 Second Meeting:
Transcript of March 21
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5 ADVISORY COMMISSION ON ELECTRONIC COMMERCE
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11 FOURTH MEETING
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17 Dallas, Texas
18 Tuesday, March 21, 2000
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1 MEMBERS:
2 THE HONORABLE JAMES S. GILMORE, III CHAIRMAN
Governor, Commonwealth of Virginia
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DEAN F. ANDAL
4 Chairman, California Board of Equalization
5 C. MICHAEL ARMSTRONG
Chief Executive Office, AT&T
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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
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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 LOCK
Governor, State of Washington
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GROVER NORQUIST
20 President, Americans for Tax Reform
21 ROBERT NOVICK
Counselor, U.S. Trade Representative
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1 MEMBERS (CONT'D):
2 RICHARD PARSONS
President, Time-Warner, Inc.
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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
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STANLEY S. SOKUL
11 Davidson & Company, Inc.
12 THEODORE WAITT
Chairman and CEO, Gateway, Inc.
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1 P R O C E E D I N G S
2 (10:37 a.m.)
3 CHAIRMAN GILMORE: Well, good
4 morning, ladies and gentlemen, we certainly
5 do appreciate the flexibility of the members
6 of the Commission, staffs, and even the
7 spectators who are here today. Let me try to
8 recap where I think we are, and where we will
9 proceed from for the balance of the day.
10 When we departed last night, we
11 were still on Item B2 of the agenda, the
12 State and Local Caucus Proposal. As I
13 understand it, Governor Leavitt, now, correct
14 me if I'm wrong. That is still on the
15 agenda, and you were, I believe, seeking some
16 extensive time for discussion of that
17 proposal, or was it withdrawn?
18 GOVERNOR LEAVITT: Mr. Chairman
19 , it is still on the agenda, and as I
20 understood when we left for recess, it was on
21 the table.
22 CHAIRMAN GILMORE: Very good.
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1 GOVERNOR LEAVITT: It's on the
2 table.
3 CHAIRMAN GILMORE: Then it is still
4 on the table. We can -- we can proceed to
5 that or we can pass it by. But in any case,
6 the plan at this time, we are -- we have
7 adopted Mr. Pincus' amendment to the
8 Operating Rules, which means that we are in a
9 position to offer floor amendments.
10 Obviously, what has been at work is
11 informal meetings by small groups in an
12 effort to try to reach some type of -- of --
13 well, not a consensus, but in any case, some
14 enhanced majority, if possible. And that is
15 ongoing still. We are in a position to
16 present some floor amendments, get some of
17 that work out of the way. And if it is the
18 wish of the Commission, we can move to an
19 additional recess in a short while and see
20 whether an additional substantive matter can
21 be brought forward prior to the end.
22 With respect to the agenda, what
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1 was scheduled for today was a report, a
2 meeting of the Drafting Subcommittee and a
3 report of that Subcommittee just in terms of
4 the sheer form and format of the final report
5 and any type of technical language that might
6 be in it, not substantive language. We have
7 not been able to do that because we have not
8 yet firmly settled on all of the substantive
9 provisions to be plugged in to that
10 framework.
11 The floor resolutions will go on.
12 Any additional substantive matters can be
13 taken up this morning. I will offer, if
14 necessary, towards the end of the day a
15 resolution which will allow the Drafting
16 Subcommittee to work after adjournment of
17 this meeting today, and an additional final
18 conference call of the Commissioners would be
19 in a position to vote the final report after
20 the Drafting Committee has completed with the
21 language. I will offer that amendment.
22 The alternative -- let's see. We
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1 will -- we will offer that, but I would like
2 to state that, having consulted with some of
3 the Commissioners, the Chairman is on notice
4 that some of the Commissioners are in a
5 position where today they would have to leave
6 around one o'clock. In light of the fact
7 that the -- each vote is very material in
8 terms of where it is, I would anticipate and
9 advise the members of the Commission that I
10 would anticipate a motion to adjourn being
11 made in the one o'clock area. And if that
12 happens, we have already done substantial
13 work of this Commission, we have already
14 passed a number of majority provisions, there
15 is on the record one or two supermajority
16 provisions that will rise to a
17 recommendation. And we will simply proceed
18 from there to the Drafting Committee. But
19 there is still time to do any additional
20 alterations. It is very clear that we have
21 worked through the evening, through the
22 night, and through the morning in an effort
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1 to try to work out accommodations that would
2 satisfy a larger number of members of the
3 Commission. But that remains to be seen.
4 That, I think, begins to set the
5 framework of where we are today, and I think
6 that we can accommodate everything that is on
7 the agenda. We are now on the floor
8 amendment provision. We also, of course, can
9 return to the domestic issues, B2, and then
10 go down and ask whether or not any of the
11 other amendments wish to be offered by way of
12 a floor amendment, and then of course any
13 additional floor amendments. And that is the
14 way, in fact, we shall proceed.
15 I would ask Governor Leavitt
16 whether it is your desire at this time to
17 present the State and Local Caucus Proposal
18 for discussion and for a vote, or whether you
19 wish to pass it by?
20 GOVERNOR LEAVITT: Mr. Chairman
21 , you had indicated that you saw the prospect
22 of additional recess to discuss proposals
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1 that had been circulated on an informal
2 basis. Do you see that being -- now being
3 the appropriate time to do that, or when
4 would you say that -- that's critical to my
5 decision on how to deal with Domestic Issue
6 B.
7 CHAIRMAN GILMORE: All right. It
8 is -- first of all, I believe that there will
9 certainly be an additional recess. We're not
10 getting any information back that now is a
11 timely time, there doesn't seem to be
12 anything that seems to be able to move ahead
13 on that point. I believe that it is
14 appropriate to open the floor to floor
15 amendments; naturally a motion to recess is
16 in order, but I would suggest that a period
17 of time now to begin to offer -- to open the
18 floor to floor amendments, let anyone have
19 what they want to say on floor amendments,
20 but we will not close floor amendments unless
21 it is the wish of the Commission to do so,
22 but instead will recess and see if there's
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1 any additional floor amendment that needs to
2 come up in order to try to alter the ultimate
3 outcome of the -- of the Commission. Does
4 that help?
5 GOVERNOR LEAVITT: Yes. Thank
6 you, Mr. Chairman. I think my purpose would
7 be to reserve -- I would like to amend my
8 proposal with a substitute. The substitute,
9 I hope, could be the alternative that's being
10 discussed quietly and privately among members
11 of the Commission, to see if there's an
12 adequate support to move it above the
13 thirteen-vote level. If there is not, it
14 would be my inclination to withdraw that
15 proposal and to proceed with the rest of the
16 business.
17 CHAIRMAN GILMORE: Then it is my
18 intention to pass it by, to recess at a later
19 time to see whether or not an amendment can
20 be offered that would draw additional votes
21 or not, and we will return to it, I can give
22 you that assurance.
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1 GOVERNOR LEAVITT: Thank you.
2 If you'd give me that assurance, I'm prepared
3 to be moved -- to have us move forward.
4 CHAIRMAN GILMORE: Then with
5 respect to the rest of the agenda, the next
6 -- I will -- again, these are now in the
7 nature of floor amendments, but I will give
8 the preference or the priority to those
9 people who have filed the original formal
10 motions, and then we will return to any
11 additional floor amendments.
12 Number three is Mr. Norquist.
13 Mr. Norquist, do you wish to offer that
14 resolution or withdraw it at this time?
15 COMMISSIONER NORQUIST: I'd like
16 the opportunity to speak to it briefly, but
17 then I'd be willing to... do I get a chance
18 to do that?
19 CHAIRMAN GILMORE: The floor is
20 yours--
21 COMMISSIONER NORQUIST: Okay.
22 CHAIRMAN GILMORE: --to address it
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1 briefly, Mr. Norquist.
2 COMMISSIONER NORQUIST: Resolution
3 Number 1 calls for state and local
4 governments to exempt consumers' personal
5 computer purchases and Internet access
6 service from sales and use taxes and calls on
7 Federal law to discourage such taxation. And
8 the reason for this is obviously state and
9 local governments exempt, many times, food
10 and other things, and I would argue that in
11 order to make sure that all Americans, people
12 of modest means as well as middle class
13 Americans, to have access to personal
14 computers at home and access, that it should
15 be the policy of the country to eliminate
16 sales and use taxes on those products and
17 Internet access as a way -- as a way to help
18 out people with those opportunities.
19 I think that the recommended tax
20 cuts in the proposal that's been passed
21 already is -- is sort of in that, and so I
22 just offer this as a suggestion to those
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1 people in their own states and localities
2 that would like help lower income Americans.
3 The first thing that the government can do is
4 to stop doing harm in their effort to get
5 lower income Americans to have the
6 opportunity to buy computers and have access.
7 That was the purpose of Resolution 1. It's
8 not necessary to have a vote on it.
9 CHAIRMAN GILMORE: Mr. Norquist,
10 having spoken to the resolution and explained
11 its purpose, but not wishing to bring it to a
12 vote at this time, the matter is withdrawn.
13 The next item is Mr. Norquist's
14 Resolution Number 2, Item 4 on the agenda.
15 Mr. Norquist.
16 COMMISSIONER NORQUIST: Number 2
17 deals with a question that some people --
18 that have been brought up in some cases,
19 saying that if somebody buys something from a
20 store and they pay a six percent tax, but if
21 they buy something from Amazon.com, they
22 don't pay the tax. As we all know, if you
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1 buy from Amazon.com you pay shipping fees.
2 And in most cases the shipping fees dwarf the
3 sales taxes unless you're in some city that
4 has excessively burdensome sales taxes.
5 One way to avoid those few cases
6 where the sales tax is actually larger than
7 the shipping fee, and that occurs in perhaps
8 very expensive computers or very expensive
9 furniture, would be to put a hundred dollar
10 maximum on the sales tax that applied to any
11 good or service that was bought. We've seen
12 around the country the American people are
13 not willing to tolerate the present excessive
14 excise taxes on automobiles. The people of
15 Washington State have been very emphatic
16 about their objection to paying more than
17 thirty dollars tax on automobiles. In your
18 state of Virginia you've led the charge to
19 reduce those excessive taxes. But these
20 excessive taxes still exist for expensive
21 computers and expensive furniture. And in
22 those few cases, you actually do have a
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1 disparity between somebody buying over the
2 Internet or through a catalog because of the
3 savings on sales taxes that is actually
4 larger than the shipping fee. In most case,
5 of course, there is no such disadvantage.
6 But if we put a hundred dollar fee
7 on the sales tax applicable to any good or
8 service, we solve that problem. And so for
9 those politicians who view this as a concern,
10 and I share the legitimate concern that some
11 real -- real -- realtors and real estate
12 folks have put forward, we can solve this by
13 limiting the tax rather than by passing
14 additional taxes.
15 This is the first time I've
16 introduced this concept. I'm not looking for
17 a vote on it, but I think as we go through
18 the debate it's an important idea to put
19 forward.
20 CHAIRMAN GILMORE: Is there any --
21 by the way, if there's any additional comment
22 on any of these matters, please raise your
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1 hand and make your presence known, and I
2 will, of course, open the floor to anyone
3 that wishes to address any of these items.
4 Mr. Norquist, having stated his
5 concern and his resolution, has now withdrawn
6 it.
7 We will now move to -- by the way,
8 Mr. Norquist, is it your intention to ask for
9 a vote on any of these?
10 COMMISSIONER NORQUIST: I don't
11 think so.
12 CHAIRMAN GILMORE: Okay. Then the
13 next item is Mr. Norquist's filed Resolution
14 Number 3, which is Number 5 on the agenda.
15 Mr. Norquist.
16 COMMISSIONER NORQUIST: Did we skip
17 3?
18 CHAIRMAN GILMORE: Did I?
19 COMMISSIONER NORQUIST: Number 3.
20 CHAIRMAN GILMORE: I'm sorry. Your
21 Number 3--
22 COMMISSIONER NORQUIST: Yeah.
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1 CHAIRMAN GILMORE: --which is
2 Number 5 on the agenda.
3 COMMISSIONER NORQUIST: Okay.
4 CHAIRMAN GILMORE: But go right
5 ahead.
6 COMMISSIONER NORQUIST: My
7 Resolution Number 3 deals with the digital
8 divide, which the good news is that the new
9 consumer research shows that while five and
10 ten years ago only certain sectors of the
11 population were buying computers and using
12 them at home, now both men and women, people
13 of all ethnic backgrounds and all ages are
14 moving to where they have access to it. But
15 still there's a concern that some lower
16 income Americans may have less access to
17 computers and to the Internet.
18 And so I put together in one place
19 a series of suggestions on how we can reduce
20 the government- created digital divide here.
21 To abolish the three percent Federal excise
22 tax on telecommunications, to reduce the
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1 excessive state and local telecommunications.
2 And also, which is a new proposal, which is
3 to sunset the Gore tax. Right now the
4 e-rate, the Gore tax, that's been imposed on
5 every American, rich or poor, to raise money
6 for -- ostensibly for wiring schools. Some
7 of this money is spent in other ways, but for
8 -- it's supposed to be spent for the good
9 purpose of making sure that all public
10 schools are wired. What I would suggest that
11 we do, however, is that we sunset that so
12 that after five years or ten billion dollars
13 or whatever the argument is that it would
14 take to wire all schools, that we sunset that
15 tax so that our grandchildren aren't paying
16 the Gore tax a hundred years from now, as the
17 great grandchildren of people who lived in
18 1900 are paying for the Spanish-American War.
19 And so I think to protect the -- on the
20 digital divide, we should sunset that once
21 it's accomplished its stated goals. I would
22 also suggest that we have an audit to see how
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1 the money was actually spent.
2 The -- and then lastly, again, to
3 exempt personal computers and Internet access
4 service from sales and use taxes.
5 That is my thoughts on how we can
6 move to reduce the digital divide, which
7 unfortunately the government is enhancing.
8 The good news, of course, being that it is a
9 shrinking divide by all measures.
10 The fourth resolution and the fifth
11 resolution--
12 CHAIRMAN GILMORE: Excuse me,
13 Mr. Norquist, let me go in order.
14 COMMISSIONER NORQUIST: Sure.
15 CHAIRMAN GILMORE: I presume it
16 would be your intention to summarize these in
17 your thousand-page additional addendum that
18 you intend to offer to the report?
19 COMMISSIONER NORQUIST: I will.
20 CHAIRMAN GILMORE: As opposed to
21 offering them for a vote, which we may do.
22 MAYOR KIRK: No, Governor, I
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1 think they were -- you said a thousand pages,
2 not a thousand words.
3 CHAIRMAN GILMORE: Oh, I'm sorry.
4 COMMISSIONER NORQUIST: I was
5 accepting mine as a friendly amendment.
6 CHAIRMAN GILMORE: I have that in
7 mind for myself, and I guess I just projected
8 it over to everyone else. I'm sorry.
9 COMMISSIONER NORQUIST: Yes. I
10 will address them in -- in -- in the -- in
11 the statement. Four is simply the measure--
12 CHAIRMAN GILMORE: And -- excuse
13 me. And I might say that Mayor Kirk has
14 offered an amendment to your resolution,
15 which we are passing by. Mayor Kirk, that of
16 course rends the -- renders the amendment,
17 probably, not in order since there is no
18 underlying amendment. However, if you would
19 like the floor to address your amendment, I
20 would offer you the same courtesy.
21 MAYOR KIRK: I would -- I
22 would only thank all of the Commissioners for
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1 taking to heart this issue of the digital
2 divide, and hopefully in a substantive way
3 and not in an illusory manner. It is a real
4 concern for the poorest of Americans, those
5 in rural America, those in inner cities that
6 don't have access to this technology, and I
7 hope we will continue to encourage states,
8 cities, government, private philanthropy
9 groups, others, industry, to work for ways to
10 make sure that not only that that technology
11 is there but that, as Ted Waitt brought to
12 our attention in San Francisco, people also
13 have access to an income stream.
14 I mean, if we're -- the issue of
15 e-commerce and Internet access are two
16 different issues. Internet access is easily
17 solvable by having computer centers, such as
18 Governor Gilmore's proposed, and having
19 computers available in libraries and other
20 public places, but as Mr. Waitt and others
21 have noted, access to e-commerce is really
22 more of a credit card economy than it is just
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1 an issue of access to the Net. So we need to
2 look at all of the factors related to that:
3 Raising people's conditions, providing jobs
4 in inner cities where we need them,
5 particular at a level that people have a
6 livable wage that gives them an income stream
7 that they can participate in this new economy
8 that we are all so protective of.
9 CHAIRMAN GILMORE: As Chairman, I
10 have also offered amendments regarding
11 closing the digital divide, certainly based
12 upon the substantive actions I've taken in
13 the Commonwealth of Virginia before the
14 Virginia Legislature, and proposed that that
15 they be made nationwide.
16 But in the interest of preserving
17 as much time as possible so that we can
18 continue to work on potential amendments to
19 some of the substantive businesses, I will
20 not speechify any further on this matter.
21 But I am very concerned about the digital
22 divide and have offered substantive
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1 resolution as well.
2 Mr. Norquist, your next is
3 Resolution Number 4, which is Item 6 on the
4 agenda.
5 COMMISSIONER NORQUIST: Right.
6 Item 6, my Resolution 4, calls on not taxing
7 Internet access; that is part of what has
8 already been passed, and I appreciate the
9 broad support that that has had all over the
10 -- during the course of this year from this
11 Commission. I think we actually had eighteen
12 members put themselves on record as -- as --
13 as for that in San Francisco.
14 I put it forward in case it wasn't
15 going to be in the consensus document; I'm
16 glad that it is.
17 Resolution 5--
18 CHAIRMAN GILMORE: Excuse me,
19 Mr. Norquist.
20 COMMISSIONER NORQUIST: Yeah.
21 CHAIRMAN GILMORE: But Governor
22 Locke has, in fact, filed an amendment to
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1 your Resolution Number 4. You do not plan to
2 -- you withdraw the amendment--
3 COMMISSIONER NORQUIST: Right.
4 CHAIRMAN GILMORE: --is that
5 correct?
6 COMMISSIONER NORQUIST: Uh-huh.
7 CHAIRMAN GILMORE: Governor Locke,
8 it being withdrawn, your amendment is at this
9 point not in order, but nevertheless if you
10 wish to speak to it, you have the floor.
11 Governor Locke also recognizes that
12 his amendment is likewise withdrawn.
13 Number 7, Commissioner Norquist,
14 your Resolution Number 5, on the agenda
15 Number 7.
16 COMMISSIONER NORQUIST: Right.
17 This calls for eliminating the three percent
18 telecommunications tax that was put in to
19 fund the Spanish-American War, which several
20 people have noted the war is over. I am glad
21 that in the consensus document that we've
22 already passed here, the call for abolition
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1 of this tax is included. I think that one of
2 the greatest successes of this Commission has
3 been to highlight in the minds of both
4 Congress and the American people that this
5 three percent telecommunications tax, you
6 know, originally put in as a tax on rich
7 people to temporarily fund a temporary war
8 has really outlived its usefulness and
9 creates a disadvantage for particularly lower
10 income people who shouldn't be charged with
11 that. But it's also an old tax that needs to
12 go away.
13 And it is because this tax has
14 lasted more than a hundred years that I think
15 we need to get Congress to focus on
16 sunsetting the Gore tax. And I just had
17 discussions with Mr. Tauzin, who is on the
18 Commerce Committee on the House, and he has
19 actually introduced legislation to sunset the
20 Gore tax, which I think -- I just wanted to
21 make sure people understood there is on going
22 effort in Congress to do that, as well as to
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1 get rid of the three percent
2 telecommunications tax. But I think that
3 your leadership on this, and this Commission,
4 has really raised the visibility of this tax
5 and has made it less likely to survive
6 another hundred years.
7 I withdraw the amendment because
8 it's already in the consensus document.
9 Thank you.
10 CHAIRMAN GILMORE: The Business
11 Proposal which has -- has been adopted eleven
12 to, I think, one on this Commission contains
13 language regarding the Federal telecom tax.
14 I know that there are on going discussions
15 continuing regarding this matter that our
16 Federal authorities, Mr. Pincus, the Federal
17 authorities are not here. But nevertheless,
18 Mr. Pincus is, I know, concerned about this
19 issue and we're in discussions on it.
20 Nonetheless, it remains at this time a part
21 of the adopted document already previously
22 offered the Commission. Therefore you
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1 withdraw?
2 COMMISSIONER NORQUIST: Well, and I
3 would simply note that in San Francisco when
4 we did an unofficial poll here, we had the
5 support of everybody except the three
6 Administration officials and Mr. Lebrun.
7 Everybody else was for it, and I think that
8 shows the broad consensus in the country for
9 getting rid of it.
10 CHAIRMAN GILMORE: Thank you.
11 COMMISSIONER NORQUIST: And I
12 withdraw it here because it's already in the
13 consensus document.
14 CHAIRMAN GILMORE: Thank you,
15 Mr. Norquist. Number 8 on the agenda was a
16 recommendation filed by Commissioner Sokul,
17 your Number 1, Mr. Sokul. You have the floor
18 if you wish to address it, or if you wish to
19 offer it for a vote.
20 COMMISSIONER SOKUL: Okay. Thank
21 you. We've spent a lot of time talking about
22 the complexity and the burdens that are
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1 placed upon businesses by state and local tax
2 systems, and we've really focused on legal
3 burdens. We haven't focused a lot on illegal
4 burdens or unconstitutional burdens that are
5 passed and challenged by business when the
6 states pass an unconstitutional law. And
7 this is a real problem. And I -- I put this
8 forward because, when we talk of
9 simplification and the need for uniformity,
10 there is never going to be uniformity if
11 fifty different state court systems are
12 deciding Federal constitutional issues. We
13 need to get the constitutional questions into
14 the Federal court system, which are designed
15 for national uniformity, providing national
16 uniformity. This situation goes back to the
17 Depress -- Depression Era statute, the Tax
18 Injunction Act, and I wanted to -- I realize
19 that the Commission probably feels that this
20 issue is maybe a little bit irrelevant, maybe
21 very irrelevant, but if you're ever going to
22 have true uniformity and national standards,
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1 this has to be addressed. And I recognize
2 that we haven't delved into this dark
3 underbelly of state tax practices, and I'm
4 not going to force the Commission to do it
5 today at this late date, so I won't offer
6 this amendment for a vote.
7 CHAIRMAN GILMORE: Mr. Sokul,
8 having addressed his amendment and at least
9 one of the dark underbellies that we're
10 addressing here in this meeting, withdraws
11 his recommendation at this time, having
12 addressed it. The next item, Mr. Sokul, is
13 your Recommendation Number--
14 COMMISSIONER SOKUL: Yeah.
15 CHAIRMAN GILMORE: 2, Number 9 on
16 the agenda.
17 COMMISSIONER SOKUL: Yeah. This
18 next resolution I offered, I filed this, you
19 know, thirty days ago, and my intention when
20 I was filing that for my -- was -- was based
21 upon my hopefully- flawed crystal ball this
22 that Commission wasn't really going to
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1 ultimately coalesce around any proposal, and
2 that once things kind of crashed, I did feel
3 there was a broad consensus on this panel on
4 the need for simplification. And so I
5 offered this resolution so that at the end of
6 the day, potentially we could all unify at
7 least around this principle, which I do
8 believe nineteen members of the Commission
9 agree with.
10 Events have sort of overtaken my
11 initial analysis, so I don't think this is
12 needed anymore, and I withdraw this as well.
13 CHAIRMAN GILMORE: Simplification
14 has been addressed and the proposal already
15 adopted. It is also under further
16 discussions also with respect to further
17 discussions that are going on in order to try
18 to resolve some of the issues on the
19 Commission, and therefore Mr. Sokul, having
20 spoken to the resolution, withdraws Number 9,
21 including, by the way, I think an amendment,
22 substitute amendment you had put in--
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1 COMMISSIONER SOKUL: Yeah, I--
2 CHAIRMAN GILMORE: --as well?
3 COMMISSIONER SOKUL: Yeah, I had--
4 CHAIRMAN GILMORE: Same thing?
5 COMMISSIONER SOKUL: --changed my
6 initial resolution which asked Congress to
7 get involved, to one that simply noted
8 findings and -- because I knew hat some
9 people were nervous about Congressional
10 involvement, so. I withdraw them both.
11 CHAIRMAN GILMORE: The next
12 document is Recommendation Number 3 from
13 Mr. Sokul, the need for improved economic
14 data. That is Number 10 on the agenda.
15 Mr. Sokul, do you wish to offer this for a
16 vote?
17 COMMISSIONER SOKUL: Um--
18 CHAIRMAN GILMORE: The floor is
19 yours -- the floor is yours.
20 COMMISSIONER SOKUL: Yeah, let me
21 -- this resolution calls upon Congress to
22 increase its activity and start caring more
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1 about the economic data that's available. I
2 -- I think that I'm not alone among
3 Commissioners in thinking that the data that
4 we have -- have had to discuss these issues
5 has been sparse and often speculative. And I
6 know that the Commerce Department probably
7 would like to have a few words to say on
8 this, because I know they're making progress
9 in trying to come up with some firm
10 e-commerce numbers. So I don't... I will
11 just withhold it at this time, and when they
12 come back maybe they can agree to it being --
13 but I don't want to force a vote on it right
14 now.
15 CHAIRMAN GILMORE: It may not be
16 objectionable, but nonetheless it is not
17 offered for a vote at this time. If any
18 member of the Commission wishes to offer it,
19 make a motion, otherwise we will pass it by.
20 At least pass it by at this time.
21 COMMISSIONER SOKUL: Right, I just
22 don't want to close it out without having
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1 Commerce an opportunity to--
2 CHAIRMAN GILMORE: You may
3 introduce it as a new floor amendment under
4 the new rule at any time before the
5 adjournment of the meeting, Mr. Sokul, if
6 that is your desire.
7 The next item is Commissioner
8 Sokul's Recommendation Number 5, which is
9 Number 11 on the agenda. Mr. Sokul.
10 COMMISSIONER SOKUL: Yeah, this --
11 this resolution I'd like us to vote on. I
12 think this resolution involves -- it's
13 entitled The Need for Increased Attention to
14 the Privacy Issues, Implications of Internet
15 Taxation. It's a brief resolution, I think
16 it's self-explanatory, it doesn't draw any
17 conclusion one way or another. It just does
18 something which I think is important, and it
19 highlights to Congress that when you're
20 talking about Internet taxation, pay
21 attention to privacy as well. I mean, we've
22 talked about it a bit in terms of digital
238
1 goods. How are you ever going to tax and
2 enforce a tax on digital goods without
3 significant invasions of consumer privacy?
4 And I think that the same holds true with
5 respect to trying to enforce use taxes. And
6 this is not just an issue for the public,
7 it's an -- it's an issue for e-commerce as
8 well, the businesses involved, because if the
9 public feels their privacy is going to be
10 invaded, they will not utilize e-commerce.
11 CHAIRMAN GILMORE: Mr. Sokul, I'm
12 going to give you some additional time to
13 address your -- your amendment as we move to
14 debate, but Governor Locke, having offered an
15 amendment to this provision, I'm going to ask
16 him to introduce his, we will debate his and
17 then yours in order, and then we will--
18 COMMISSIONER SOKUL: Sure.
19 CHAIRMAN GILMORE: --move to a
20 vote. Governor Locke, is it still your wish
21 to offer an amendment to Mr. Sokul's Item
22 Number 11 on the agenda?
239
1 GOVERNOR LOCKE: Yes, it is,
2 Mr. Chairman. I'll move the adoption of my
3 amendment to Mr. Sokul's resolution.
4 CHAIRMAN GILMORE: By the way, do
5 we have a second to Mr. Sokul's resolution on
6 privacy?
7 It is so seconded. Is there a
8 second to Governor Locke's amendment to
9 Mr. Sokul--
10 COMMISSIONER JONES: Second.
11 CHAIRMAN GILMORE: Seconded by
12 Delna Jones. Governor Locke, offer us, if
13 you would please, the reason for your
14 amendment, and speak to it if you would. And
15 then we will open the floor on the amendment.
16 GOVERNOR LOCKE: I very much
17 share Commissioner Sokul's concerns about
18 privacy with respect to all aspects of
19 electronic commerce, but I really think that
20 it's important to understand that these
21 privacy issues are inherent in all aspects of
22 electronic commerce and not just the tax
240
1 administration system. And that -- so my
2 amendment really asks Congress to explore
3 further consumer privacy issues before
4 determining if any laws are necessary to
5 protect online privacy. I think there's a
6 lot of concern about privacy throughout the
7 United States on all aspects of, not just
8 electronic commerce, but all commerce. And
9 the Congress is debating these issues, and I
10 would just ask that -- this amendment, I
11 think, just provides a little bit greater
12 clarity saying that the American consumer's
13 concerned about all issues of privacy, and it
14 ought to be addressed by Congress. So it's
15 really in keeping with Commissioner Sokul's
16 purpose, but providing a little bit more
17 clarity on what the Congress should -- should
18 examine.
19 CHAIRMAN GILMORE: Mr. Sokul, are
20 you prepared to accept this as a friendly
21 amendment?
22 COMMISSIONER SOKUL: I -- maybe.
241
1 And I'd like to ask Governor Locke a
2 question. If he would delete the paragraph
3 that begins: The Commission believes any
4 system designed to administer taxes should be
5 developed in a manner that minimizes the
6 personal information obtained and should
7 contain sufficient safeguards and security.
8 If you would just delete that, I could accept
9 your amendment.
10 GOVERNOR LOCKE: Where is that?
11 COMMISSIONER JONES: Now,
12 therefore.
13 GOVERNOR LOCKE: Oh, okay.
14 COMMISSIONER SOKUL: And the reason
15 for that is I don't know what minimizes
16 means, I don't know what safeguards are where
17 there's a lot of hacking, and let's just not
18 get into that debate and...
19 GOVERNOR LOCKE: That's --
20 that's fine.
21 COMMISSIONER SOKUL: Okay.
22 CHAIRMAN GILMORE: Governor Locke
242
1 withdraws from his resolution -- or amends
2 his resolution to withdraw the next to last
3 paragraph that being -- wish is: Now,
4 therefore, be it resolved the Commission
5 believes any system designed to administer
6 taxation on electronic commerce should be
7 developed in a manner that minimizes personal
8 information obtained from consumers and
9 should contain sufficient safeguards and
10 security to protect any personal information
11 obtained.
12 That being withdrawn from Governor
13 Locke's amendment, it now becomes a friendly
14 amendment. Mr. Sokul, do you wish to speak
15 to the overall, it being adopted together now
16 as one amendment on privacy, do you wish to
17 have any further discussion before we move to
18 a vote or before we open the floor for
19 further discussion regarding privacy?
20 Mr. Sokul, you have the floor.
21 COMMISSIONER SOKUL: No, I have --
22 I think the points have been made.
243
1 CHAIRMAN GILMORE: Okay.
2 COMMISSIONER SOKUL: Unless anyone
3 else has something to say.
4 CHAIRMAN GILMORE: Other discussion
5 from the Commission members regarding
6 Mr. Sokul's Number 5, which is, once again,
7 Number 11 in your -- in your books on the
8 agenda? Further discussion?
9 GOVERNOR LOCKE: Governor
10 Gilmore?
11 CHAIRMAN GILMORE: Governor Locke?
12 GOVERNOR LOCKE: Excuse me. As
13 Commission Jones indicated, the next
14 paragraph should be further modified, then,
15 to say -- take it -- take out the "further"
16 where it says be it further resolved, just so
17 it says be it resolved.
18 CHAIRMAN GILMORE: Without
19 objection, that change is, in fact, offered
20 by Governor Locke.
21 Further discussion on this matter?
22 Is the Commission ready for a vote?
244
1 Move to call the question? Second?
2 All in favor of calling the
3 question, say aye.
4 All opposed, nay?
5 Ms. Rosenker, call the roll on this
6 privacy resolution offered by Sokul and
7 amended by Locke.
8 COMMISSIONER SOKUL: Do we need a
9 roll call?
10 CHAIRMAN GILMORE: No, I think the
11 rules call for that, but it will be quick.
12 MS. ROSENKER: Mr. Andal?
13 Mr. Armstrong?
14 Mr. Gilmore?
15 CHAIRMAN GILMORE: Yes.
16 MS. ROSENKER: Excuse me. Chairman
17 Gilmore?
18 CHAIRMAN GILMORE: Yes.
19 MS. ROSENKER: Mr. Guttentag?
20 COMMISSIONER GUTTENTAG: Abstain.
21 MS. ROSENKER: Mr. Harris?
22 COMMISSIONER HARRIS: Aye.
245
1 MS. ROSENKER: Mayor Kirk?
2 Ms. Jones?
3 COMMISSIONER JONES: Aye.
4 MS. ROSENKER: Governor Leavitt?
5 GOVERNOR LEAVITT: Abstain.
6 MS. ROSENKER: Mr. Lebrun?
7 COMMISSIONER LEBRUN: Abstain.
8 MS. ROSENKER: Governor Locke?
9 GOVERNOR LOCKE: Abstain.
10 MS. ROSENKER: Mr. Norquist?
11 COMMISSIONER NORQUIST: Aye, for
12 privacy.
13 MS. ROSENKER: Mr. Novick?
14 Mr. Parsons?
15 COMMISSIONER PARSONS: Aye.
16 MS. ROSENKER: Mr. Pincus?
17 Mr. Pittman?
18 COMMISSIONER PITTMAN: Aye.
19 MS. ROSENKER: Mr. Pottruck?
20 COMMISSIONER POTTRUCK: Aye.
21 MS. ROSENKER: Mr. Sidgemore?
22 COMMISSIONER SIDGEMORE: Aye.
246
1 MS. ROSENKER: Mr. Sokul?
2 COMMISSIONER SOKUL: Aye.
3 MS. ROSENKER: Mr. Waitt?
4 COMMISSIONER WAITT: Aye.
5 COMMISSIONER ANDAL: Mr. Andal,
6 aye.
7 MS. ROSENKER: Mr. Armstrong?
8 COMMISSIONER NORQUIST: Do you want
9 to explain to Mr. Kirk what we're voting on,
10 because he just walked in.
11 CHAIRMAN GILMORE: This is the
12 Privacy Amendment offered by Mr. Sokul and
13 amended as a friendly amendment by Governor
14 Locke, and there is a vote on this amendment.
15 Governor Locke abstained on his own motion.
16 MAYOR KIRK: I don't know.
17 COMMISSIONER ANDAL: Is the Mayor
18 of Dallas against friendliness?
19 MAYOR KIRK: I'm a very
20 friendly person, but I'll abstain since I
21 didn't hear the--
22 MS. ROSENKER: Mayor Kirk.
247
1 MAYOR KIRK: --the debate.
2 MS. ROSENKER: I'll go back and
3 call Mr. Armstrong, since you've returned.
4 CHAIRMAN GILMORE: Just -- just
5 announce the vote, Heather, this is a very
6 immaterial matter.
7 COMMISSIONER ARMSTRONG: Aye.
8 CHAIRMAN GILMORE: In the big
9 scheme of things. Let me have it and I'll
10 announce the vote.
11 MR. GRIFFITH: It's not finished.
12 CHAIRMAN GILMORE: It's not
13 finished? Oh, I beg your pardon, he's come
14 back. Mr. Armstrong. Have you voted,
15 Mr. Armstrong?
16 COMMISSIONER ARMSTRONG: Aye.
17 CHAIRMAN GILMORE: Mr. Armstrong
18 votes aye, Ms. Rosenker.
19 And, Governor Locke, your provision
20 passes twelve to zero, with five abstentions.
21 Therefore, while it is a majority position of
22 the Commission, it will not be a
248
1 recommendation. Interestingly enough.
2 We will now move on to Item 13 --
3 excuse me, 12. This is my resolution
4 regarding Taxpayer, Consumer, and Small
5 Business Protection From Expanded Sales and
6 Use Taxes. I, too, intend to withdraw this
7 at this time, and address it in the addendum
8 that I will place into the -- into the final
9 report of the Commission. But I will say
10 that I may contemplate within this, that I
11 would like the Congress, if not a part of the
12 Commission report at least part of my own
13 reference, to address the issue of the use
14 tax. If this Commission proceeds to, in
15 fact, make it difficult or not possible at
16 this time to do remote collections, then we
17 have the anomalous situation of the people of
18 the United States out there being obligated
19 for use tax of their states, but there is no
20 collection ability to do that on remote
21 sellers. I believe that makes most of the
22 people of the United States criminals because
249
1 they're not paying the use tax. The only
2 other thing is for the states to begin to
3 pound them and make them pay the use tax. I
4 do not think that's a proper thing.
5 In the meanwhile, the use tax in
6 Virginia raises less than a million dollars
7 per annum on a forty-eight billion dollar
8 biennial budget. It's not that much money.
9 And my belief is that the people of the
10 United States would be best served by the
11 elimination of the use tax as a matter of
12 interstate commerce by the Congress. Or even
13 in the alternative, that the Commission
14 should recommend to the states that they
15 reform their use taxes by abolishing them.
16 But in light of the serious
17 business of the hour and the work that has to
18 be done remaining within a recess, I withdraw
19 this -- this resolution.
20 Likewise, I have submitted
21 Resolution Number 2, Item 13, Business
22 Protection from Expanded Income and Business
250
1 Activity Taxes in the Internet System. This
2 deals with the issues of nexus within each
3 state for the purpose of requiring sellers,
4 remote sellers to, in fact, collect taxes.
5 That is a central issue that we are dealing
6 with in our private and informal discussions
7 among small groups and -- in order to try to
8 resolve these matters. And therefore I
9 withdraw Resolution Number 2, which is Number
10 13 on the agenda.
11 Number 14 on the agenda, I have
12 offered Protection Against Excessive Taxation
13 of the Internet's Backbone and Telephone
14 Service. That also, of course, is a matter
15 of some discussions, which we will bring
16 forward hopefully later on this morning.
17 This is telecommunications simplification.
18 It being part of the larger issue already
19 adopted by this Commission, I withdraw that
20 resolution. Once again like, I think,
21 Mr. Norquist, if there was no underlying
22 adoption of any kind, I had hoped to offer
251
1 these as a substitute, but they are now
2 unnecessary.
3 Likewise Number 15, Closing the
4 "Digital Divide." That is a matter that I
5 will withdraw at this time, though I may even
6 want to bring that back up depending upon how
7 the rest of the meeting goes. I'm very
8 concerned about the digital divide and I
9 believe that active steps can be taken to
10 make the Internet accessible to everyone in
11 the United States. That ought to be the
12 thrust of our policy. It is what we are
13 doing in Virginia, and that is what should be
14 the national policy, to make the Internet as
15 available as possible to every person in the
16 United States to have the benefit of
17 e-commerce and e-trade and entrepreneurship.
18 I will withdraw it, however, at this time.
19 And the last one on the list is 16,
20 my Resolution Number 5: Taxpayer and Consumer
21 Protection from Expanded Sales and Use Tax
22 Collections. That, of course, deals
252
1 naturally with the underlying issue of sales
2 and goods on the Internet which is the
3 substance of what has already been adopted
4 and what is under further discussion.
5 That deals with those formal
6 matters. I understand that we are now in a
7 position to take a little -- a short recess
8 and determine whether or not there are any
9 additional floor amendments that should come
10 forward for the balance of this meeting.
11 Without objection, we will recess for twenty
12 minutes and come back at 11:30.
13 (Recess)
14 CHAIRMAN GILMORE: Well, there
15 certainly is an air of expectation, I must
16 say.
17 Good afternoon, ladies and
18 gentlemen. After many small groups have had
19 some private discussions, we do not believe
20 that a consensus at this time is forming,
21 although discussions even to this minute are
22 continuing, and we anticipate that some may
253
1 continue on into the future. But we have
2 arrived at a time at which the Commissioners
3 will soon be in a position in which they must
4 go.
5 Where we are at this point on the
6 agenda is certain pre-filed amendments to
7 Operating Rules, which at this time, of
8 course, can be offered as floor amendments.
9 GOVERNOR LEAVITT: Mr. Chairman
10 ?
11 CHAIRMAN GILMORE: And then we will
12 return back to floor amendments. Yes, sir?
13 GOVERNOR LEAVITT: Previously I
14 had indicated a willingness to expedite our
15 business to withdraw my proposal on -- our
16 proposal on the basis that we could return to
17 it, and I'm wondering if you'd recognize me
18 for the purpose of being able to make that --
19 that -- that proposal.
20 CHAIRMAN GILMORE: Governor, I
21 will, in fact, do that, and we fully intend
22 to give ample time for it to be addressed.
254
1 Where we are at this time on the agenda is to
2 conclude the pre-filed amendments to
3 Operating Rules and other Operating Rules,
4 and then we will return, in fact, I have a
5 floor amendment of my own, as a matter of
6 fact, after yours, that we will take up. And
7 then at that point I believe we'll conclude
8 with concluding remarks and then we will be
9 done, at least for this meeting.
10 GOVERNOR LEAVITT: Thank you,
11 Mr. Chairman.
12 CHAIRMAN GILMORE: Ladies and
13 gentlemen, the first floor amendment
14 previously filed and as of -- I'm going to
15 convert this into a floor amendment because
16 it has some alteration in order to
17 accommodate some of the thinking that has
18 gone on through the morning and early
19 afternoon.
20 This is an amendment to the
21 Operating Rules, ladies and gentlemen, for
22 the purpose of addressing the issue of
255
1 transmission of the Commission's report to
2 Congress. And the amendment is as follows:
3 Vote on Final Language of the Report to
4 Congress. Now, ladies and gentlemen, we have
5 -- the Commission, we have at this point
6 already adopted certain resolutions by
7 majority vote. There are one or two items
8 that have, in fact, obtained a two-thirds
9 vote in a prior meeting. We will need to
10 convert this into a drafting, a drafted
11 document for presentation to the Commission.
12 That can and will be done. And then there
13 will be a need for an additional telephone
14 conference for the purpose of reviewing those
15 final language changes and preparing this
16 document to go to the Congress.
17 In line with this, I'm going to
18 offer the following language on a report to
19 Congress: Notwithstanding Rule IV.A's
20 requirement that each Commissioner must be
21 physically present to vote -- Notwithstanding
22 Rule IV.A's requirement that each
256
1 Commissioner must be physically present to
2 vote, the vote on the form -- on the form --
3 the vote on the form and text of the final
4 language of the report to Congress will be
5 made during a publicly transmitted telephone
6 conference call on a date to be selected by
7 the Chairman, to be organized by the
8 Commission's Executive Director. If a --
9 this prevents us, ladies and gentlemen, from
10 having to deal with it today while we are
11 physically present; it buys us an opportunity
12 to do this without having to do it today. If
13 we had been able to draft a final document
14 today, we would have -- this would not have
15 been necessary, but now it is.
16 If a Commissioner is unable to
17 participate personally in that conference
18 call, the Commissioner may communicate his or
19 her vote in writing to the Executive Director
20 prior to the conference call. A Commissioner
21 may cast his or her vote in only one of three
22 forms: "yeah," "nay," or "abstain." The
257
1 Commission shall announce the vote of each
2 Commissioner during the conference call, and
3 no other business shall be conducted by the
4 Commission during the conference call. The
5 purpose of this vote is to obtain the
6 Commission's approval of the form and text of
7 the final language of the report to Congress.
8 And I'm going to add: And any other matter
9 called by a vote of a majority of the
10 Commissioners serving. This language is
11 proposed to accommodate a final interest by
12 members of the Commission to take one more
13 stab at trying to improve the status of where
14 we are today, so that in the event that the
15 Commissioners decide that they do have
16 something that improves that and a majority
17 choose to vote to place it on the conference
18 call, then it will become a part of the
19 conference call and will be considered at the
20 same time that we then examine the text of
21 the rest of the report. That is an amendment
22 to the Operating Rules offered by the
258
1 Chairman in order to accommodate the needs
2 and operations of this Commission. Is there
3 a second?
4 COMMISSIONER PARSONS: Second.
5 COMMISSIONER NORQUIST: Second.
6 CHAIRMAN GILMORE: Discussion on
7 the amendment?
8 Seeing none, all in favor of the
9 amendment to the Operating Rules please say
10 aye.
11 All opposed, nay.
12 COMMISSIONER ANDAL: Nay.
13 CHAIRMAN GILMORE: There is one
14 nay. Please call the roll, if you would,
15 Ms. Rosenker. Even though we obviously know
16 where we are, but nonetheless, I'm going to
17 follow the rules.
18 MS. ROSENKER: Mr. Andal?
19 COMMISSIONER ANDAL: No.
20 MS. ROSENKER: Mr. Armstrong?
21 COMMISSIONER ARMSTRONG: Yeah --
22 yes.
259
1 MS. ROSENKER: Mr. Guttentag?
2 COMMISSIONER GUTTENTAG: Abstain.
3 MS. ROSENKER: Mr. Harris?
4 COMMISSIONER HARRIS: Yes.
5 MS. ROSENKER: Mayor Kirk?
6 MAYOR KIRK: Yes.
7 MS. ROSENKER: Governor Leavitt?
8 GOVERNOR LEAVITT: Yes.
9 MS. ROSENKER: Ms. Jones?
10 COMMISSIONER JONES: Yes.
11 MS. ROSENKER: Mr. Lebrun?
12 COMMISSIONER LEBRUN: Yes.
13 MS. ROSENKER: Governor Locke?
14 GOVERNOR LOCKE: Yes.
15 MS. ROSENKER: Mr. Norquist?
16 COMMISSIONER NORQUIST: Yes.
17 MS. ROSENKER: Mr. Novick?
18 COMMISSIONER NOVICK: Yes.
19 MS. ROSENKER: Mr. Parsons?
20 COMMISSIONER PARSONS: Yes.
21 MS. ROSENKER: Mr. Pincus?
22 COMMISSIONER PINCUS: Yes.
260
1 MS. ROSENKER: Mr. Pittman?
2 COMMISSIONER PITTMAN: Yes.
3 MS. ROSENKER: Mr. Pottruck?
4 COMMISSIONER POTTRUCK: Yes.
5 MS. ROSENKER: Mr. Sidgemore?
6 COMMISSIONER SIDGEMORE: Yes.
7 MS. ROSENKER: Mr. Sokul?
8 COMMISSIONER SOKUL: Yes.
9 MS. ROSENKER: Mr. Waitt?
10 COMMISSIONER WAITT: Yes.
11 MS. ROSENKER: Chairman Gilmore?
12 CHAIRMAN GILMORE: Yes.
13 The amendment to the rules is
14 adopted seventeen to one, with one
15 abstention.
16 The Chairman now offers a second
17 amendment to the rules. There has been some
18 discussion here, ladies and gentlemen, today
19 or -- and yesterday about the rule of this
20 Commission which states a two-thirds vote in
21 order to transmit a report to the Congress.
22 As the Chair has ruled, this is in
261
1 contravention to the statute, which allows
2 for a report, in fact demands a report, but
3 only requires a two-thirds majority for
4 findings and recommendations. Again, the
5 Chair has ruled and has been upheld.
6 Nonetheless, I'm going to offer an amendment
7 to correct that situation and make this in
8 accordance with the statute under which we
9 are operating.
10 And the following amendment is
11 offered: Upon approval of a final report by
12 a majority of the Commissioners serving at
13 the time the report is issued, the Commission
14 shall transmit the report to the Speaker of
15 the United States House of Representatives,
16 the President Pro-Temp for the United States
17 Senate, the Majority Leader of the United
18 States Senate, the Minority Leader of the
19 United States Senate, the Minority Leader of
20 the United States House of Representatives,
21 the respective Chairman and ranking members
22 of the U.S. House and U.S. Senate Committees
262
1 on Commerce and Judiciary, the Chairman and
2 ranking members of the U.S. House Committee
3 on Ways and Means, the Chairman and ranking
4 member of the United States Senate Committee
5 on Finance, and any other Congressional
6 committee that requests a copy of the report.
7 The chairman offers this amendment
8 to our Operating Rules. Is there a second?
9 COMMISSIONER WAITT: Second.
10 CHAIRMAN GILMORE: It is moved and
11 seconded. Is there debate on the issue of
12 the offering of the amendment? Mr. Lebrun.
13 COMMISSIONER LEBRUN: Mr. Chairman,
14 as I stated yesterday, I do not believe that
15 the statute which created this Commission
16 permits us to submit a report with anything
17 less than two-thirds vote. Anything we
18 submit contains findings and is clear that
19 what was voted upon yesterday also includes
20 recommendations. Those are findings, those
21 are recommendations, the statute clearly
22 states that requires a two-thirds vote. And
263
1 there's a letter that we received yesterday
2 from Senators Daschle, Graham, Enzi and
3 Voinovitch states that's crystal clear that
4 recommendations and findings require a
5 two-thirds vote. We cannot, by an operating
6 rule, change that statutory mandate.
7 Therefore, I'm going to vote against the
8 proposed amendment to the Operating Rules.
9 CHAIRMAN GILMORE: I'm going to
10 read the language of the statute. Not later
11 than eighteen months after the date of the
12 enactment of this Act, the Commission shall
13 transmit to Congress for its consideration a
14 report reflecting the results, including such
15 legislative recommendations -- including such
16 legislative recommendations as required to
17 address the findings of the Commission study
18 under this Title. Any recommendation agreed
19 to by the Commission shall be tax -- tax and
20 technologically neutral and apply in all
21 forms to remote commerce. No finding or
22 recommendation shall be included in the
264
1 report unless agreed to by at least two
2 thirds of the members of the Commission
3 serving at the time the finding or
4 recommendation is made.
5 I so ruled yesterday that that
6 makes it crystal clear that any finding or
7 recommendation is included by two thirds
8 within an overall report, which naturally
9 would be adopted by this Commission by
10 majority rule, and it's been upheld. But of
11 course, the changing of the rule is not in
12 contravention of the statute, but would, of
13 course, conform our rule to the statute.
14 That is the position of the Chair.
15 Mr. Lebrun, of course, disagreeing. Further
16 discussion?
17 Call to the question.
18 GOVERNOR LEAVITT: I just have
19 a question, Mr. Chairman--
20 CHAIRMAN GILMORE: Second?
21 GOVERNOR LEAVITT: I just have
22 a question.
265
1 CHAIRMAN GILMORE: Governor
2 Leavitt?
3 GOVERNOR LEAVITT: What is the
4 impact -- what -- what is the impact of a
5 ruling of the Chair when the rule cannot --
6 if the rule fails? Does the ruling of the --
7 does the rule change -- if the rule change
8 fails and the Chair has ruled contrary to a
9 change on the rule, what is the impact of
10 the--
11 CHAIRMAN GILMORE: If the rule
12 change fails, then our rule is in
13 contravention of the statute, the Chair has
14 so ruled and the Chair has been upheld. This
15 is a question of whether or not we wish to
16 conform our rule to the statute.
17 UNIDENTIFIED MALE SPAKER: Call for the question.
18 Second?
19 COMMISSIONER POTTRUCK: Second.
20 CHAIRMAN GILMORE: All in favor of
21 calling the question say aye.
22 All opposed, nay?
266
1 All in favor of this resolution, I
2 will ask Ms. Rosenker to call the roll for
3 this proposed amendment to the Operating
4 Rules.
5 MS. ROSENKER: Mr. Andal?
6 Mr. Armstrong?
7 COMMISSIONER ARMSTRONG: Yes.
8 MS. ROSENKER: Mr. Guttentag?
9 COMMISSIONER GUTTENTAG: This time
10 no.
11 MS. ROSENKER: Mr. Harris?
12 COMMISSIONER HARRIS: Aye.
13 MS. ROSENKER: Mayor Kirk?
14 MAYOR KIRK: No.
15 MS. ROSENKER: Ms. Jones?
16 COMMISSIONER JONES: No.
17 MS. ROSENKER: Governor Leavitt?
18 GOVERNOR LEAVITT: No.
19 MS. ROSENKER: Mr. Lebrun?
20 COMMISSIONER LEBRUN: No.
21 MS. ROSENKER: Governor Locke?
22 GOVERNOR LOCKE: No.
267
1 MS. ROSENKER: Mr. Norquist?
2 COMMISSIONER NORQUIST: Yes.
3 MS. ROSENKER: Mr. Novick?
4 COMMISSIONER NOVICK: No.
5 MS. ROSENKER: Mr. Parsons?
6 COMMISSIONER PARSONS: Yes.
7 MS. ROSENKER: Mr. Pincus?
8 COMMISSIONER PINCUS: No.
9 MS. ROSENKER: Mr. Pittman?
10 COMMISSIONER PITTMAN: Yes.
11 MS. ROSENKER: Mr. Pottruck?
12 COMMISSIONER POTTRUCK: Yes.
13 MS. ROSENKER: Mr. Sidgemore?
14 COMMISSIONER SIDGEMORE: Yes.
15 MS. ROSENKER: Mr. Sokul?
16 COMMISSIONER SOKUL: Yes.
17 MS. ROSENKER: Mr. Waitt?
18 COMMISSIONER WAITT: Yes.
19 CHAIRMAN GILMORE: Chairman votes
20 yes.
21 MS. ROSENKER: Chairman Gilmore?
22 CHAIRMAN GILMORE: Yes.
268
1 The amendment to the rules is
2 adopted ten to eight.
3 The Chairman offers a third
4 resolution from the floor with respect to the
5 Operating Rules of the Commission regarding
6 the report as follows: Resolution Supporting
7 Individual Commissioners' Ability to
8 Separately Submit Their Views in the Report
9 to Congress.
10 Whereas the Commission will submit
11 a report of its findings and recommendations
12 to Congress by April 21, 2000;
13 Whereas Congress has directed that
14 no finding or recommendation shall be
15 included in the report unless agreed to by at
16 least two thirds of the members of the
17 Commission;
18 Whereas at the request of the
19 Commission, the report will separately
20 include the Commissioners' rules, Operating
21 Rule IV.A;
22 Whereas the Commission desires to
269
1 submit a report that treats the views of all
2 of its members with equal respect and
3 deference;
4 Whereas the Commission desires a
5 report that is desirable and readable by the
6 public;
7 Therefore, be it resolved, pursuant
8 to Operating Rule IV.A that any Commissioner
9 may include his or her views in the report to
10 Congress; and be it resolved that a
11 Commissioner's views submitted pursuant to
12 Operating Rule IV.A shall contain no more
13 than one thousand words; and be it resolved
14 that each Commissioner's views shall be
15 submitted to the Executive Director on a date
16 to be announced by the Chairman.
17 As I say, this is a very simple
18 rule, it's the thing that we've been
19 discussing for quite some time, which is to
20 allow a one thousand word statement by each
21 Commissioner in the final report prior to its
22 submission to Congress so each person will
270
1 have a chance to put their views in, whether
2 they've been in the majority, the minority,
3 or whatever.
4 It's so seconded.
5 MAYOR KIRK: Just point of
6 inquiry.
7 CHAIRMAN GILMORE: Yes.
8 MAYOR KIRK: Would that
9 rule, as we have it stated, permit several
10 Commissioners to permit a joint statement
11 containing...
12 CHAIRMAN GILMORE: Yes, it would,
13 Mayor Kirk.
14 MAYOR KIRK: Okay.
15 GOVERNOR LOCKE: Would it be a
16 thousand for the joint--
17 CHAIRMAN GILMORE: All in favor--
18 MAYOR KIRK: A thousand for
19 the joint statement, or a thousand per -- I
20 mean, so if three of us put in, we could have
21 three thousand?
22 CHAIRMAN GILMORE: I'm sorry, I
271
1 didn't hear you.
2 MAYOR KIRK: Or three
3 thousand pages?
4 CHAIRMAN GILMORE: Pardon me?
5 MAYOR KIRK: No, I mean,
6 could -- if three Commissioners issued a -- a
7 statement, would that expand to three
8 thousand words for the three of them?
9 CHAIRMAN GILMORE: Certainly.
10 MAYOR KIRK: Thank you.
11 COMMISSIONER POTTRUCK: Call the
12 question.
13 CHAIRMAN GILMORE: Okay. The
14 question has been moved by David Pottruck.
15 Second?
16 COMMISSIONER ARMSTRONG: Second.
17 CHAIRMAN GILMORE: Second by
18 Mr. Armstrong. All in favor of this
19 amendment please say aye.
20 All opposed nay?
21 Unanimous.
22 COMMISSIONER NORQUIST: How do you
272
1 count hyphenated words?
2 CHAIRMAN GILMORE: We are coming
3 near the conclusion, we have done those
4 items. There are two -- there are two things
5 left on the agenda. One is any additional
6 floor amendments, including the one that I
7 know that Governor Leavitt wishes to bring
8 forward, and then I have a digital divide one
9 as well. And then at that point we will
10 offer any concluding remarks by individual
11 Commissioners, and then I would expect a
12 motion to adjourn.
13 I believe, Governor, that my
14 amendment may be more of a consensus one and
15 more -- shorter, so let me offer this first.
16 This is regarding Closing the
17 Digital Divide to Permit All Americans to
18 Participate in the Internet Economy.
19 Whereas, the United States has a
20 unique national interest in maximizing the
21 economic and social potential of the Internet
22 for all Americans;
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1 Whereas the United States and each
2 individual state and locality are undertaking
3 efforts to make computers and the Internet
4 widely accessible for all citizens in
5 schools, libraries, community centers, and
6 homes;
7 Whereas, the personal computer and
8 access to the Internet will become as
9 ubiquitous as the telephone and television
10 over the next decade;
11 Whereas, in furtherance of this
12 goal, taxes on individual consumers who log
13 on the Internet and participate in electronic
14 commerce should be as low as possible;
15 Therefore, be it resolved that the
16 Commission recommends to Congress, one, that
17 Congress:
18 1. Clarify federal welfare
19 guidelines expressly to permit the states to
20 spend TANF surpluses (unobligated balances)
21 to provide needy families access to computers
22 and the Internet and to provide training in
274
1 computers and Internet use.
2 2. Encourage states and localities
3 to partner with private technology companies
4 to make computers and the Internet widely
5 accessible to needy families, libraries,
6 schools, and community centers and to train
7 needy families how to use computers and the
8 Internet. Incentives for these partnerships
9 may include: (a) Federal and state tax
10 credits and incentives for private technology
11 companies that partner with state and local
12 governments, (b) federal matching funds for
13 state and local expenditures.
14 Ladies and gentlemen, the reason
15 I'm offering this as part of the digital
16 divide is to put this Commission squarely on
17 record on extending the benefits of the
18 Internet to all Americans. This is in accord
19 with a variety of programs that I believe
20 exist in all the states, and specifically
21 exist in Virginia. We have requested and
22 will request authority that any surpluses of
275
1 TANF funds be freed to be used in order to
2 expand to needy families the ability to, in
3 fact, utilize the Internet to increase the
4 quality of their lives, and that is the
5 reason this is offered.
6 I so move. Is there a second?
7 There is a second. Is there
8 discussion? Mayor Kirk, perhaps you would
9 care to second--
10 MAYOR KIRK: Mr. Chairman, I
11 would only add what I hope is a friendly
12 amendment, and I'm pleased to see this and I
13 second it. It contains many of the elements
14 of the amendment I submitted to Commissioner
15 Norquist's. I would only add, if you would
16 accept it as friendly amendment, the very
17 last paragraph of mine that encourages the
18 Administration and Congress to continue
19 gathering data for empirical research to help
20 inform federal, state, and local policy
21 makers on measures that will lead to
22 reduction and elimination of the digital
276
1 divide.
2 CHAIRMAN GILMORE: I accept that as
3 a friendly amendment.
4 MAYOR KIRK: Thank you, sir.
5 CHAIRMAN GILMORE: Mr. Lebrun.
6 COMMISSIONER LEBRUN: Mr. Chairman,
7 I support the resolution and the digital
8 divide, the effort to delete or to reduce the
9 digital divide. Governor Janklow in South
10 Dakota has been very successful in wiring our
11 schools for computers and the Internet. He's
12 making great efforts to get computers in
13 those schools. I think -- I think it's
14 somewhat ironic, however, that we're not able
15 to endorse and support a more level playing
16 field which permits the states to use sales
17 tax revenue, if that's the decision of the
18 citizens of that state, to help span that
19 digital divide. If South Dakota's sales tax
20 revenue is decreased, the ability of our
21 government to provide Internet computers in
22 the schools and to wire the schools is going
277
1 to be reduced. And so I support the idea and
2 I'll support this resolution, but I think
3 it's somewhat inconsistent with some of the
4 other actions that have been taken by this
5 Commission. And if we continue to erode the
6 sales tax base of states like South Dakota,
7 I'm afraid it's going to make it more
8 difficult to span that digital divide.
9 CHAIRMAN GILMORE: Any other
10 discussion?
11 COMMISSIONER POTTRUCK: Call the
12 question.
13 CHAIRMAN GILMORE: David Pottruck's
14 called for the question. Second?
15 All in favor of calling the
16 question say aye.
17 All opposed nay?
18 All in favor of this resolution on
19 the digital divide please say aye.
20 All opposed, nay.
21 There are no nays, no need for a
22 for a roll call. Thank you very much.
278
1 Governor Leavitt, you have a floor amendment,
2 I believe. Thank you for your forbearance on
3 that digital divide motion.
4 GOVERNOR LEAVITT: Thank you,
5 Mr. Chairman. As we are all aware through
6 the endless recesses that we have been on,
7 we've been negotiating hard, and I think all
8 of us were hopeful that we could come to an
9 agreement that would allow us to have more
10 than thirteen votes and hence have a formal
11 finding that we could advance. Regrettably,
12 that has not occurred. We had hoped we could
13 join the proposal that was advanced by the
14 Business Caucus, and I believe could have
15 reached conclusion favorably in almost every
16 area, with the exception of the so-called
17 nexus carve-outs, which very clearly would
18 have had the effect of creating a special
19 privilege for those who attempt to create
20 entity isolation.
21 At the heart of our discussions is
22 a very important policy question that may
279
1 have more to do with shaping government in
2 the next decade than any other policy issue
3 we will deal with as a nation. And that is,
4 is the sales tax a viable tool for the 21st
5 Century? It may not be. And if so, what are
6 our alternatives? I believe one of the
7 conclusions of this panel will -- will be,
8 and one of the positive things that has come
9 from this is a clear understanding that,
10 unless it is radically simplified, the
11 existing system will not be viable.
12 I think we can also agree that
13 unless we are -- that there are very few
14 alternatives. One of the alternatives will
15 be for us to cut back on certain services,
16 certain of which will likely be healthy for
17 both the public and for government. But many
18 of which will not be, such as education and
19 public -- public safety and roads.
20 The question we must ask, then, is,
21 if we're not able to cut back on an unlimited
22 basis, given the fact that the sales tax
280
1 currently makes up nearly half of the
2 revenues of state and local governments, what
3 are the options? Well, obviously, one of the
4 options will be to look at property taxes or
5 at sales taxes. I hope as a public servant
6 to never be in the position of having to
7 wrestle with that dilemma. I have signed
8 into law this last week my thirtieth tax cut
9 during my administration; something I've
10 taken some pride in, and I do not look
11 forward to a debate and discussion about the
12 need to increase any tax.
13 If we are to, however, find that
14 the sales tax can be made viable, we are
15 focused, I believe, as a Commission on one
16 very important policy issue that remains. If
17 the sales tax is viable in the 21st Century,
18 will we have a system that creates permanent
19 special privilege for a limited group who
20 will be told, in essence, that they do not
21 need to contribute to our schools, they have
22 no necessity to contribute to our roads and
281
1 to our law enforcement, but otherwise they --
2 because others will pay either more or will
3 pay their share on this particular tax? Or
4 in the alternative, will we have a level
5 playing field? Now, we all hate taxes. But
6 the reality is, if you have to have them, at
7 very least they ought to be fair.
8 Now, given the fact that we are not
9 likely to be able to -- we are not going to
10 be able to concur with -- because of the
11 nexus carve-out issue, which we believe would
12 answer that question, if we were to go
13 forward with nexus carve-outs and essentially
14 memorialize the creation of a system that by
15 its nature is not level and does not treat
16 people fairly, we believe that would
17 predispose us to a decision that the sales
18 tax is not viable. A conclusion that we
19 believe is not in the interest of the country
20 to reach until we have determined whether we
21 can radically simplify.
22 Mr. Chairman, I wish to put forward
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1 as an alternative, a paper entitled A
2 Proposal for Internet Tax Reform. The author
3 of this needs to be given credit, David
4 Pottruck, who has been extraordinary in his
5 efforts and willingness to work with us in
6 the development of various proposals and
7 negotiating long and hard and for many hours,
8 wrote this document that I believe was very
9 skillfully written, that captured the belief
10 of what I think is most of the members of
11 this group. I'd like to highlight just a few
12 phrases that are used in this document.
13 CHAIRMAN GILMORE: Governor
14 Leavitt, let me ask, since it is a document,
15 do we have copies of it--
16 GOVERNOR LEAVITT: Yes, I'd
17 like to--
18 CHAIRMAN GILMORE: --in our papers,
19 or?
20 GOVERNOR LEAVITT: No. I'd
21 like to distribute it now. Given that it is
22 a floor amendment, we will pass it around the
283
1 floor, it won't take long.
2 Can we do that now? Has it not
3 been passed out? All right, it's being
4 passed out.
5 In the interest of time,
6 Mr. Chairman, I'll just continue my remarks
7 while it's being passed out.
8 The essence of this document and
9 the expression of some general views. First
10 that the members of the Commission do not see
11 the Internet as a target for new taxes, nor
12 do they want to endorse any action that would
13 expand the digital divide, i.e., reducing the
14 availability of the Internet to those
15 Americans at the bottom of our socio-economic
16 ladder.
17 The second general conclusion is
18 that members of the Commission do not believe
19 that there exists any compelling reason to
20 impose taxes exclusively target -- targeted
21 at electronic commerce.
22 Third, that there is widespread
284
1 belief among the Commissioners that the
2 current myriad of taxes that are applied to
3 the telecommunications industry are both
4 excessive and too complicated. Specific
5 discussion is had about the repeal of the
6 federal excise tax.
7 The fourth conclusion is that we
8 have come to -- when it comes to the issue of
9 privacy that there is enormous sensitivity,
10 and that any system that is accepted as a
11 sales tax system for the future must deal
12 with that issue.
13 And then finally, dealing with the
14 question of -- of sales tax on Internet -- on
15 remote sales. I think Mr. Pottruck's words
16 have been extraordinarily well-crafted. He
17 states: Inevitably somewhere down the road
18 in three, five, or ten years, take your pick,
19 commerce will be intertwined with cyberspace
20 and physical worlds will merge and interact
21 and meet increasing demands of consumers. If
22 remote sales over the Internet are taxed
285
1 differently than intrastate sales, we will
2 have a system based on a tangle of legal
3 maneuvering that will create separations
4 between local merchants and their Internet
5 counterparts and a playing field that will be
6 viewed as inherently unfair. Such
7 unfairness, if left to fester, will bring
8 contempt and noncompliance. It's hard to
9 argue that the need -- that there is a need
10 for an enormous simplification of state and
11 local taxes that can pave the way toward a
12 level playing field that does not
13 discriminate between methods of access.
14 The report continues, that we found
15 virtually no Commissioners who thought a
16 structural increase in the taxes paid by
17 consumers was the purpose of our work.
18 There are many other details.
19 Mr. Chairman, I would submit this as a floor
20 amendment for consideration as the majority
21 position or as a position of this -- as a
22 finding of this -- of this body.
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1 COMMISSIONER SOKUL: Governor
2 Gilmore?
3 MAYOR KIRK: I second.
4 COMMISSIONER SOKUL: Governor
5 Gilmore, I just have a quick question for
6 Governor Leavitt.
7 CHAIRMAN GILMORE: Yes. This
8 document, which is presented by way of a
9 floor amendment has been offered by Governor
10 Leavitt, seconded by Mayor Kirk.
11 Mr. Sokul, you've asked for the
12 floor?
13 COMMISSIONER SOKUL: Yeah. I just
14 wanted to ask Governor Leavitt, I know that
15 it's not your fault that you're doing this
16 now because things were delayed and you were
17 asked to withhold, but Mr. Pottruck has left.
18 And I was just wondering if you had his
19 permission to offer this like this.
20 GOVERNOR LEAVITT: It was
21 actually offered as -- with several different
22 alternatives. I expressed to him that I
287
1 would be offering it. He did not protest. I
2 did not ask for copyright clearance.
3 COMMISSIONER NORQUIST: Is this
4 today's conversation?
5 GOVERNOR LEAVITT: Yes, I
6 talked with him today--
7 COMMISSIONER NORQUIST: Pottruck
8 told you it was okay to present this -- his--
9 GOVERNOR LEAVITT: No, I told
10 him I was going to be -- we -- advancing it.
11 If he doesn't want to be associated with it,
12 he certainly doesn't need to do it, doesn't
13 need to vote for it.
14 COMMISSIONER NORQUIST: He's not
15 here.
16 GOVERNOR LEAVITT: Well, okay,
17 I'm offering it, recognizing, fully
18 disclosing that they are his words. You may
19 choose to support them or not support them
20 based on your decision.
21 COMMISSIONER NORQUIST: Pottruck is
22 against this as a resolution.
288
1 COMMISSIONER PARSONS: Point of
2 information?
3 CHAIRMAN GILMORE: Mr. Parsons?
4 COMMISSIONER PARSONS: What -- what
5 is -- I'm just trying to figure out what this
6 is proposed as, a finding--
7 GOVERNOR LEAVITT: I propose
8 this as a finding of the Commission.
9 CHAIRMAN GILMORE: Mr. Armstrong?
10 COMMISSIONER PARSONS: Because this
11 is--
12 CHAIRMAN GILMORE: I'm sorry, do
13 you have the floor, Mr. Parsons? Go right
14 ahead.
15 COMMISSIONER PARSONS: No, I'm
16 just... I'm trying -- I'm having difficulty
17 getting my mind around -- I've always thought
18 of this as kind of a preamble to something.
19 And when you -- when you separate the
20 preamble from the body or text that it was a
21 preamble to, it's hard for me to grapple with
22 what you're left with. It's -- it's -- so I
289
1 -- I don't -- I don't quite know how to -- I
2 mean, it's not a finding, as such. It's not
3 a proposal, as such. It's a preamble to
4 something that, without the something, I
5 don't know how you -- you know, even if we
6 approved it as what? I mean, this is really
7 like--
8 GOVERNOR LEAVITT: Mr. Chairman
9 , may I respond?
10 COMMISSIONER PARSONS: --text to
11 our ultimate report.
12 CHAIRMAN GILMORE: Governor
13 Leavitt?
14 GOVERNOR LEAVITT: You will see
15 from reading it that it does have what would
16 include substantial policy guidance if it
17 were adopted. Clearly this document operates
18 at thirty thousand feet. It's a broad look
19 at the horizon of tax issues that we've been
20 dealing with. But if adopted, it would very
21 clearly make some statements that I think
22 would guide the discussions of Congress in a
290
1 productive way.
2 Now, there were other details that
3 could have been attached to it dealing with
4 -- from the Business proposal, but we
5 couldn't come to an agreement on the nexus
6 carve-outs. We could agree on almost all of
7 the others, but the nexus carve- outs we felt
8 created a permanent special privilege that
9 would ultimately cause the sales tax not to
10 be a viable tool in the future. But this
11 clearly does offer policy guidance. I
12 mentioned five areas that I thought were
13 provided -- that this did provide policy
14 guidance. And given the fact that we haven't
15 achieved thirteen votes on anything and this
16 Commission has no formal finding, I would
17 offer this thirty thousand foot level and ask
18 if -- ask you to consider, are those findings
19 matters on which you have agreement? If they
20 are, then I would invite you to vote for
21 them. If they're not, I would invite you to
22 vote your conscience.
291
1 CHAIRMAN GILMORE: I'm going to
2 call on Mr. Norquist.
3 Let me say that the Chair has a
4 familiarity with this document. Mr. Pottruck
5 had discussed it with me when it was
6 initially put forward. It was designed to be
7 something that might bring a supermajority to
8 the Business Caucus Proposal, but it needed
9 to have a greater consensus in order to
10 achieve the supermajority. Many of us
11 rejected this document and this text, even
12 offered some other different forms of it,
13 none of which ever achieved in any types of
14 discussions a supermajority, even
15 broad-ranging support from the Business
16 Caucus.
17 I believe that this document as
18 written is a justification for taxes on the
19 Internet. An alternative format had been
20 offered but never agreed to. My intention is
21 to vote no to this. But naturally, the floor
22 is open for discussion, and I think
292
1 Mr. Norquist was next, then Mr. Pittman.
2 COMMISSIONER NORQUIST: I yield to
3 Mr. Armstrong.
4 CHAIRMAN GILMORE: Mr. Armstrong.
5 COMMISSIONER ARMSTRONG: Governor
6 Leavitt, I think that you and I and David
7 were, in fact, intimately authors of this
8 document in part. David created it, and we
9 were going back and forth with calls and what
10 have you. And it was meant to be a preamble.
11 When I last left this, we were not going to
12 bring this forward. I mean, that was the
13 understanding that I last left with, and I
14 could well have missed a meeting between you
15 and David. But I just checked to find out
16 whether I was one step behind by asking both
17 my team and David's team, which is still
18 here, did they expect that this would be
19 introduced? And the answer is no.
20 Number two, that this may be a
21 great idea, Mike. But since I haven't seen
22 the responses back and forth, I'm very ill
293
1 prepared to vote on it. And so I would just
2 offer a suggestion to ya, that we have
3 created an opportunity for further
4 discussions between us. And if we wish to
5 include something like this, then let's
6 include that in those discussions between us.
7 But since this has not been reviewed by
8 Mr. Pottruck or his staff, or at least my
9 staff, I'd have to vote no. But it doesn't
10 mean that I don't think it's a good idea, I
11 just think it's very premature.
12 GOVERNOR LEAVITT: Mr. Armstron
13 g, I'm prepared to accept a deferred vote on
14 this. I would also like to make clear that I
15 have indicated that David Pottruck was the
16 primary author of it simply because I wanted
17 to make certain that I wasn't in any way
18 misrepresenting its source. I have not and
19 would not try to imply that he would vote for
20 it. He may well vote against it, seeing it
21 as being out of context in -- in the in -- in
22 the overall scheme. I'm prepared to accept
294
1 that.
2 I have put it forward because I
3 think we're going to fail as a Commission in
4 coming to any finding that has thirteen
5 votes. And I think likely the reason for
6 that is that we're going to be at a level of
7 detail upon which we cannot agree. And so
8 one solution to that might be to move
9 ourselves to a higher altitude and see if we
10 can't find principles upon which we could
11 agree that could, in fact, provide us with a
12 context for policy guidance that would be
13 helpful to the Congress and to others who
14 have to wrestle with these weighty issues.
15 CHAIRMAN GILMORE: Mr. Pittman?
16 COMMISSIONER PITTMAN: Yeah, I just
17 wanted to address two points. One, I do
18 believe if you do read the introduction here
19 that it is clear that this was intended as
20 some sort of preamble to the proposal, which
21 we've already voted on, and I think this
22 standing alone is -- is completely out of
295
1 context of what it was intended.
2 The other issue I did not want to
3 leave hanging out there is, I don't think
4 anybody, because I think you have a lot of
5 people here who are all working diligently
6 trying to put something together that is
7 helpful to the country, helpful to the
8 economy, helpful to the American consumers,
9 but I didn't want to let stand the
10 characterization of where we're apart is some
11 sort of permanent carve- outs, because I
12 don't think that has been the intention nor
13 the words nor the actions of the people on
14 this -- this group. And I think if you
15 polled the people one by one, I don't think
16 anybody could point to things that are that.
17 So I did not want that to stand because I do
18 think that is a mischaracterization, and
19 probably an impediment to reaching some sort
20 of more consensus opinion.
21 COMMISSIONER NORQUIST: Governor?
22 CHAIRMAN GILMORE: Mr. Norquist.
296
1 COMMISSIONER NORQUIST: We don't
2 have to speculate about where David Pottruck
3 is. His staff just came and told me that he
4 would be opposed to this resolution, and they
5 are disappointed that it's put forward the
6 way it is.
7 GOVERNOR LEAVITT: Again, I
8 have not represented his support of it. I
9 simply wanted to clarify his authorship of
10 it.
11 COMMISSIONER ANDAL: Mr. Chairman,
12 I call the question.
13 CHAIRMAN GILMORE: Motion to call
14 the question. Is there a second?
15 There is a motion to call the
16 question. All in favor of calling the
17 question please say aye.
18 All opposed, nay.
19 MAYOR KIRK: No.
20 CHAIRMAN GILMORE: I think we ought
21 to call the roll, please.
22 MAYOR KIRK: Dean, I think
297
1 we'll be brief. Would you, out of fairness
2 to those of us who would like to speak to
3 this, withdraw your motion? I promise we'll
4 be brief.
5 COMMISSIONER ANDAL: Fair enough.
6 MAYOR KIRK: Thank you.
7 CHAIRMAN GILMORE: The motion for
8 the question is withdrawn. The floor is open
9 for discussion. Governor -- I did it again.
10 Mayor Kirk.
11 MAYOR KIRK: Governor. I
12 think he likes me in spite of that.
13 CHAIRMAN GILMORE: I'm nonplussed,
14 I have no comment.
15 MAYOR KIRK: So am I. Thank
16 you. And, members of the Commission, I do
17 appreciate it, and I thank Governor Leavitt
18 and others for bringing this proposal
19 forward, and I appreciate you giving us an
20 opportunity to have a chance to go on record.
21 When we started down this road I
22 characterized this debate as not so much
298
1 debate about whether or not people were
2 treated evenly or whether we were going to be
3 discriminatory or non-discriminatory about
4 the Internet from my perspective as a mayor
5 dealing, not at a thirty thousand foot level,
6 but at a where-the-rubber-meets-the-road
7 level of government and have a responsibility
8 to meet the needs of citizens every day in
9 the most basic ways. Even those citizens
10 that shop and transact business over the
11 Internet still have the same desires to live
12 in neighborhoods that are safe and parks that
13 are well maintained, to have public libraries
14 that not only have access to computers but
15 good old fashioned books, and yes, even red
16 fire trucks that show up when all of that
17 technology has a short in a fuse and has a
18 fire. There will never be a time in the life
19 of our communities where you can digitize
20 this. In this form or large form. And
21 ultimately one of the elements of this
22 Commission's work was to see what and analyze
299
1 what the impact of our decisions would have
2 on the abilities of state and local
3 governments to provide services that all of
4 us are dependent upon. I think it's
5 important for the public to know that I think
6 all of us have at least verbalized at some
7 point a commitment to having a recommendation
8 to Congress that would set a broad national
9 tax policy that didn't just deal with our
10 business but the business of all Americans,
11 that it would be fair, that it would be
12 equal, that it would be non-discriminatory.
13 And I would only amend your
14 statement, Governor Leavitt, to some degree
15 that we all hate taxes. I think it's
16 somewhat of an overstatement. And we do the
17 American public a disservice to say we hate
18 taxes that provide the services we need.
19 What we hate are taxes that are unfair. What
20 we hate are taxes that are applied to some
21 people and not others. What we really don't
22 like is when government steps in and decides
300
1 we like your business more than we like other
2 businesses.
3 And what I had wanted was an
4 opportunity to make a statement to Congress
5 and vote for a proposal that allows us to go
6 on record in favor of those principles, of
7 fairness, of non- discrimination with respect
8 to the Internet, but also no special
9 privilege, that treats retailers and
10 e-tailers alike. We've heard a lot of
11 testimony about how wonderful e-commerce, and
12 it is, and how fast it's growing. We forget
13 the fact that retailers pay about two thirds
14 of all the sales taxes that are generated,
15 and have been doing so for years. And they
16 support schools and they support communities,
17 and they employ people. And they give back
18 to communities in so many more ways. And I
19 think it would be a mistake for this
20 Commission to come out with a recommendation
21 that says we favor one form of business,
22 albeit new, albeit wonderful, albeit
301
1 exciting, over other forms that have been the
2 backbone of this nation's economy for years.
3 I also wanted to be in support of a
4 proposal that really gave states an incentive
5 to reform the very complex and confusing and
6 out of date state sales tax structures. And
7 I still think it's -- it is a strong, strong
8 impediment for our governors and state and
9 local tax administrators to hear that message
10 that our current system is out of date with
11 today's economy. But this proposal at least
12 encourages us to do the same thing. It also
13 commits us to working to eliminate the
14 federal excise tax and reform
15 telecommunications taxes. But we're not
16 going to be able to get all of those things
17 at a level that each of us desired.
18 And I think this policy is more
19 than a preamble, I think we sell it short to
20 put it as that. It was brought forth by a
21 number of people, with a lot of input with
22 the thought that if we couldn't get
302
1 concurrence on all the levels of detail,
2 should we miss the opportunity, or should we
3 take advantage of the opportunity to give
4 Congress some policy directives? And I think
5 this proposal gives us the ability to do
6 that, and I heartily endorse it and I'll vote
7 for it.
8 CHAIRMAN GILMORE: There seem to be
9 some hands. Governor Locke?
10 GOVERNOR LOCKE: Thank you,
11 Chairman Gilmore. I'm going to be supporting
12 this, and I do think it's a -- it's -- helps
13 us frame the issues and informs the American
14 public of the policy issues that are before
15 us as a country.
16 I think it's actually a fairly good
17 preamble with respect to the majority vote
18 yesterday with respect to the Business Caucus
19 Proposal. But I think it clearly describes
20 the tensions, the dilemmas that face our
21 country. And I don't think it does
22 disservice to what was voted on by the
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1 majority of the Commission members yesterday.
2 I regret that we came so very, very
3 close to discussions last night and this
4 morning that could have enabled a
5 supermajority and perhaps almost unanimous
6 support for a proposition that would have
7 addressed the issues that we looked at.
8 Those of us who support this and
9 those of us who voted against or abstained
10 from the majority position of the Business
11 Caucus Proposal yesterday, we do support a
12 continuation of the moratorium. We are not
13 seeking immediately any type of the ability
14 of the states to impose a tax on remote
15 sales. We think that there should be no
16 access charges with respect to -- or charges
17 on access to the Internet. We supported some
18 clarification of nexus so that those
19 businesses that do have activities in states
20 now clearly would not be subject to sales
21 taxes. And we supported the elimination of
22 the -- of the federal excise tax on
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1 telecommunications. We were so very, very
2 close, but on a couple of details were not
3 able to reach agreement and -- and the time
4 has run out. And I would hope that over the
5 next few weeks that we can continue these
6 discussions. But in the event that we are
7 not able to reach final closure, final
8 agreement with a supermajority vote, a
9 two-thirds vote as requested by the Congress
10 for any type of finding or recommendation to
11 the Congress, I think that what Mr. Pottruck
12 wrote, while not -- while he has not endorsed
13 this, nonetheless fairly accurately and --
14 and fairly paints and describes the dilemmas
15 that's existing in our country today. And
16 for that I think it's a good -- a good piece
17 that all Americans should be aware of.
18 CHAIRMAN GILMORE: Further
19 discussion? Mr. Armstrong.
20 COMMISSIONER ARMSTRONG: Yes.
21 Mr. Pottruck just took advantage of advanced
22 digital technology by calling me on his cell
305
1 phone and asked me to express on his behalf
2 that he did not agree that this would be
3 presented or that it was his authorship, and
4 I say that on his behalf.
5 Second, I will reiterate, Governor,
6 that I think that this may be a good idea but
7 I do not think in the context of none of us
8 having reviewed what I just got distributed
9 that it's a good idea today.
10 GOVERNOR LEAVITT: Mr. Armstron
11 g, let me respond by saying -- could I
12 complete my comment, Mr. Chairman?
13 CHAIRMAN GILMORE: We are going
14 around twice now, if you could be brief,
15 Governor.
16 GOVERNOR LEAVITT: I want to
17 make it clear that I have not done anything
18 to deliberately take advantage of
19 Mr. Pottruck's words. We'd discussed this, I
20 worked on this document, others worked on the
21 document, it was part of several different
22 proposals. It's been part of circulation.
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1 This is -- I agree, no one should be asked to
2 vote for it that hasn't seen it. If you
3 don't want to vote on it, that's just fine.
4 I think you've got a proposal, we could vote
5 on it at a future time. We can re-write it.
6 It was a composite of lots of people's work.
7 I don't represent his support for it. Dave
8 Pottruck and I have worked very cooperatively
9 together; I have the highest regard for him,
10 and I suspect he feels the same way about me,
11 and I hope that he would know that I in no
12 way intended this to do otherwise.
13 CHAIRMAN GILMORE: Motion,
14 seconded, call the question. All in favor of
15 calling the question say aye.
16 All opposed, nay.
17 There is a nay. Ms. Rosenker,
18 please call the roll.
19 MS. ROSENKER: Mr. Andal?
20 COMMISSIONER ANDAL: Aye.
21 MS. ROSENKER: Mr. Armstrong?
22 COMMISSIONER ARMSTRONG: Aye.
307
1 MS. ROSENKER: Mr. Guttentag?
2 COMMISSIONER GUTTENTAG: Regretfull
3 y abstain.
4 MS. ROSENKER: Mr. Harris?
5 COMMISSIONER HARRIS: Aye.
6 MS. ROSENKER: Mayor Kirk?
7 MAYOR KIRK: No.
8 MS. ROSENKER: Governor Leavitt?
9 Ms. Jones?
10 COMMISSIONER JONES: No.
11 MS. ROSENKER: Mr. Lebrun?
12 COMMISSIONER LEBRUN: No.
13 MS. ROSENKER: Governor Locke?
14 GOVERNOR LOCKE: No.
15 MS. ROSENKER: Mr. Norquist?
16 COMMISSIONER NORQUIST: I need
17 coaching here. Aye. Thank you.
18 MS. ROSENKER: Mr. Novick?
19 COMMISSIONER NOVICK: Abstain.
20 MS. ROSENKER: Mr. Parsons?
21 Mr. Pincus?
22 COMMISSIONER PINCUS: Abstain.
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1 MS. ROSENKER: Mr. Pittman?
2 COMMISSIONER PITTMAN: Aye.
3 MS. ROSENKER: Mr. Pottruck?
4 Mr. Sidgemore?
5 COMMISSIONER SIDGEMORE: Yes.
6 MS. ROSENKER: Mr. Sokul?
7 COMMISSIONER SOKUL: Aye.
8 MS. ROSENKER: Mr. Waitt?
9 COMMISSIONER WAITT: Aye.
10 MS. ROSENKER: Governor -- Chairman
11 Gilmore?
12 CHAIRMAN GILMORE: Aye.
13 The question is called by a vote of
14 ten yea, five nays, and three abstentions.
15 All of this document has been offered by
16 Governor Leavitt as a finding or
17 recommendation to the report of this
18 Commission. All in favor of including this
19 document as a finding of the Commission
20 please say aye.
21 All opposed say nay.
22 Ms. Rosenker, call the roll please.
309
1 MS. ROSENKER: Mr. Andal?
2 COMMISSIONER ANDAL: No.
3 MS. ROSENKER: Mr. Armstrong?
4 COMMISSIONER ARMSTRONG: No.
5 MS. ROSENKER: Mr. Guttentag?
6 COMMISSIONER GUTTENTAG: Regretfull
7 y abstain.
8 MS. ROSENKER: Mr. Harris?
9 COMMISSIONER HARRIS: No.
10 MS. ROSENKER: Mayor Kirk?
11 MAYOR KIRK: Aye.
12 MS. ROSENKER: Governor Leavitt?
13 GOVERNOR LEAVITT: Aye.
14 MS. ROSENKER: Ms. Jones?
15 COMMISSIONER JONES: Aye.
16 MS. ROSENKER: Mr. Lebrun?
17 COMMISSIONER LEBRUN: Aye.
18 MS. ROSENKER: Governor Locke?
19 GOVERNOR LOCKE: Aye.
20 MS. ROSENKER: Mr. Norquist?
21 COMMISSIONER NORQUIST: Aye. Nay.
22 I was looking for my coach. No, we're fine.
310
1 No. Thank you.
2 MS. ROSENKER: Mr. Novick?
3 COMMISSIONER NOVICK: Abstain.
4 MS. ROSENKER: Mr. Parsons?
5 COMMISSIONER PARSONS: No.
6 MS. ROSENKER: Mr. Pincus?
7 COMMISSIONER PINCUS: Abstain.
8 MS. ROSENKER: Mr. Pittman?
9 COMMISSIONER PITTMAN: No.
10 MS. ROSENKER: Mr. Pottruck?
11 Mr. Sidgemore?
12 COMMISSIONER SIDGEMORE: No.
13 MS. ROSENKER: Mr. Sokul?
14 COMMISSIONER SOKUL: No.
15 MS. ROSENKER: Mr. Waitt?
16 COMMISSIONER WAITT: No.
17 MS. ROSENKER: Chairman Gilmore?
18 CHAIRMAN GILMORE: No.
19 Governor Leavitt's motion fails,
20 five yeas, ten nays, three abstention, one
21 not present.
22 Other floor amendments to be
311
1 offered at this time? Governor Locke?
2 GOVERNOR LOCKE: Mr. Gilmore, I
3 was just wondering if -- if you want me to
4 sit by Commissioner Norquist so I can help
5 him understand how he should vote?
6 COMMISSIONER PARSONS: Are you
7 suggesting that I'm falling down on the job?
8 GOVERNOR LOCKE: On a more
9 serious note, Chairman Gilmore, having voted
10 on the prevailing side by which the privacy
11 resolution by Mr. Sokul failed, did not
12 receive a supermajority, I'd move for
13 reconsideration of that.
14 MAYOR KIRK: Second.
15 CHAIRMAN GILMORE: It takes two
16 thirds to move to reconsider and--
17 COMMISSIONER SOKUL: I would ask--
18 CHAIRMAN GILMORE: This motion is
19 in order.
20 COMMISSIONER SOKUL: Governor
21 Gilmore?
22 CHAIRMAN GILMORE: Yes?
312
1 COMMISSIONER SOKUL: I would ask
2 unanimous consent that -- that Governor Locke
3 and anyone else be able to change their votes
4 at this time, if they so choose.
5 COMMISSIONER NORQUIST: These
6 people who voted against privacy earlier
7 today want to switch their vote? Is that
8 what's happening?
9 CHAIRMAN GILMORE: Without
10 objection--
11 COMMISSIONER ARMSTRONG: Those of
12 us who abstained would like to be able to
13 support it.
14 CHAIRMAN GILMORE: Without
15 objection, so that we do not go through the
16 whole parliamentary process, we will allow --
17 without objection we'll allow anyone that
18 wishes to change their vote on Mr. Sokul's
19 vote to so record that after they have so
20 designated at this time. Are there any
21 people that wish to change their vote?
22 Governor Locke does. Any others?
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1 GOVERNOR LOCKE: I change my
2 vote from abstention to yes.
3 CHAIRMAN GILMORE: From abstention
4 to yes.
5 MAYOR KIRK: Governor
6 Gilmore, if you would show that I've changed
7 mine from abstention to yes.
8 COMMISSIONER ANDAL: Records will
9 show I am also so changing my vote.
10 COMMISSIONER SOKUL: Thank you.
11 CHAIRMAN GILMORE: Well, we're
12 going to recommend privacy anyway.
13 COMMISSIONER NORQUIST: Does --
14 does this mean the three Federal
15 representatives are remaining opposed to the
16 privacy resolution?
17 CHAIRMAN GILMORE: I believe their
18 vote was an abstention, and it remains such.
19 MAYOR KIRK: It was
20 regretfully--
21 COMMISSIONER NORQUIST: That --
22 that's a no vote, that counts.
314
1 CHAIRMAN GILMORE: Other floor
2 amendments? Without -- if there are no
3 others then, we will begin towards our
4 conclusion because we still have an
5 opportunity for the Commissioners to each
6 offer concluding remarks. I'm going to ask
7 each Commissioner to hold please their
8 remarks to three minutes. Three minutes.
9 Let us begin if we could, please, for
10 concluding remarks, and we will begin
11 alphabetically, Mr. Andal.
12 COMMISSIONER ANDAL: I have nothing
13 to add.
14 CHAIRMAN GILMORE: Mr. Andal has
15 nothing to add at this time. Mr. Armstrong?
16 COMMISSIONER ARMSTRONG: Thank you,
17 Mr. Chairman. I would simply say at this
18 stage that I don't believe that what
19 separates us are special interests, whether
20 it's the special interests of government to
21 tax or for business and others not to tax or
22 for even divergent interests on nexus. I
315
1 think what we've really run into is the issue
2 of time. And we passed an earlier -- I don't
3 know if it's an amendment, Mr. Chairman, or
4 whatever, that enables a continuation of
5 discussion, and I would enter into that with
6 great sincerity, that we take a lot of time
7 to express how common we are, and yet at the
8 end of the day, we can't seem to get over the
9 goal line. And I would hope that both sides
10 of the nexus issue or even the preamble issue
11 would meet, would conference call, would
12 video conference in order to see if we can't
13 bring more to the majority and more to the
14 resolution of our issues.
15 CHAIRMAN GILMORE: Mr. Guttentag.
16 COMMISSIONER GUTTENTAG: I pass,
17 Mr. Chairman.
18 CHAIRMAN GILMORE: Delegate Harris,
19 Paul Harris.
20 COMMISSIONER HARRIS: I pass.
21 CHAIRMAN GILMORE: Commissioner
22 Delna Jones.
316
1 COMMISSIONER JONES: I just want to
2 add that while much of the discussion that's
3 gone on has been very important and very
4 critical, I think, to the long term effect of
5 the issue of taxation and the Internet, I
6 think some of the things as I sit here
7 representing a state that does not have a
8 sales tax has not been affecting my state
9 particularly. The issue that is still
10 dividing us is the issue of nexus. And I
11 think in some side discussions some of the
12 Business people have not really understood
13 why that's such an important issue.
14 If you were sitting in my seat
15 representing a state that does not have a
16 sales tax, we have really nothing in this
17 issue other than the issue of an income tax
18 that we are critically dependent upon. If
19 the rules are changed in relationship to the
20 income tax structure, we really have no place
21 else to go, as do some of the states who have
22 only a sales tax and no income tax. So I
317
1 would hope that over the next few weeks or
2 days that those issues could be resolved. I
3 guess I am not as optimistic as I had hoped
4 to be by now, but I certainly hope that the
5 powers that be will see it clear to not
6 impact the income tax system as you're trying
7 to deal with the sales tax system.
8 CHAIRMAN GILMORE: Mayor Kirk.
9 MAYOR KIRK: Pass.
10 CHAIRMAN GILMORE: Governor
11 Leavitt.
12 GOVERNOR LEAVITT: Mr. Chairman
13 , I would simply like to impart my personal
14 appreciation and say what a privilege it's
15 been to serve with this group. This is a
16 group of clear-thinking people who have
17 devoted themselves to a very difficult task,
18 particularly those who have devoted
19 themselves from the private sector. Those of
20 us who are in the public sector spend a fair
21 amount of our time having to do this as our
22 job. Obviously, you haven't -- you've taken
318
1 on a public duty, and I would just simply
2 like to say thank you and express my
3 admiration for all of you. I hope we'll have
4 opportunities to deal with each other on less
5 contentious issues where the bond that we
6 have developed will be allowed to nurture and
7 grow. Thank you.
8 CHAIRMAN GILMORE: Mr. Lebrun.
9 COMMISSIONER LEBRUN: Thank you,
10 Mr. Chairman. First of all, I'd like to
11 publicly thank Senator Tom Daschle for
12 appointing me to this great Commission. It's
13 been a true privilege for me to serve with
14 all of you. I want to thank the Chair for
15 the courtesies it extended to me and other
16 members of the Commission. I want to thank
17 all the members of the Commission for the
18 great contributions I think each and everyone
19 of you have made toward this great debate.
20 I, too, am somewhat disappointed that we've
21 not been able to reach a consensus on some
22 important issues, but I think what we have
319
1 done has contributed to the information that
2 will be continued to be debated in Congress,
3 in state legislatures, and in city hall. Any
4 of us who have been involved in the
5 legislative process knows that's it's an on
6 going process, and this process is not going
7 to end with the conclusion of this Commission
8 or with our report. The contributions that
9 we have made through our debates, through the
10 papers that are presented, the testimony,
11 will be utilized by Congress, be utilized by
12 state legislatures and governors and city
13 hall, and it has been a great privilege and I
14 thank you all very much.
15 CHAIRMAN GILMORE: Governor Gary
16 Locke.
17 GOVERNOR LOCKE: Thank you very
18 much, Chairman Gilmore. And I want to really
19 say to all the members of the Commission how
20 much I've appreciated getting to know all of
21 you, both the private sector, the various
22 interest groups that have been represented,
320
1 and the Federal officials. I've very much
2 appreciated getting to know and understand
3 more of the issues that -- especially in the
4 business community, how they -- what they
5 face, and the challenges that you face.
6 We in the State of Washington very
7 much want e-commerce to grow. We're very
8 proud of the e- commerce businesses that we
9 have. And I believe that they truly will
10 revolutionize the way in which citizens
11 conduct their businesses and contribute to the
12 quality of life through America.
13 We need a level playing field, and
14 we need, of course, the states to simplify
15 their tax structure, and that's a
16 prerequisite to any type of -- of -- of a
17 level playing field. We in the State of
18 Washington do not have an income tax, we rely
19 almost -- well, we rely to a large extent on
20 sales taxes, and we just want to make sure
21 that as we seek a level playing field and as
22 we encourage e- commerce to grow, that we are
321
1 not -- that if the sales tax is still to be
2 viable, that we're not creating a situation
3 where we are forced to go to an income tax or
4 to raise property taxes or other forms of
5 taxes. But I would hope that over the next
6 several weeks that through the informal
7 discussions, that we still might be able to
8 reach closure and really present to the
9 Congress a great recommendation that all of
10 us can support. Thank you.
11 CHAIRMAN GILMORE: Grover Norquist.
12 COMMISSIONER NORQUIST: Yes, I'd
13 like to say I've enjoyed serving on the
14 Commission with all of the members. I was
15 asked to serve specifically to represent the
16 interests of consumers. And I'm particularly
17 pleased with the proposal that -- that was
18 passed by this Commission which makes the
19 case for looking after the interests of
20 consumers, calling for getting rid of the
21 three percent telecommunications tax. I
22 believe Congress is on route to do that
322
1 largely because of the work of this
2 Commission speaking to state and local
3 governments about their taxes being at
4 fourteen percent on telecommunications, way
5 above other industries. And ensuring that we
6 don't do what some politicians wanted to do,
7 which was calling for some date certain
8 taxing electronic commerce and distant sales.
9 As we've learned from the people who've
10 testified here, we don't want under the
11 constitution to let Alabama tax collectors
12 tax -- levy taxes on Michigan businesses any
13 more than we can sustain the abuse of tort
14 law where Alabama juries go after Detroit
15 business with such abandon.
16 I think this Commission and the
17 proposal that we have voted through with
18 majority status is a tremendous step forward.
19 And I would remind everyone that the very
20 powerful Medicare Commission, which concluded
21 recently, put together a majority report,
22 even though they'd been asked for a
323
1 two-thirds majority, behind the bipartisan
2 Breaux-Thomas Commission, and that was tremendously
3 effective. It is exactly the bipartisan
4 approach that Congress will eventually pass.
5 It was unfortunate the Clinton administration
6 instructed their people to vote against it so
7 it couldn't get two thirds, but it did have a
8 solid majority and Congress has made it very
9 clear that they look to that as the model.
10 And I think that what we've passed now with a
11 strong majority, and if we can add to it
12 without compromising on principle, I think
13 that will be delightful. This Commission has
14 been a tremendous success.
15 CHAIRMAN GILMORE: Bob Novick.
16 COMMISSIONER NOVICK: Pass.
17 CHAIRMAN GILMORE: Mr. Richard
18 Parsons.
19 COMMISSIONER PARSONS: Thank you,
20 Mr. Chairman. For me, as well as others
21 who've spoken already, and I assume some who
22 are yet to speak, it's been a privilege to
324
1 serve on this Commission with this
2 distinguished and honorable group of people.
3 I confess, however, to being
4 somewhat disappointed here at the end, or
5 close to the end, and somewhat bewildered.
6 I'm disappointed that we haven't been able to
7 come to a position that a supermajority could
8 -- could rally around. I agree with
9 Mr. Norquist that majority is -- is some
10 evidence, but I think if we could get to the
11 level of putting together a supermajority,
12 that might be what they used to call in the
13 law conclusive evidence to the Congress that
14 a way has been found.
15 I do agree with -- with both
16 Governor Locke and Governor Leavitt who said
17 that we got very close, that, in fact, all
18 that separated us at the end was questions
19 around this nexus issue. And I think Delna
20 Jones put her finger on -- on something that
21 -- that, as we struggle over this last week
22 to maybe come together one more time, we
325
1 should bear in mind. The real issue in nexus
2 has very little to do with electronic
3 commerce. The real issue that the states are
4 concerned with in the definition of nexus has
5 to do with the other ways in which they get
6 their arms around persons doing business in
7 their state, namely income tax and other
8 business activity tax. Then somehow we can
9 figure out how to separate these two so that
10 we can get focused on electronic commerce.
11 I think a way may be found that we can form
12 consensus around it. So maybe Mike's right,
13 maybe a little more time would help.
14 But at any rate, the thing I'm --
15 I'm bewildered about is that if ever there
16 was an issue that was of national scope and
17 significance, and indeed it's the issues that
18 led the Congress to create this commission,
19 this -- this whole question of the Internet
20 and taxation and electronic commerce is one.
21 And if ever there was an issue that one would
22 assume that -- that -- that, you know, our
326
1 leaders might attempt to help lead on, this
2 is one. And so I'm -- I'm bewildered by --
3 by the number of abstentions we've had from
4 -- on virtually anything and everything.
5 Particularly from -- from our federal
6 representatives. And I would hope that as we
7 try one last time to push the ball over the
8 goal line, that -- that we could at least get
9 some position taken. I don't think anybody
10 can hide on this one. I think that, you
11 know, this Commission was put together in a
12 balanced way to present a lot of different
13 perspectives. I think several of us, you
14 know, have -- have tried hard to get home.
15 Reasonable minds can differ, but I would hope
16 at the end of the day that we would get --
17 get everyone to be a part of the process of
18 finding a solution here, and not just
19 throwing up their hands and, you know, taking
20 a powder on every issue.
21 CHAIRMAN GILMORE: Mr. Pincus.
22 COMMISSIONER PINCUS: Pass.
327
1 Obviously, my eloquence failed.
2 CHAIRMAN GILMORE: Mr. Pittman.
3 COMMISSIONER PITTMAN: Oh, I too
4 want to say it's certainly been a privilege
5 serving on this Commission. And I think it's
6 been very interesting, not only the
7 information that's come from the other
8 Commissioners, but also the information that
9 we gathered and that came to us, much of it
10 unsolicited. I'm sure, like all the other
11 Commissioners, I heard from a lot of people.
12 I found it very interesting. I think it
13 made, certainly, me more aware of the issues
14 that confront folks from all walks of life.
15 Having come from a state which is, when I was
16 growing up, primarily small business and
17 still having plenty of relatives in that
18 business, I'm quite sympathetic to many of
19 their plights. And I think the issue which
20 Dick brings up, that one of nexus issues,
21 actually has little to do with the Internet,
22 and it's a nagging issue of nexus and
328
1 interpretations that the states have on it
2 and the burden that places on -- on certain
3 businesses. Probably, although Mike said how
4 many tax forms he has to fill out or
5 whatever, he can afford it. I think there's
6 some business that get -- get crushed by
7 that, and I think that's certainly what I
8 heard a lot of.
9 I do want to say, and I want to
10 echo what others are saying, I think the --
11 the -- what is very positive that's come out
12 of today is indeed hearing that actually we
13 have much more agreement than we do
14 disagreement as a group. And as a matter of
15 fact, listening to the discussion, it sounds
16 like there's one issue that we're really
17 apart on, and I think if you tear it apart,
18 we're not that far apart even on that one
19 issue. So although we didn't take a vote
20 that gave a supermajority, I do take some
21 pride and some comfort in the fact that we
22 managed as a group to get it down to this
329
1 much of an issue, instead of this big issue.
2 And I don't think what we've had here is a
3 failure, but I do think it's a success, and I
4 think the very fact that a -- a -- a preamble
5 which was worked on and, I'm not sure what
6 draft it was and whose draft it was, that was
7 put forward, but at least putting that in by
8 folks who did not vote for the majority
9 report I think is encouraging because it does
10 say we're more on the same page than we are
11 on different pages.
12 CHAIRMAN GILMORE: Mr. Sidgemore.
13 COMMISSIONER SIDGEMORE: Yeah, I
14 just want to say this was a new and very
15 different experience for me. This -- this is
16 not like our traditional board meetings or
17 staff meetings at MCI WorldCom. And I do
18 also want to echo the comments that everybody
19 else made. It's really been an honor to work
20 with so many smart, and I would say and
21 underline, fair-minded people. I think
22 everybody here really tried very hard not
330
1 only to defend their own constituency, but
2 also to be open-minded and objective to -- to
3 a great degree. I also want to say that I
4 think the majority proposals that we
5 presented yesterday, although it didn't, you
6 know, achieve the two-thirds consensus, I do
7 think that's going to be a powerful proposal,
8 and I do think there are a lot of very, very
9 strong things in that that it'll be
10 meaningful long term. But, of course, it was
11 our hope all along that we would get a
12 two-thirds consensus.
13 And on that point, you know, as Bob
14 said, our differences here, particularly in
15 this room in the various cities, you know, in
16 the public forum, our differences have often
17 seemed very great, and at the end of the day
18 they turn out to be not, not really that
19 great. And I guess I want to be with Mike
20 Armstrong on this, in that I am an optimist
21 at heart, and I really believe that since we
22 are so close, there's still an opportunity to
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1 come together. And I just want to say that I
2 am still open-minded, and I think everybody
3 else is, too, and it would be just terrific
4 if we could find a way to bridge that over
5 the next little while.
6 CHAIRMAN GILMORE: Mr. Sokul.
7 COMMISSIONER SOKUL: Thank you,
8 Governor. We're -- our Commission doesn't
9 make law; we're -- we're reporting to
10 Congress our work products. And I think that
11 Congress -- there was a lot of discussion
12 over two-thirds majority, what does that
13 mean? I think that what happened is Congress
14 knew this was a tough issue, which is why
15 they created the Commission in the first
16 place, and they said we're gonna put in a
17 two- thirds majority requirement, because if
18 they can get it, that's going to make our job
19 a lot easier. And that's understandable.
20 And there's still a chance that we might
21 ultimately be able to make their job much
22 easier. However, if we -- if we can't do
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1 that, in the grand scheme of things what
2 we're reporting back is, you know something,
3 this is a tough issue. You know, we're sorry
4 we couldn't make it easy for you, but this is
5 a tough issue.
6 In certain respects we didn't help
7 them where we possibly could have. For
8 example, it would have been helpful if they
9 had known how the administration felt on
10 certain issues; but that didn't happen. But
11 they do know a lot that they didn't know
12 before. They know more about the issues,
13 they know a lot more about the nuances of the
14 issues. They know that there are sides that
15 are formed on the debate. You know, when
16 some people say level playing field I hear
17 nationalized tax powers, state tax powers.
18 They know that privacy issues are important
19 and -- and -- and need more exploration. They
20 know that international issues are important.
21 And they know that we all agree that the real
22 problem here is the state and local tax
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1 systems which have developed since the
2 Depression, not the Internet, not electronic
3 commerce. And those must be reformed.
4 That's the first step.
5 So even though we're not making
6 Congress's job perhaps not as easy as they
7 hope, I think that our Commission has already
8 been a tremendous success, and it's been an
9 honor to be part of it.
10 CHAIRMAN GILMORE: Mr. Waitt.
11 COMMISSIONER WAITT: Thanks,
12 Mr. Chairman. Again, I just wanted to echo
13 some of the comments that have been made from
14 some of the other Commissioners. You know,
15 it has been a privilege and an honor for me
16 to serve on -- on this Commission, and it's
17 also been a tremendous learning experience to
18 be here, as well. And I found it, you know,
19 infinitely valuable. I would like to thank
20 Chairman Gilmore for the role that he's
21 played on this Commission. And I think where
22 -- if I look at this and I look at where, you
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1 know, where we might have gotten bogged down,
2 it was on the tough issue, on the big issue
3 of what are we going to tax in terms of
4 transactions on the Internet? It had to do
5 with the sales tax. If you go to all the
6 meetings, that was the biggest issue that we
7 dealt with. Now, we can call it just as
8 simply the nexus issue, but that issue,
9 that's just kind of the tip of the iceberg
10 for the broader issue of what are we going to
11 tax on the -- on the Internet?
12 You know, I do have to compliment
13 Mayor Kirk, or Governor Kirk as he keeps
14 trying to give you a promotion, and -- and
15 Governor Leavitt on the role that they
16 played, because I really do understand where
17 you're -- where you're coming from, you know.
18 This is a big issue and you don't want to run
19 the risk of losing revenues to your states
20 with -- in an area where electronic commerce
21 is going to continue to grow. And I think
22 the role a lot of us also have played is we
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1 want to keep electronic commerce growing.
2 And I do think we got -- got very close to
3 something -- to something there. There's a
4 lot of things, and we're in agreement on a
5 lot of issues. You know, when it comes to
6 the digital divide, when it comes to -- comes
7 to privacy issues, when it comes to
8 simplification issues, but the fact of the
9 matter is, the states have to have some
10 incentive and have to have a little nudge
11 before they're going to really simplify this
12 system because this system today is much too
13 complex for businesses to -- for businesses
14 to deal with. And if we are going to move to
15 a level playing field, we gotta have a much
16 simpler system if we're gonna deal with a tax
17 system in this -- in this new economy.
18 So, again, I think there's a lot of
19 areas we agree on. It's been very good for
20 me to be, you know, part -- part of this
21 Commission, and I've enjoyed it. And I think
22 our work here is, again, just starting, and
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1 we've really raised a lot of the issues and
2 raised this debate, and the debate's going to
3 go on and eventually as it came out in -- in
4 Quill, it's going to be up to Congress to do
5 what they're going to do and hopefully
6 they'll listen to some of the advice that we
7 -- we're -- we're giving them here.
8 COMMISSIONER PINCUS: Governor.
9 Governor, excuse me, I passed, but since
10 there have been several references to the
11 Administration, I wonder if I might make a
12 brief comment?
13 CHAIRMAN GILMORE: Mr. Pincus.
14 COMMISSIONER PINCUS: Thank you.
15 Um, I didn't want to unnecessarily prolong
16 the proceedings, since I think people are
17 eager to go home, but I did want to, I guess,
18 in reference to what Mr. Sokul said, that I
19 think we've tried to be pretty clear about
20 where the Administration is, both in public
21 discussions in the last several days and also
22 in private discussions with a number of
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1 people around this table. And I think we
2 have, as I said we were going to do
3 yesterday, and I think a number of you know
4 we've been doing for the past twenty hours,
5 spent quite a bit of time trying to help
6 bridge the gap and come up with something
7 that thirteen people can support. And I'm
8 glad that we're going to have the opportunity
9 to continue to work on that. But I wanted to
10 sort of undercut the notion that we've been
11 sitting around drinking water and doing
12 nothing. I think we've actually, especially
13 in the last two days, spent quite a lot of
14 time trying to -- to address these issues,
15 and every member of this Commission certainly
16 has my commitment and my colleagues'
17 commitment that we're going to continue to do
18 that. Thank you.
19 CHAIRMAN GILMORE: Well, first of
20 all, let me begin my remarks by thanking
21 Mayor Kirk, once again, for your hospitality
22 here in Dallas. We're lucky to have been
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1 able to be here. This is a great American
2 city. And, Mr. Mayor, thank you very much
3 for your hospitality.
4 I also want to compliment and refer
5 everyone here and thank the staff of this
6 Commission that has worked tirelessly,
7 sometimes under extremely onerous and
8 difficult circumstances in order to bring us
9 successfully through these ten months of
10 these deliberations. I want to compliment
11 Heather Rosenker, and ask her to stand, and I
12 also want to ask everyone on her staff who
13 has helped her with any of these meetings to
14 please stand also for our applause.
15 I also want to thank the members of
16 the Commission for the exemplary work on
17 behalf of the people of the United States.
18 I'm proud to have served as Chairman of this
19 Commission and with each and every one of
20 you, and I'm proud of the caliber of these
21 deliberations, too. And of the debate that
22 we have had and the decisions that we, in
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1 fact, have made. As we consider this
2 challenge, we've got to think about the fact
3 that we undertook one of the great challenges
4 of contemporary policy and we did it in a
5 ten-month period. And we reached
6 conclusions. And I think we've demonstrated
7 that even a federal commission can work on
8 Internet time if it has to.
9 We've accomplished great deeds on
10 behalf of the people. And I want to thank
11 the Commissioners for their work and their
12 effort and their service. This has been the
13 greatest examination of policy ideas that
14 I've ever been associated with over these
15 past ten months. We have examined all the
16 ideas, all the thinking on this, every
17 theory, virtually all the data, all
18 information, and a debate that began, I
19 think, a year ago on the basis of sometimes
20 myth, sometimes assertion, political
21 posturing, I think has been swept away in the
22 face of a great deal of thought,
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1 consideration, the facts, analysis, before we
2 ever moved in this meeting to the proposal of
3 any type of adoption by a majority of this
4 Commission. We have reached majority
5 positions, in fact, one or two super-
6 majorities that will rise to the level of a
7 recommendation. But other than that, we have
8 reached a majority report, and it is a solid
9 one. And I believe that we have gotten over
10 the goal line successfully. And the Congress
11 will benefit greatly from the success and the
12 thought and the careful analysis of this
13 Commission.
14 I am very proud of the quality of
15 the ideas that will be in the report to
16 Congress. In the words of Senator Lott,
17 Congress expected bold policy proposals that
18 reduce tax burdens on America's consumers and
19 businesses. And that is exactly what we're
20 sending to him and to his colleagues. The
21 fact that the Internet is the most
22 transforming economic development since the
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1 industrial revolution, information technology
2 is driving the economic boom, it is creating
3 new jobs, it is increasing productivity and
4 efficiencies in every sector of the economy,
5 and generating new wealth in America. The
6 Internet is not just facilitating commerce,
7 it is creating new commerce. For the first
8 time, consumers can locate perfect
9 information and access to goods and services
10 at the touch of a button, and small mom and
11 pop entrepreneurs can for the first time in
12 history reach a global marketplace and
13 compete with big capital intensive companies.
14 The result is a digital marketplace that Adam
15 Smith would have marveled at.
16 America's response to this
17 revolution should not be to tax it or all the
18 people, the individual taxpayers and
19 consumers and small businesses who have been
20 empowered by it. The history of the 20th
21 Century was about bigger government built at
22 the expense of hard-working people. But the
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1 21st Century offers the promise of smaller,
2 more efficient government and a proportionate
3 increase in the economic freedom and liberty
4 of individual people who are permitted to
5 keep more of their own money. The Internet
6 changes everything. Including government.
7 Government at all levels must now begin to
8 harness the efficiencies and productivity
9 increases facilitated by information
10 technology and the Internet. Free enterprise
11 is doing it, government must do it, too.
12 These ideas generated by the
13 Commission are going to leave a lasting
14 legacy on thinking for a new century. And
15 what are they that we are talking about? A
16 ban on sales tax collections on remote
17 Internet sales of goods and services. A ban
18 on sales taxes on the sale of digitized
19 goods, such as content and information and
20 video and music delivered electronically. A
21 ban on taxes on Internet access. An
22 abolition of the three percent Federal
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1 telephone tax. An immediate tax cut of over
2 five billion dollars annually for the
3 American people. Simplification of confusing
4 and burdensome tax systems for all businesses
5 in America, both retailers and
6 telecommunications companies. So this
7 Commission has rung the bell for the 21st
8 Century. And a new paradigm in this day --
9 in this country. For that I want to thank
10 you all for standing firm for the people of
11 America, and I want you to know that I am
12 proud to have served with each and every one
13 of you as your Chairman. Thank you for your
14 participation and your commitment to public
15 service.
16 We have now come to the end of the
17 agenda. Without objection, we are adjourned.
18 Thank you.
19 (Whereupon, at 3:40 p.m., the
20 PROCEEDINGS were adjourned.)
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1 CERTIFICATION
2 As the Reporter, I hereby certify
3 that this meeting of the E-Commerce
4 Commission took place in Dallas, Texas, on
5 March 21, 2000, and were recorded on audio
6 tape by me. I further certify that these
7 audio tapes were then reduced to writing by
8 me and are a true and accurate record of the
9 proceedings.
10 _________________________________
Notary Public, State of Texas
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