Internet Access Tax Ban Dead

Posted December 5, 2003 at 6:22pm

In a town dominated by tax cut-hungry Republicans, freshman Sen. Lamar Alexander (Tenn.) has managed to do the unthinkable and in the process caused some of his GOP colleagues to accuse him and his supporters of being “pro-tax.”

Along with a cadre of other former governors in the Senate, Alexander has successfully prevented the chamber from continuing the five-year trend of banning taxes on Internet hook-ups.

The freshman’s efforts have run right up against two powerful Members — his home-state colleague, Senate Majority Leader Bill Frist (R-Tenn.), and National Republican Senatorial Committee Chairman George Allen (Va.).

In the meantime, there is no longer a moratorium to protect consumers from either taxes on their Internet service bills or taxes on the hook-ups between service providers and companies that provide access to transmission lines.

“The gates are now open for states to begin taxing Internet access,” said Allen spokesman Mike Waldron. “If consumers start seeing their Internet access bills go up, the blame is solely laid at the feed of a minority of pro-tax Senators.”

In a speech inserted into the Congressional Record on Nov. 25, Frist assailed the lack of progress on talks between Alexander and Allen, the chief proponent of a bill to permanently reinstitute the tax moratorium that expired on Nov. 1.

“Every option I suggested was rejected by both sides, and both indicated that no deal was better than any of the options I set forth,” said Frist. “As an aside, this was the first, last and only moment when the various parties were able to reach agreement with respect to anything having to do with taxing the Internet.”

Frist did not specifically single Alexander out for criticism, but he pointedly praised Allen’s commitment to the legislation. He also acknowledged that the bill was dead for the year, but has not ruled out filing a motion to limit debate, or cloture, when the Senate returns in January to cut off what many consider an Alexander-led filibuster.

“Senator Alexander has raised concerns that the Internet tax moratorium is an unfunded mandate prohibiting states from deciding how they’ll collect revenue,” explained Alexander spokeswoman Alexia Poe. “Nothing makes him madder than legislators in Washington making decisions and then sending the bill to the states.”

Still, both sides indicated they would prefer to continue talks rather than have a potentially embarrassing showdown between Alexander and Frist on the Senate floor over cloture.

Frist has largely left the negotiating to Allen. But as Majority Leader he would have to file the cloture motion to bypass Alexander’s objections to moving the bill to a final vote.

Urged on by the National Governors Association, the National Association of Counties and the National League of Cities, Alexander has nearly single-handedly prevented the Internet tax moratorium from becoming law this year.

Many Senate GOP aides claimed the lack of action has been due primarily to Alexander’s unwillingness to compromise on the legislation.

“As we’ve gone through this, it’s really been like Lucy and the football,” said Waldron, referencing the popular “Peanuts” cartoon character’s penchant for yanking the football right before Charlie Brown tries to kick it.

“Senator Allen has dealt in a very straight forward manner, only to have the goal post moved each time an agreement has been reached,” Waldron said.

Aides said there was a general feeling that Alexander and his supporters were going through the motions of discussions, but actually had no intention of reaching a compromise this year.

Additionally, a senior Senate GOP aide confirmed that Alexander was not ready with his amendments when the bill came to the floor three weeks ago, despite his repeated demands that he be allowed to offer several different proposals to alter the measure. Ultimately, the bill was pulled from the floor before any votes were taken.

“They were just trying to delay the bill until the Senate was out of session,” another Senate GOP aide charged of Alexander and fellow bill opponent Sen. George Voinovich

(R-Ohio).

But Poe strongly disputed the notion that Alexander was stonewalling Allen.

“Going from not supporting a moratorium at all to supporting one for two years, it’s tough to call that not compromising,” said Poe. “We expect to continue discussions and work with everyone involved to reach a compromise.”

Alexander did agree to allow the Senate to extend the current language of the moratorium in the omnibus spending bill, but Allen and House GOP negotiators rejected it as not good enough.

“It’s better to have nothing than to have something that will imperil Senator Allen’s efforts to enact a ban on Internet access taxes, particularly on newer technology,”

Waldron said.

Though Congress has passed temporary moratoria on Internet taxes since 1998 with little trouble, this year’s battle was complicated by Allen’s desire to change the language of the moratorium to include digital subscriber lines, or DSL.

Both supporters and opponents of the bill agree that the last moratorium, which expired last month, banned taxes on Internet hook-ups. But because the language was crafted when people still relied on so-called “dial-up” service, it left open the possibility that states and localities could put additional taxes on DSL service and other emerging technologies.

Alexander and other opponents argue that the language that Allen suggested to define DSL would have barred states and localities from taxing new communication technologies and could block them from collecting current telephone taxes, if phone companies change the platform on which they rest their networks to Internet-based technology.

But Allen has hotly disputed that notion. “Our bill updates the language of the initial proposal to bring the same spirit of the initial law to reflect current technology,” Waldron said.