ALEXANDER, CARPER URGE GOVERNORS TO BACK THEIR INTERNET TAX PROPOSAL

Pressure is building to renew the moratorium on discriminatory Internet taxation, Sen. Alexander (R-Tenn.) said Mon. Rather than having language inserted in an omnibus bill “in the dead of night,” the Senate should focus on legislation he and Sen. Carper (D-Del.) introduced (S-2084) to extend the moratorium 2 years. Speaking at the National Governors’ Assn. meeting, he and Carper urged all governors to meet with their congressional delegations and discuss what impact a rival bill by Sens. Allen (R-Va.) and Wyden (D- Ore.), S-150, might have on their state tax revenues.

Governors need to meet “eyeball to eyeball” with senators on the issue, Gov. Mike Huckabee (R-Ark.) said. He referred to a Sun. luncheon meeting at the NGA conference where governors discussed the migration of phone calls to the Internet. “It’s a very fluid issue,” he said, echoing Alexander and Carper in saying that S-150 would prevent states from taxing Voice over Internet Protocol (VoIP) calls, costing states as much as $20 billion annually. “This has nothing to do with Internet taxation,” Alexander said, “and everything to do with telecommunications taxes.”

S-150 doesn’t affect telecom taxes, Allen has repeatedly insisted, most recently at a Heritage Foundation debate with Alexander (CD Feb 13 p13). At that event, Allen offered to add language to S-150 specifying the bill takes no position on VoIP. Alexander Mon. called that offer “encouraging” but said no further progress had been made. He did say he would meet with Allen this week to discuss the 2 sides’ goals, with staff meetings to follow.

Meanwhile, S-150 supporters have launched a coalition. The Consumer Internet Access Coalition (CIAC) said in a statement Mon. it had formed in response to Alexander and Carper’s bill, which would “significantly increase the cost of Internet access to consumers.” The group’s domain name -- www.noemailtax.com -- evokes an argument frequently lobbed against S-150 opponents, although S-2084 supporters insist nothing in their bill would permit e-mail taxation. CIAC companies include AOL, AT&T, BellSouth, Cingular, eBay, Qwest, SBC, Sprint, Time Warner, T-Mobile, Verizon Wireless, Verizon and Yahoo, plus CTIA, the Information Technology Assn. of America (ITAA), the Information Technology Industry Council (ITI) and USTA.

The FCC just launched a VOIP rulemaking, Alexander noted, adding that FCC Chmn. Powell recently had spent an hour in Alexander’s office discussing VoIP. Alexander said Congress was expected to re-examine the Telecom Act next year, and the FCC’s position on cable modem service as an information service differed from the 9th Circuit’s interpretation -- so a 2-year moratorium was preferable to the permanent one in S-150. S-2048 would reinstate the moratorium that expired in Nov., keep previously grandfathered taxes, and grandfather states taxing DSL but prevent other states from taxing consumer DSL connections. Carper conceded that as a result, their bill preserves some tax bans he and Alexander call unfunded mandates. Recalling politics is the “art of the possible,” he said S-2048 would satisfy moratorium supporters without crippling states. Huckabee called S-2084 “a middle ground position.” Other governors backing S-2084 Mon. were Jim Doyle (D-Wis.) and Edward Rendell (D-Pa.).

Momentum is “shifting” toward S-2084, Carper said, citing S-150 supporter Sen. Hutchison’s (R-Tex.) now backing S-2084 to preserve taxes in Tex. The bill has 11 total sponsors. Alexander cited the unanimous House vote for HR-49 -- a bill by Rep. Cox (R-Cal.) that’s the same as S-150 -- as a sign Congress wanted to act. Carper said it was up to Senate Majority Leader Frist (R-Tenn.) to decide what goes to a Senate floor vote. S-2084 has just been referred to the Senate Commerce Committee, while S-150 already cleared that committee. Alexander said going through the committee with S-2084 was an option; he’s testifying today (Tues.) before that committee on the issue. S-2084 originally took the form of an amendment to S-150 and could again appear that way. While Carper said he, like Frist, wants a compromise, “we'll be happy to take an up-or-down vote.”