Byline: ERIC PIANIN and JOHN SCHWARTZ Washington Post
WASHINGTON -- The House on Wednesday approved a five-year extension of a moratorium on certain types of Internet taxes in the latest signal of the rush by both parties to court the politically potent high-tech industry.
The bill, overwhelmingly approved 352 to 75, extends the current ban on Internet access taxes and other ``discriminatory'' levies on electronic commerce. By doing so, supporters say they hope to encourage the continued booming growth of e-business unfettered by tax restraints.
Some lawmakers said the measure might have more symbolic importance than a substantive one. The measure does not address the larger -- and more politically controversial -- question of state taxation of Internet commerce. Nor does it address concerns that the preferential tax treatment of e-commerce is hurting ``bricks-and-mortar'' retailers.
``Both political parties are courting the technology sector,'' said Sen. Ron Wyden, D-Ore. ``They are saying, `I hope this will end up in marriage, that you'll end up with me.' The high tech folks are saying `We're just out on our first date here -- we're just getting acquainted!' ''
Next week the House will consider a change in immigration policy that would allow 200,000 new high-skilled foreign workers into the country. It will also take up bills rescinding a three-cent telephone excise tax and imposing a permanent ban on taxing Internet access. Late this month, the House will vote on legislation to establish permanent normal trade relations with China, a top priority of high-tech industry leaders.
Computer company executives alone have contributed $13 million to House and Senate candidates during the current election cycle -- evenly divided between Republicans and Democrats -- according to the nonpartisan Center for Responsive Politics.
House Minority Leader Richard A. Gephardt of Missouri touted the Democrats' new high-tech agenda in a speech late last month before several technology groups. On Wednesday, House Republicans unveiled a ``e-Contract 2000'' at a news conference attended by school children who use the Internet to do their homework.
House Speaker J. Dennis Hastert, R-Ill., Majority Leader Richard K. Armey, R-Texas, and other GOP leaders formally signed the ``contract,'' which vows to slash taxes and regulations, promote free trade and e-commerce and assure a pool of well-trained and skilled workers.
The bill approved Wednesday would extend by five years the current three-year moratorium on Internet access taxes and other so-called discriminatory taxes that might, for example, make consumers pay higher sales taxes for a book bought from barnesandnoble.com than they would pay for a book bought from Barnes and Noble at a mall.
The extension, like the original Internet Tax Freedom Act, does not prohibit states from collecting current sales taxes or ``use'' taxes -- the equivalent of sales taxes owed on sales from out-of-state merchants. Use taxes have been on the books of every state that collects sales taxes and have been around since the 1930s.
But in 1992, the Supreme Court declared that even though consumers owed the tax, states could not compel remote merchants to collect them. State and local governments argue they will lose tax revenues if the moratorium is extended without a system that will help them to simplify their tax structures and collect those taxes.
``We are in opposition to any long-term extension of the Internet Tax Freedom Act that does not address the existing inequity in state sales tax and use-tax systems,'' said Steve Pfister of the National Retail Federation. The merchants' group wants an approach that would include passing a broader bill with tax simplification measures. ``Today's vote to extend the Net tax moratorium sends a clear signal that more time is needed to develop the right approach to how we address taxation on the Internet,'' said Rhett Dawson, president of Information Technology Industry Council, a trade group that includes America Online, IBM, Microsoft and Intel.
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