Opening Statement

Statement of Ranking Member John Conyers, Jr.
Markup of:  H.R. 3086, the "Permanent Internet Tax Freedom Act" and H.R. 4874, the "Search for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act of 2014"
Full Committee

Wednesday, June 18, 2014 at 10:00 A.M.
2141 Rayburn Building

     H.R. 3086, the ‘Permanent Internet Tax Freedom Act,’ addresses the impending expiration of the Internet Tax Freedom Act. Enacted in 1998, ITFA was intended to be a temporary moratorium to nurture the Internet in its infancy.  It did so by prohibiting multiple and discriminatory taxation of the Internet as well new taxes on Internet access. Although Congress has extended this moratorium on three prior occasions, it is now due to expire in November of this year.

     As we consider this legislation, there are several points that we should keep in mind. To begin with, today’s Internet is very different than the Internet of 1998, and the reasons that initially warranted a moratorium simply no longer apply. Today’s Internet has gone mainstream.  It has provided a platform for innovation, created entirely new industries, and improved countless services. It is no longer primarily accessed through a dial-up service from a few providers. Instead most Americans have several options from cable to DSL to fiber optics, from satellite services to wireless services. The Internet is no longer a nascent idea in need of federal tax protection to grow.  It is now a prosperous sector of the global economy.

     Yet, in those states that were exempted under the ITFA’s grandfather clause and allowed to continue to tax Internet access, studies show that there is no difference in the rates of household Internet access between states that tax Internet access and those states that do not tax Internet access. In other words, there is no evidence that making ITFA permanent will encourage people who do not currently subscribe to high-speed Internet access services to begin doing so.

     In addition, legislation concerning state taxation must take into consideration the needs of all affected stakeholders. Specifically, Congress must be mindful of any legislation that may adversely impact state revenues and thereby impede the ability of these states to provide needed services to their residents. Unfortunately, H.R. 3086, if enacted as is, will result in some states losing millions of dollars in revenue. For example, Texas and its localities could lose upwards of $350 million in revenue a year.

     Fortunately, this legislation only needs two simple revisions to eliminate these negative impacts –  the moratorium should not be made permanent; and the grandfather protections should be extended for the term of the moratorium. That is why I intend to offer an amendment that will make these two important changes to the bill. If these changes are not made and Congress chooses instead to protect an entire economic sector from taxation, the bill’s adverse impact on state revenues will likely shift the tax burden to lower income and rural consumers who continue to rely on telephone services. Utility companies, retailers, manufacturers, and other non-broadband related businesses may also feel the brunt of the tax shift.

     Finally, our committee should focus on meaningful ways to help state and local governments as well as local businesses, such as the Marketplace Fairness Act, which the Senate overwhelming passed more than 13 months ago. By failing to address the issue of remote sales taxation, our local retailers – who have to collect sales taxes – are increasingly losing to out-of-state businesses that do not collect these taxes. Retail competitors should be able to compete on a level playing field with their Internet counterparts at least with respect to sales tax policy.

     Not only do local retailers suffer because of the disparate treatment of remote sales taxes, but state and local government suffer as a result of reduced tax revenues. Lost tax revenues mean that state and local governments will have fewer resources to provide their residents essential services, like education and police and fire protection. Accordingly, I urge the Chairman to schedule a markup before the August work period of the Marketplace Fairness Act or a similar effective measure. We owe it to our local communities, our local retailers, and state and local governments to act before the end of this year.