTRONG: Thank you.
12 Then I vote for the recess.
13 MS. ROSENKER: Mr. Guttentag?
14 COMMISSIONER GUTTENTAG: Aye.
15 MS. ROSENKER: Mr. Harris?
16 COMMISSIONER HARRIS: Aye.
17 MS. ROSENKER: Mayor Kirk?
18 MAYOR KIRK: Aye.
19 MS. ROSENKER: Governor Leavitt?
20 GOVERNOR LEAVITT: Aye.
21 MS. ROSENKER: Ms. Jones?
22 COMMISSIONER JONES: Aye.
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1 MS. ROSENKER: Mr. Lebrun?
2 COMMISSIONER LEBRUN: Aye.
3 MS. ROSENKER: Governor Locke?
4 GOVERNOR LOCKE: Aye.
5 MS. ROSENKER: Mr. Norquist?
6 COMMISSIONER NORQUIST: Aye.
7 MS. ROSENKER: Mr. Novick?
8 COMMISSIONER NOVICK: Aye.
9 MS. ROSENKER: Mr. Parsons?
10 COMMISSIONER PARSONS: Aye.
11 MS. ROSENKER: Mr. Pincus?
12 COMMISSIONER PINCUS: Aye.
13 MS. ROSENKER: Mr. Pittman?
14 COMMISSIONER PITTMAN: Aye.
15 MS. ROSENKER: Mr. Pottruck?
16 COMMISSIONER POTTRUCK: Aye.
17 MS. ROSENKER: Mr. Sidgmore?
18 COMMISSIONER SIDGEMORE: Aye.
19 MS. ROSENKER: Mr. Sokul?
20 COMMISSIONER SOKUL: Aye.
21 MS. ROSENKER: Mr. Waitt?
22 COMMISSIONER WAITT: Aye.
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1 MS. ROSENKER: Chairman Gilmore?
2 CHAIRMAN GILMORE: I'll point out
3 this will be a recommendation and finding in
4 the final report, this vote that we just had.
5 We are adjourned.
6 GOVERNOR LEAVITT: Mr.
7 Chairman?
8 CHAIRMAN GILMORE: We are in recess
9 for forty- five minutes.
10 GOVERNOR LEAVITT: Mr.
11 Chairman. I need to tell -- the amendment
12 that was passed out was the wrong version,
13 and that we are now circulating the proper
14 version. Just wanted you to know that.
15 CHAIRMAN GILMORE: Thank you.
16 (Recess)
17 CHAIRMAN GILMORE: Ladies and gentlemen, we will now reconvene. May I ask
18 whether or not a quorum exists? I believe a
19 quorum does exist -- there is no absence of a
20 quorum. Ladies and gentlemen, without
21 objection we will go to dinner and we will
22 recess, and we will reconvene at the call of
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1 the chairman. Is there objection?
2 COMMISSIONER NORQUIST: What's for
3 dinner?
4 CHAIRMAN GILMORE: We are in
5 recess, and on the call of the chairman.
6 (Whereupon, at 7:46 p.m., the
7 PROCEEDINGS were continued.)
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